63 FR 48193
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-605]
Industrial Phosphoric Acid From Israel: Preliminary Results and Partial
Recission of Countervailing Duty Administrative Review
Wednesday, September 9, 1998
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AGENCY: Import Administration, International Trade Administration, Department of
Commerce.
ACTION: Notice of preliminary results 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, 1996 through December 31, 1996. 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 of administrative review, we will instruct the U.S. Customs Service to assess
countervailing duties as detailed in the Preliminary Results of Review. Interested parties are
invited to comment on these preliminary results. See Public Comment section of this notice.
EFFECTIVE DATE: September 9, 1998.
FOR FURTHER INFORMATION CONTACT: Stephanie Moore or Eric Greynolds, Office CVD/AD
Enforcement VI, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230;
telephone: (202) 482-3692 or (202) 482-6071, 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 4,
1997, the Department published a notice of "Opportunity to Request Administrative Review" (62
FR 41925) of this countervailing duty order. We received a timely request for review, and
we initiated the review, covering the period January 1, 1996 through December 31, 1996, on
September 25, 1997 (62 FR 50292).
In accordance with 19 CFR 351.213(b), this review covers only those producers or exporters of the
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subject merchandise for which a review was specifically requested. Accordingly, this review covers
Rotem-Amfert Negev Ltd. (Rotem) and Haifa Chemicals Ltd. (Haifa). Haifa did not export the
subject merchandise during the period of review (POR). Therefore, we are rescinding the review
with respect to Haifa. This review covers nine programs.
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, et seq. Antidumping Duties;
Countervailing Duties; Final Rule, 62 FR 27296 (May 19, 1997), 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 1996.
Allocation Period
In British Steel plc. v. United States, 879 F.Supp. 1254 (February 9, 1995) (British Steel),
the U.S. Court of International Trade (the Court) rules 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. British Steel, 929 F.Supp 426,
439 (CIT 1996). Accordingly, the Department has applied this method to those non-recurring
subsidies that have not yet been countervailed. Rotem submitted an AUL calculation
based on depreciation expenses and asset values of productive assets reported in its
financial statements. Rotem's AUL was derived by adding the sum of average gross
book value of depreciable fixed assets for ten years and dividing these assets by
the total depreciation charges for the related periods. We found this calculation
to be reasonable and consistent with our company-specific AUL objective. Rotem's
calculation resulted in an average useful life of 23 years, which we have used as the
allocation period for non-recurring subsidies received during the POR.
For non-recurring subsidies received prior to the POR and already countervailed based on an
allocation period established in an earlier segment of the proceeding, it is not reasonable or
practicable to reallocate those subsidies over a different period of time. Since the
countervailing duty rate in earlier segments of the 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. Such a practice may lead to an increase or decrease in
the total amount countervailed and, thus, would result in the possibility of over- or under-
countervailing the actual benefit. Therefore, for purposes of these preliminary results, the
Department is using the original allocation period assigned to each non-recurring subsidy received
prior to the POR. See Certain Carbon Steel Products from Sweden; Final Results of
Countervailing Duty Administrative Review, 62 FR 16549 (April 7, 1997).
Privatization
(I) Background
Israel Chemicals Limited (ICL), the parent company which owns 100 percent of Rotem's
shares, was partially privatized in 1992, 1993, 1994, and 1995. 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 1992, 1993, and 1995 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 review, the portion of the ICL shares privatized was so small, less than 0.5
percent, that 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 the 1994 Final Results,
61 FR at 53352.
(II) Modification of the Application of Repayment Methodology
In prior reviews, to calculate the portion of the purchase price which represented repayment of
prior subsidies through partial privatizations in 1992, 1993 and 1995, the Department converted
the net worth figures for Rotem from new Israeli shekels (NIS) to U.S. dollars, based on exchange
rate information on the record. In this review, the respondent has submitted U.S. dollar
denominated audited financial statements for 1983 through 1989. The notes to the financial
statements indicate that the company maintains its accounts in NIS and in U.S. dollars. Amounts
originating from transactions denominated in, or linked to, the dollar are stated at their original
amounts. Amounts not originating from such transactions are determined on the basis of the
exchange rate prevailing at the time of the transaction. As a result, we have recalculated the
portion of the purchase price paid for ICL's shares that is attributable to repayment of prior
subsidies using the U.S. dollar denominated net worth figures provided in Rotem's financial
statements.
Grant Benefit Calculations
To calculate the benefit for the POR, we followed the same methodology used in the final results of
the 1995 administrative review. 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
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Review, 63 FR 13626, 13633 (March 20, 1998) (1995 Final Results).
