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###### Department of Commerce

###### International Trade Administration 

          - [C-357-813] 

# AGENCY:

Import Administration, International Trade Administration, Department of Commerce. 

# EFFECTIVE DATE:

November 2, 2000. 

# FOR FURTHER INFORMATION CONTACT:

Dana S. Mermelstein at (202) 482-1391 or Doug Campau at (202) 482-1395, Office of CVD/AD Enforcement VII, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230. 

## Initiation of Investigation 

### The Applicable Statute and Regulations 

Unless otherwise indicated, all citations to the statute are references to the provisions effective January 1, 1995, the effective date of the amendments made to the Tariff Act of 1930 (the Act) by the Uruguay Round Agreements Act (URAA). In addition, unless otherwise indicated, all citations to the Department's regulations are to the regulations codified at 19 CFR part 351 (2000). 

### The Petition 

On September 29, 2000, the Department of Commerce (the Department) received a countervailing duty petition filed in proper form on behalf of the American Honey Producers Association and the Sioux Honey Association (the petitioners). Supplements to the petitions were filed on October 5, 11, 17 and 19, 2000. In addition, we received submissions from the parties with regard to industry support on October 16, 18, and 24. 

In accordance with section 702(b)(1) of the Act, petitioners allege that manufacturers, producers, or exporters of honey from Argentina received countervailable subsidies within the meaning of section 701 of the Act. 

Pursuant to section 702(C)(1)(b), the Department extended the deadline for initiation to no later than October 27, 2000. 

                        The Department finds that petitioners filed the petition on behalf of the domestic industry because they are interested parties as defined under sections 771(9)(C) and (D) of the Act. The petitioners have demonstrated sufficient industry support with respect to this countervailing duty investigation, which they are requesting the Department to initiate.                         *See Determination of Industry Support for the Petition*                         below.                     

### Scope of the Investigation 

                        For purposes of these investigations, the products covered are natural honey, artificial honey containing more than 50 percent natural honey by weight, preparations of natural honey containing more than 50 percent natural                               ( print page 65836)                            honey by weight, and flavored honey. The subject merchandise includes all grades and colors of honey whether in liquid, creamed, comb, cut comb, or chunk form, and whether packaged for retail or in bulk form.                     

The merchandise subject to these investigations is currently classifiable under subheadings 0409.00.00, 1702.90, and 2106.90.99 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Although the HTSUS subheadings are provided for convenience and U.S. Customs Service (“U.S. Customs”) purposes, the Department's written description of the merchandise under investigation is dispositive. 

                        During our review of the petition, we discussed the scope with the petitioners to ensure that the scope in the petition accurately reflects the product for which the domestic industry is seeking relief. Moreover, as discussed in the preamble to the Department's regulations (                        *Antidumping Duties; Countervailing Duties; Final Rule*, 62 FR 27296, 27323 (May 19, 1997)), we are setting aside a period for parties to raise issues regarding product coverage. The Department encourages all parties to submit such comments by November 9, 2000. Comments should be addressed to Import Administration's Central Records Unit at Room 1870, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, D.C. 20230. The period of scope consultations is intended to provide the Department with ample opportunity to consider all comments and consult with parties prior to the issuance of the preliminary determination.                     

### Consultations 

Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department invited representatives of the Government of Argentina (GOA) for consultations with respect to the petition filed. The Department held consultations with the GOA on October 13, 2000. 

### Determination of Industry Support for the Petition 

Section 702(b)(1) of the Act requires that a petition be filed on behalf of the domestic industry. Section 702(c)(4)(A) of the Act provides that a petition meets this requirement if the domestic producers or workers who support the petition account for: (1) At least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. In addition, section 702(c)(4)(D) of the Act provides that if the petition does not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the administering authority shall poll the industry or rely on other information in order to determine if there is support for the petition as required by subparagraph (A). Because the petitions at issue did not establish support of domestic producers or workers accounting for more than 50 percent of the total production of the domestic like product, the Department has relied on other information in order to determine whether they meet the statutory requirements for industry support. 

                        Section 771(4)(A) of the Act defines the “industry” as “the producers as a whole of a domestic like product, or those producers whose collective output of a domestic like product constitutes a major proportion of the total domestic production of the product.” Thus, to determine whether the petition has the requisite industry support, the statute directs the Department to look to producers and workers who produce the domestic like product. The International Trade Commission (“ITC”), which is responsible for determining whether “the domestic industry” has been injured, must also determine what constitutes a domestic like product in order to define the industry. While both the Department and the ITC must apply the same statutory definition regarding the domestic like product (section 771(10) of the Act), they do so for different purposes and pursuant to separate and distinct authority. In addition, the Department's determination is subject to limitations of time and information. Although this may result in different definitions of the like product, such differences do not render the decision of either agency contrary to the law. (                        *See Algoma Steel Corp. Ltd.*                         v.                         *United States*, 688 F. Supp. 639, 642-44 (CIT 1988);                         *High Information Content Flat Panel Displays and Display Glass from Japan: Final Determination; Rescission of Investigation and Partial Dismissal of Petition*, 56 FR 32376, 32380-81 (July 16, 1991)).                     

