(Cite as: 48 FR 51501)

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-469-021]

Bottled Green Olives From Spain; Final Results of Administrative Review of Countervailing Duty Order

Wednesday, November 9, 1983

*51501 AGENCY: International Trade Administration, Commerce.

ACTION: Notice of Final Results of Administrative Review of Countervailing Duty Order.

*51502 SUMMARY: On August 2, 1983, the Department of Commerce published the preliminary results of its administrative review of the countervailing duty order on bottled green olives from Spain. The review covers the period January 1, 1980 through December 31, 1981.

We gave interested parties an opportunity to comment on our preliminary results. After review of all comments received, the final results are the same as the preliminary results.

EFFECTIVE DATE: November 9, 1983.

FOR FURTHER INFORMATION CONTACT:Susan Silver or Joseph Black, Office of Compliance, Internatonal Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On August 2, 1983, the Department of Commerce ("the Department") published in the Federal Register (48 FR 34997) the preliminary results of its administrative review of the countervailing duty order on bottled green olives from Spain (39 FR 32904; September 12, 1974). The Department has now completed that administrative review, in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").

Scope of the Review

Imports covered by the review are shipments of Spanish bottled green olives. Such merchandise is currently classifiable under items 148.4420, 148.4440, 148.4800, and 148.5020 through 148.5080 of the Tariff Schedules of the United States Annotated. The review covers the period January 1, 1980 through December 31, 1981 and three programs: (1) A rebate upon exportation of indirect taxes under the Desgravacion Fiscal a la Exportacion ("the DFE"); (2) an operating capital loans program; and (3) a minimum export price program.

Analysis of Comments Received

We gave interested parties an opportunity to comment on our preliminary results. We received written comments from the Petitioner, the Spanish exporters and a bottled green olive importer in the United States.

Comment 1: The petitioner, the Green Olive Trade Association, asserts that the Department must investigate all of the "subsidies" alleged in the original 1973 countervailing duty petition. The petitioner argues that one program, the Export Investment Reserve, was specifically identified in the petition, and two other types of programs, preferential financing for plant expansion and regional financing assistance, are similar to allegations in the petition. The petitioner notes that the Department has, in a sense, investigated these programs through the questionnaire, by describing what constitutes subsidization, and by asking whether any subsidies, other than those specifically enumerated, are bestowed, Further, the Spanish government falsely responded to that question, ignoring those programs described in the petition.

Department's Position: Since the time of our questionnaire in February 1981, the petitioner has been aware, or should have been aware, that we had not asked questions about those programs, and could have called this fact to our attention. Because the original investigation occurred in 1973 and because the Department of the Treasury did not find countervailable the one program specifically indentified, the allegations are new, brought to our attention after the publication of our preliminary results. We will not now investigate them. We do, however, intend to examine the alleged three types of programs in our next administrative review. Finally, we have no evidence that the Spanish government falsely replied to our questionnaire.

Comment 2: The petitioner challenges our decision not to countervail the minimum export price program applicable from November 1, 1979 through December 31, 1980 to bulk and bottled green olive exports. The petitioner contends that, in spite of the weakness of the U.S. dollar against the Spanish peseta, Spanish bottlers during that period were able to sell bottled green olives at an artificially high export price because of their near monopoly position as sellers of bulk olives in the United States market and their ability to purchase bulk olives at prices lower than prices available to their U.S. competitors. By mandating this price differential, the Spanish government was able to place the Spanish bottled olive exporting industry at an advantage over U.S. competition without granting a direct export subsidy. Since the result is the same, the program must be a countervailable subsidy.

Department's Position: The Department does not consider the minimum export price program on bottled green olives to be a countervailable subsidy, because the program operates to increase the price of bottled olives exported to the U.S. Further, the minimum export price program on bulk olives does not confer a benefit on exports of bottled olives, as the Spanish domestic price of bulk olives is unregulated and not necessarily lower for exporters of bottled olives.

Comment 3: The petitioner maintains that the minimum export price for bottled green olives from Spain is similar to a program found counteravailable in the Department's investigation of nitrocellulose from France (48 FR 11971, March 22, 1983). In that case, the French government purchased military grade nitrocellulose at an artificially high price. The petitioner claims that the law does not distinguish between a subsidy "provided by the government" through government purchases of production and a practice "required by government action" as in the case of bottled green olives.

Department's Position: In the cited case, the Department determined on the basis of the best information available that the French government was "cross- subsidizing" industrial grade nitrocellulose by purchasing nitrocellulose for the military at inflated prices, augmenting the income of the manufacturer. The minimum price program, unlike the case of French nitrocellulose, involved no infusion of government funds; bottled and bulk olive consumers were not required to purchase at the higher price, but were free to buy or not buy at the elevated price.