Facts Available
Section 776(a)(2) of the Act requires the Department to use facts available if "an
interested party or any other person * * * withholds information that has been
requested by the administering authority * * *." In this case, the Government of
Israel (GOI) did not comply with the Department's requests for information that was
necessary to conduct a specificity analysis of the Environment Grant Program. On
April 7, 1998 and on April 24, 1998, the Department issued questionnaires requesting
information regarding eligibility for and actual use of the benefits provided under
the Environment Grant Program. The GOI provided information regarding the total number
of applicants that applied for or received grants, and the total amount of the grants
given under the program. However, the GOI did not extract information from this data
that would have allowed the Department to fully examine whether the program is, in fact,
specific. Based on the information presented, the Department could only derive the
absolute number of applicants for and recipients of grants under this program. The
GOI also provided the Department with the criteria considered by the MOE in determining whether
an application will be approved, including the financial and economic strength of the applicant,
extent of the investment needed, and the extent of the improvement compared to the investment,
but did not provide information as to how these criteria were applied.
Section 776(b) of the Act permits the administrative authority to use an inference that is adverse
to the interests of an interested party if that party has "failed to cooperate by not acting to
the best of its ability to comply with a request for information." Such an adverse inference
may include reliance on information derived from: (1) The petition, (2) a final determination
in the investigation under this title, (3) any previous review under section 751 or determination
under section 753 regarding the country under consideration, or (4) any other information placed
on the record. Because respondents did not comply with the Department's requests for such
information, and failed to explain why such information could not be provided, we find that
respondents failed to cooperate by not acting to the best of their ability. Therefore, we are
using an adverse inference in accordance with section 776(b) of the Act. The adverse inference
is a finding that the Environment Grant Program is specific under section 771(5A)(D)(iii) of
the Act. For further discussion, see Memorandum regarding Specificity of the Environment
Grant Program dated August 12, 1998, which is on file in the Central Records Unit
(Room B-099 of the Main Commerce Building.)
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined To Confer Subsidies
1. Encouragement of Capital Investments Law (ECIL)
This 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 grants are limited 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, drawback, and capital
grants in disbursements over a period of years for several projects. 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 23 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. 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 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 1996 as the most
appropriate discount rate. ICL's interests 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.
To calculate the total subsidy in the POR, we first summed the grant amounts allocated to and
received in 1996, after taking into account the partial privatizations in 1992, 1993, and 1995. To
derive the subsidy rates, as discussed in the 1995 Final Results, we attributed ECIL grants 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, and grants to Rotem's green acid to total sales minus direct
sales of phosphate rock and grants to Rotem's IPA facilities to sales of IPA, MKP, and fertilizers.
We summed the rates obtained on this basis, and preliminarily determine the net subsidy from this
program to be 5.58 per ad valorem for the POR.
2. Encouragement of Industrial Research and Development Grants (EIRD)
During the 1996 review period, Rotem received five EIRD grants. Two of them were received for
projects which have no relation to the production of subject merchandise or inputs thereto; the
three remaining grants are for research into phosphate rock production, which is an input to IPA
production. Thus, they provide countervailable benefits to the production of subject merchandise.
In the 1995 Final Results, we determined that EIRD rants were specifically provided to Rotem, and
that they conferred a benefit. In this review, no new information or evidence of changed
circumstances has been submitted to warrant reconsideration of this determination.
We view these grants as "non-recurring" based on the analysis set forth in the "Allocation" section of
the GIA (58 FR at 37226) because these benefits are exceptional, and Rotem cannot expect to
receive benefits on an ongoing basis from review period to
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review period. However, because the total benefit of the EIRD grants received in 1996 was less than
0.50 percent of Rotem's total sales, we allocated the entire benefit to the POR. To obtain the
subsidy rate, we divided the benefit by Rotem's total sales. On this basis, we preliminarily
determine the benefit from this program to be 0.02 percent ad valorem.
B. Other Programs Preliminarily Determined To Confer Subsidies
1. Infrastructure Grant Program
Under the Infrastructure Grant Program, the GOI establishes new industrial areas by partially
reimbursing companies for their costs of developing the infrastructure in certain geographical
zones. Rotem received assistance under this program during the POR. Therefore, within the
meaning of section 771(5)(B)(i), a subsidy is bestowed because the GOI provided a financial
contribution, which conferred a benefit. We analyzed whether this program is specific within the
meaning of section 751(5A)(D) of the Act. Because the infrastructure grants are limited to an
enterprise or industry located in certain zones within the jurisdiction of the authority providing
the subsidy, we find this program to be regionally specific in accordance with section
771(5A)(D)(iv).
We view these grants as non-recurring based on the analysis set forth in the "Allocation" section of
the GIA (58 FR at 37226) because these benefits are exceptional, and the company cannot expect
to receive benefits on an ongoing basis from review period to review period. Therefore, we
calculated the benefit under this program using the methodology for non-recurring grants noted
above in the "Grant Benefit Calculations" section. We then divided the grant amount by Rotem's
total sales because the grant benefited the Company's total production. On this basis, we
preliminarily determine the benefit from this program to be 0.18 percent ad valorem.
