64 FR 24582
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-508-605]
Industrial Phosphoric Acid From Israel: Preliminary Results of Countervailing
Duty Administrative Review
Friday, May 7, 1999
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AGENCY: Import Administration, International Trade Administration, Department of
Commerce.
ACTION: Notice of Preliminary Results and 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, 1997 through December 31, 1997. 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
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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: May 7, 1999.
FOR FURTHER INFORMATION CONTACT: Dana Mermelstein or Sean Carey, Office of AD/CVD
Enforcement VI, Group II, Import Administration, International Trade Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, N.W., Washington, D.C.
20230; telephone (202) 482-0984 or (202) 482- 3691, 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, 1998, the Department published a notice of "Opportunity to Request Administrative Review"
(63 FR 42821) of this countervailing duty order. We received a timely request for review,
and we initiated the review, covering the period January 1, 1997 through December 31, 1997, on
September 29, 1998 (63 FR 51893). 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 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 11 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 (1998).
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 1997.
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) 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. 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
Israel Chemicals Limited (ICL), the parent company which owns 100 percent of Rotem's
shares, was partially privatized in 1992, 1993, 1994, and 1995. In this administrative review, the
Government of Israel (GOI) and Rotem reported that additional shares of ICL were sold in
1997. 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 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. However, we are applying this methodology
to the 1997 partial privatization because 17 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
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Duty Determination: Certain Pasta from Italy, 61 FR 30288 (June 14, 1996).
Grant Benefit Calculations
To calculate the benefit for the POR, we followed the same methodology used in the final results of
the 1996 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 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 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
(Cite as: 64 FR 24582, *24584)
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 (63 FR at 13633-4).
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, 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.
To calculate the total subsidy in the POR, we first summed the grant amounts allocated to and
received in 1997, after taking into account the partial privatizations in 1992, 1993, 1995, and 1997.
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; 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 this
program to be 5.43 percent ad valorem for the POR.
B. 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 benefitted Rotem's total production. On this basis, we preliminarily determine
the net countervailable subsidy from this program to be 0.22 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. Encouragement of Industrial Research and Development Grants (EIRD)
B. Environmental Grant Program
C. Reduced Tax Rates under ECIL
D. ECIL Section 24 loans
E. Dividends and Interest Tax Benefits under Section 46 of the ECIL
F. ECIL Preferential Accelerated Depreciation
G. Exchange Rate Risk Insurance Scheme
H. Labor Training Grants
I. 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, 1997 through
December 31, 1997, we preliminarily determine the net subsidy for Rotem to be 5.65 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
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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 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, 1997 through December 31, 1997,
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.
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: May 3, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-11575 Filed 5-6-99; 8:45 am]
BILLING CODE 3510-DS-P