                        Section 771(10) of the Act defines the domestic like product as “a product that is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation under this title.” Thus, the reference point from which the domestic like product analysis begins is “the article subject to an investigation,”                         *i.e.,*                         the class or kind of merchandise to be investigated, which normally will be the scope as defined in the petition.                     

The domestic like product referred to in the petitions is the single domestic like product defined in the “Scope of Investigation” section above. The Department has no basis on the record to find the petitioners' definition of the domestic like product to be inaccurate. The Department, therefore, has adopted the domestic like product definition set forth in the petition. 

                        Moreover, the Department has determined that the petition (and subsequent amendments) and supplemental information obtained through the Department's research contain adequate evidence of industry support; therefore, polling is unnecessary. It is undisputed that parties expressing support for the petition represent more than 25 percent of domestic production, and thus meet the requirements of section 702(c)(4)(A)(i). Moreover, knowing the 1999 total production of the domestic like product, and the portion of production represented by those supporting the petition, as well as those who have explicitly declined to take a position, the Department is able to conclude that, even if all parties whose production is not accounted for were to oppose the petition, parties expressing support for the petition would represent more than 50 percent of those expressing support or opposition. Therefore, the petition meets the requirements of section 702(c)(4)(A)(ii). For a detailed discussion of this analysis,                         *see Attachment to the Initiation Checklist, Re: Industry Support*, dated October 26, 2000.                     

Accordingly, the Department determines that these petitions are filed on behalf of the domestic industry within the meaning of section 702(b)(1) of the Act. 

### Injury Test 

Because Argentina is a “Subsidies Agreement Country” within the meaning of section 701(b) of the Act, section 701(a)(2) applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from Argentina materially injure, or threaten material injury to, a U.S. industry. 

### *Allegations and Evidence of Material Injury and Causation*

                        The petition alleges that the U.S. industry producing the domestic like product is being materially injured, and is threatened with material injury, by reason of the individual and cumulated imports of the subject merchandise. Petitioners explained that the industry's                               ( print page 65837)                            injured condition is evident in the declining trends in (1) U.S. market share, (2) average unit sales values, (3) share of domestic consumption, (4) operating income, (5) output, and (6) sales.                     

                        The allegations of injury and causation are supported by relevant evidence including U.S. Customs import data, lost sales, and pricing information. The Department assessed the allegations and supporting evidence regarding material injury and causation and determined that these allegations are supported by accurate and adequate evidence and meet the statutory requirements for initiation.                         *See Attachment to Initiation Checklist, Re: Material Injury and Causation*                         (October 26, 2000).                     

### *Allegations of Subsidies*

Section 702(b) of the Act requires the Department to initiate a countervailing duty proceeding whenever an interested party files a petition, on behalf of an industry, that (1) alleges the elements necessary for an imposition of a duty under section 701(a), and (2) is accompanied by information reasonably available to petitioners supporting the allegations. 

### *Initiation of Countervailing Duty Investigation*

                        The Department has examined the countervailing duty petition on honey from Argentina and found that it complies with the requirements of section 702(b) of the Act. Therefore, in accordance with section 702(b) of the Act, we are initiating a countervailing duty investigation to determine whether manufacturers, producers, or exporters of honey from Argentina receive subsidies.                         *See*                         the October 26, 2000,                         *Memorandum to the File; Initiation of Countervailing Duty Investigation: Honey from Argentina (C-357-813)*                         (public document on file in the Central Records Unit of the Department of Commerce, Room B-099 (CRU)).                     

We are including in our investigation the following programs alleged in the petition to have provided countervailable subsidies to producers and exporters of the subject merchandise in Argentina: 

                            I.                             *Government of Argentina Programs*

A. Argentine Internal Tax Reimbursement/Rebate Program (“Reintegro”) 

B. National Income Tax Exemption for Corporate Profits Tied to Export Sales Pursuant to Article 20(1) of Law 20,628 

C. Law 24,467 Programs for Small and Medium-Sized Enterprises (PyMES) 

1. Investment-Expenditure Credits for Exports 

2. Law 24,467 Short- and Long-Term Export Financing 

3. Law 24,467 Short-Term Financing, Including Pre-Financing of Export Sales 

4. Law 24,467 Line of Credit for the Acquisition of new Capital Goods of Argentine Origin 

5. Law 24,467 Preferential Line of Credit to Increase Agricultural and Agro-Industrial Production in the Southern Argentine Provinces 