2. Environmental Grant Program
Through the Ministry of the Environment, the GOI administers a program to provide financial
assistance for the adaptation of existing industrial facilities to new environmental requirements.
Companies undertaking programs to reduce air pollution, hazardous wastes, and noise levels, and
to improve water quality, can receive assistance. The maximum amount of assistance available is
the lesser of 35 percent of the approved investment or the actual investment, and is capped at
1.125 million NIS.
We analyzed whether this program is specific in law (de jure), or in fact (de facto), within the
meaning of section 751(5A)(D) of the Act. We examined the Directive of the Director-General of the
Ministry of the Environment for the program eligibility criteria and found that this program is not
de jure specific, because there is no express intent to limit the availability of benefits under this
program to an enterprise or industry or group of enterprises or industries.
We then examined the information provided by the GOI with respect to the actual provision of
assistance under the program (since its inception in 1995) to see whether it meets the criteria for
de facto Specificity. According to
771(5A)(D)(iii), "a subsidy is de facto specific if one of the following factors exists: (1) The
actual recipients of the subsidy, whether considered on an enterprise or industry basis, are
limited in number; (2) an enterprise or industry is a predominant user of the subsidy; (3) an
enterprise or industry receives a disproportionately large amount of the subsidy; or (4) the
manner in which the authority providing the subsidy has exercised discretion in the decision
to grant the subsidy indicates that an enterprise or industry is favored over others."
The Department requested information regarding the number of companies and type of industries
that applied for or received benefits under the program, and the amount of benefits received. The
GOI provided no information on actual usage of the program by enterprise or industry nor did it
identify any alternative information through which the Department could make an assessment of
whether the program is de facto specific. Accordingly, based on the information on the record, we
preliminarily determine that this program is de facto specific and is, therefore, countervailable
within the meaning of section 771(5A)(D)(iii). (See Facts Available section of this notice.)
We view these grants as non-recurring based on the analysis set forth in the "Allocation" section of
the GIA (58 FR at 37226) because these benefits are exceptional, and the company cannot expect
to receive benefits on an ongoing basis from review period to review period. However, because the
total value of
the benefit received in 1996 was less then 0.50 percent of Rotem's total sales, we allocated the
entire benefit to the POR. We divided the grant amount by Rotem's total sales because the grants
benefited the company's total production. On this basis, we preliminarily determine the benefit
from this program to be 0.11 percent ad valorem.
II. Programs Preliminarily 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:
A. Reduced Tax Rates under ECIL
B. ECIL Section 24 loans
C. Dividends and Interest Tax Benefits under Section 46 of the ECIL
D. ECIL Preferential Accelerated Depreciation
E. Exchange Rate Risk Insurance Scheme
F. Labor Training Grants
G. Long-term Industrial Development Loans
Preliminary Results of Review
In accordance with 19 CFR 351.213(b), we calculated an individual subsidy rate for each
producer/exporter subject to this administrative review. For the period January 1, 1996 through
December 31, 1996, we preliminarily determine the net subsidy for rotem to be 5.89 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.
The Department also intends to instruct Customs to collect cash deposits of estimated
countervailing duties as indicated above of the f.o.b. invoice price on all shipments of the
subject merchandise from reviewed companies, entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of this review.
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, and cash deposits must continue to be collected,
at the rate previously ordered. As such, the countervailing duty cash
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deposit rate applicable to a company can no longer change, except pursuant to a request for a
review of that company. See Federal-Mogul Corporation and The Torrington Company v. United
States, 822 F.Supp. 782 (CIT 1993) and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT
1993). Therefore, the cash deposit rates for all companies except those covered by this review will
be unchanged by the results of this review.
We will instruct Customs to continue to collect cash deposits for non-reviewed companies at the
most recent company-specific or country-wide rate applicable to the company. Accordingly, the
cash deposit rates that will be applied to non-reviewed companies covered by this order will be the
rate for that company established in the most recently completed administrative proceeding under
the URAA. If such a review has not been conducted, the rate established in the most recently
completed administrative proceeding conducted pursuant to the statutory provisions that were in
effect prior to the URAA amendments, is applicable. See 1992/93 Final Results, 61 FR 28842. These
rates shall apply to all non-reviewed companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1996 through December 31, 1996, 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.
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. Case briefs must be submitted within 30 days
after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case
briefs, must 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 briefs, that is, thirty-seven days after the date of publication of these preliminary results.
Representatives of parties to the proceeding may request disclosure of proprietary information
under administrative protective order no later than 10
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.
This administrative review is issued and published in accordance with section 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 31, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-24141 Filed 9-8-98; 8:45 am]
BILLING CODE 3510-DS-M