Comment 4: The exporters claim that, in calculating the DFE overrebate, the Department should treat parafiscal taxes for certain government export inspection requirements (sanitary, "phytosanitary" and quality) as allowable indirect taxes applicable to the final stage product at the time of export.

Department's Position: We only allow the rebate of indirect taxes borne by those inputs which are physically incorporated in the final product and the rebate of final stage indirect taxes. Annex 1.1 of part 355 of the Commerce Regulations deems payments for services as not incorporated even if those services directly relate to the exportation of the merchandise. Although these parafiscal taxes are required for export of the final product, we consider these taxes for sanitary, "phytosanitary", and quality inspection actually to be payment for services performed by the government, and therefore not allowable in the calculation of the countervailable overrebate.

Comment 5: The exporters claim that the Department's calculation of the subsidy attributable to the operating capital loans program is inconsistent with our calculation in the final affirmative determinations for certain *51503 Spanish steel products (47 FR 51433; November 15, 1982). The exporters argue that, in the steel cases, the Department looked only at loans repaid during the period of investigation. Because the loans here were approximately one year in length, a March 31, 1981 increase in interest differentials was not applicable to loans repaid during 1981, but would apply only to loans due for repayment beginning in March, 1982.

Department's Position: There is no inconsistency between our treatment of the operating capital loans program in this case and loans in the Spanish steel cases. In the steel cases, the Department used date of repayment only for calculation of the benefit from medium- and long-term loans. As we said in those cases (47 FR 51448), "in calculating the benefit from the operating capital loans, our calculations include the loans obtained in 1981. Therefore, we used the interest differential in effect in 1981 when these loans were received to calculate any benefit."

Comment 6: The exporters claim that our calculations are inconsistent with precedents set in Brazilian countervailing duty cases, in which the Department allocated the subsidy benefit on a pro rata basis for the time the loans were outstanding during the review period.

Department's Position: In order to calculate the prorated benefits from all short-term loans outstanding during the period of review, we need actual loan data, including principal amounts and dates of receipt and repayment. Although we requested this information from the Spanish government during the course of the current review, we did not receive it in a timely manner. Without such data, we cannot calculate the amount of preferential loans outstanding during the review period without engaging in purely speculative assumptions.

Comment 7: The exporters claim that the Department is overstating the benefit from the operating capital loans program in 1981. They assert that over half of the operating capital loans outstanding in 1981 were contracted for prior to the March 1, 1981 liberalization of commerical short-term interest rates. The interest differential for the earlier loans therefore was 1.5 percent. Further, any loans outstanding in the period January through June 14, 1981 could only have been contracted for in June, 1980; only after July 15, 1981 could such loans be obtained at times other than June of each year. Therefore, exporters could only benefit from the higher interest rate differential after July 15, 1981. The exporters argue that the Department should calculate the 1981 subsidy based on the interest rate differential in effect at the time receipt of loans outstanding in 1981 was possible (June, 1980 and after July 15, 1981), rather than on the basis of an average interest rate differential weighted by days in 1981.

Department's Position: The Department does use date of receipt of the loan in measuring the interest differential. The Spanish government did not respond to our request for actual loan data nor did it provide support for the claim that before July 15, 1981, all loans were granted in June. Therefore, as best information available, we assumed uniform borrowing throughout the period of review and maximum use of the program. The Department used a 1.5 percent differential for borrowings up to March 1, 1981.

Comment 8: The exporters suggest that the Department calculate the benefit from the operating capital loans in 1980 by dividing the interest savings on loans received from June 15, 1979 to June 14, 1980 by exports during that same period.

Department's Position: Again, the exporters are asking us to accept, without support, the fact that until July 15, 1981 loans were given only once a year, in June. In the absence of specific loan data showing dates of receipt and repayment, and based on the best information available, we have calculated the benefit from operating capital loans as though they were granted uniformly over the period of review.

Comment 9: The exporters contend that the commercial benchmark used by the Department is too high. They contest 2 percent of the Department's 2.5 percent addition to the average of the monthly prime rates for one-year loans because any exporter that could obtain any significant amount of financing under the operating capital loans program would have been able to obtain normal commercial credit at a rate no higher than prime. To support this contention, the Spanish embassy submitted 1981 Bank of Spain statistics on "free rates," which are rates charged for "loans made without the benefit of guarantees." The exporters argue that the fact that these free rates are within the range of published monthly prime rates for the same period demonstrates that only the legally established 0.5 percent addition to prime for fees and commissions is justified.

Department's Position: Since the preferential loans are given under a broad national lending program, we have used a national commercial interest rate as our benchmark. Additionally, because the operating capital loans program is not directed toward a particular group of exporters, we have used an average commercial rate (composed of prime plus 2.5 percent), and not a rate available to borrowers of better-than-average creditworthiness. Additionally, during verification, the government of Spain refused to allow the Department to gather information on comparable commercial loans. Absent that information and its verification we would not in any event presume and use a better average interest rate.

Comment 10: The exporters contend that various additional charges associated with preferential export financing raise the cost of the operating capital loans from a nominal rate (as of March 1, 1981) of 10 percent to an effective rate of 14-15 percent, as verified in the cases of potassium permanganate and prestressed wire strand from Spain, and in the verification report on ferroalloys from Spain, dated January 6, 1981.

Department's Position: The exporters have not provided us with any documentary evidence to corroborate their assertion. The verification reports cited by respondents show that the 14-15 percent figure arose during discussions with a U.S. bank official in Madrid, which does not constitute verification. The Department has never used the 14-15 percent figure cited by the exporters; instead, in the absence of documented evidence of additional interest charges, we have continued to use the published nominal rate of interest for such operating capital loans.

Comment 11: On February 23, 1983, the exporters submitted new information showing the amount of operating capital loans granted from July 1980 through June 1981 and from July 1981 through June 1982 to those firms Department representatives had visited in March 1982. The loan information indicated that firms had borrowed less than the maximum allowable amount assumed by the Department in the preliminary results.

Department's Position: During the March 1982 verifications, the Department attempted to collect information, and verify that information, on actual loans granted under the operating capital loans program. The government of Spain instructed the firms being verified not to cooperate on this matter. The Department views the February 1983 submission of this information untimely and we will not consider it.

Comment 12: The exporters provided a table constructing a theoretical maximum subsidy of 1.49 percent for 1981. They suggest that this rate be used *51504 for assessment for that year. The table assumes maximum eligibility for operating capital loans based on exports from a previous quarter. The benefit from the loans is prorated over the review period.

Department's Position: There is no information in the record of this case to support the assumption of eligibility for loans based on quarterly exports. Following past practice, we have calculated eligibility and benefits based on previous years' exports as the best information available. Further, as noted above, we cannot prorate loan benefits without actual loan data submitted on a timely basis.

Comment 13: The exporters contend that the deposit rate for the operating capital loans program should not have been based solely upon the maximum eligibility level for 1983 (17.5 percent). Because eligibility levels are based on previous year's exports, it should have been adjusted for the year-to-year growth in those exports as represented by 1980 and 1981 data.

Department's Position: As we stated in our final results of the administrative review of unwrought zinc from Spain (48 FR 35698; August 5, 1983), the exporters are asking us to predict the future value of bottled olive exports. The Department views such forecasting as inappropriate. We cannot make such an assumption for the remainder of 1983 and the beginning of 1984 based on any increase in 1981 exports when compared to 1980.

Comment 14: The exporters maintain that the duty deposit rate should be updated to reflect the current status of Spain's phase-out of the operating capital loans program, citing a 1982 regulation reducing maximum eligibility to 10.5 percent effective January 1, 1984.

Department's Position: As we stated in our final results of administrative review for ferroalloys from Spain (48 FR 34493; July 29, 1983) and unwrought zinc from Spain (48 FR 35689), it is our policy in setting the duty deposit rate to include timely corroborated reports of government actions, subsequent to the review period and already in effect, that affect the size of the benefits on future entries. Therefore, we have not incorporated the January 1, 1984 eligibility change in setting our deposit rate.

Comment 15: The importer, Durkee Famous Foods, contends that the information submitted by its supplier supports a lower calculated DFE overrebate than that determined by the Department.

Department's Position: Our uniform practice in reviewing the overrebate under the DFE is to calculate one country-wide rate. Durkee's argument does not convince us that we should deviate from that practice.

Final Results of the Review

After consideration of all of the comments received, we determine the aggregate net subsidy to be 2.70 percent ad valorem during 1980. For 1981, we determine the aggregate net subsidy to be 2.44 percent ad valorem.

The Department will instruct the Customs Service to assess countervailing duties of 2.70 percent of the f.o.b. invoice price on all shipments of Spanish bottled green olives entered, or withdrawn from warehouse, for consumption on or after January 1, 1980 and exported on or before December 31, 1980, and 2.44 percent of the f.o.b. invoice price for shipments exported on or after January 1, 1981 and on or before December 31, 1981.

Further, as provided for in section 751(a)(1) of the Tariff Act, the Department intends to instruct the Customs Service to collect a cash deposit of estimated countervailing duties of 1.64 percent of the f.o.b. invoice price on all shipments of this merchandise 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. The Department is now beginning the next administrative review of the order.

The Department encourages interested parties to review the public record and submit applications for protective orders, if desired, as early as possible after the Department's receipt of the information in 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 s 355.41 of the Commerce Regulations (19 CFR 355.41).

Dated: November 2, 1983.

Alan F. Holmer,

Deputy Assistant Secretary for Import Administration.