6. Law 24,467 “Production Poles” Program for Honey Producers 

7. Law 24,467 Credit for Small Business Establishments 

8. Law 24,467 Preferential Lines of Credit for Working-Capital Purposes 

9. Law 24,467 Program for the Enhancement of Regional Production 

10. Law 24,467 Enterprise Restructuring Program (“PRE”) 

11. Law 24,467 Government-Backed Loan Guarantees 

12. Law 24,467 Global Credit Program 

D. Preferential Export Financing Based on Warrants 

E. Fundacion Export*Ar 

F. Honey-Specific Line-of-Credit Program for the Pre-Financing of Development Expenses Associated with Export Sales 

G. PROMEX Consortium for Honey Exportation 

H. PROMEX/PROAPI Development Plan for the Enhanced Exportation of Honey 

I. Additional Lines of Credit to Foment the Purchase of Capital Goods of Argentine Origin 

J. Regional Promotional Scheme—Reimbursement “Patagonico”: Exemption of Import Duties on Capital Goods 

K. Law 22,913 Emergency Aid 

                            II.                             *Government of Argentina/Provincial Government Program*

A. Buenos Aires Honey Program 

B. Province of San Luis Honey Development Program 

                            III.                             *Provincial Government Programs*

A. Exemption from Municipal Gross Income Tax Contingent on Export Activity Pursuant to Article 116(12) of Law 150 (Buenos Aires Tax Code) 

B. Formosa Honey Project 

C. La Pampa Lines of Credit 

D. Entre Rios Honey Program: Law No. 7435/84 

E. Province of Chubut Law No. 4430/98 

F. Province of Chaco Line of Credit Earmarked for the Honey Sector 

G. Province of Santiago del Estero: Creditos de Confianza (Trust Credits) 

H. Province of San Luis: Creditos de Confianza (Trust Credits) 

We are not including in our investigation the following programs alleged to be benefitting producers and exporters of the subject merchandise in Argentina: 

#### 1. Other Potentially Countervailable Law 24,467 Subsidies 

Petitioners allege that the GOA offers more than 70 subsidy programs pursuant to Law 24,467, including those specifically named and discussed above. Petitioners allege that the main vehicle used to confer government benefits under Law 24,467 is the bestowal of subsidized lines of credit and short- and long-term loans through Argentina's three principal state-controlled banks: the Banco de la Nation (GOA Bank of the Nation); the Banco de la Provincia de Buenos Aires (Bank of the Province of Buenos Aires); and the BICE, Argentina's second-tier Development Bank. Petitioners provided excerpts from a report on the operation of the PYMES programs as well as a “Guide for Small Businesses” as support for their allegations that these additional programs exist and requested that the Department investigate any other programs established under Law 24,467. Because petitioners did not provide specific information supporting their allegations, we are not initiating on these allegations. 

2. Argentine Drawback Regime: Excessive Duty Drawback 

Petitioners allege that the Argentine Duty Drawback regime has a built-in allowance for an excessive rebate. According to petitioners, Argentine customs law requires that drawback claims be examined by GOA's National Institute of Industrial Technology (“INTI”). Petitioners allege that if INTI finds that the difference between the value presented in the exporter's sworn declaration versus its own analysis is less than five percent, then by law, the “excessive” rebate stands. Thus, according to petitioners, the law expressly allows exporters to claim five percent more in duty drawback than actually paid in duties and taxes. Petitioners have provided excerpts from the 1998 financial statements of two Argentine honey exporters which they allege show that both may have received at least the automatic excessive rebate of five percent under the statutory scheme, as well as relevant sections of Argentine customs law. 

                        Petitioners have established that Argentina operates a duty drawback system. However, the excerpt of the law provided by petitioners does not indicate that the GOA routinely pays drawback up to five percent in excess of the allowable amounts. The excerpt apparently establishes the level of accuracy which the GOA uses to evaluate exporters' compliance with the law. According to the translated excerpt, for exporters filing duty drawback claims which are found by INTI to be within five percent of the correct amount “the appropriate credit or debit will be effected.” This appears to explain the administrative procedure by which the GOA does not penalize companies for minor errors in their duty drawback claims. This language does                               ( print page 65838)                            not suggest that exporters receive more in drawback than the amount to which they are entitled. Thus, petitioners have not provided sufficient information to support their allegation that there is a benefit to exporters under Argentina's duty drawback regime, and we are not including this program in our initiation.                     

#### 3. Regional Promotional Scheme—Reimbursement “Patagonico”: Reimbursement of Argentine National Income Tax 

Petitioners allege that the GOA administers a regional promotion scheme for the Patagonian region (La Pampa, Rio Negro, Neuquen, Chubut, Santa Cruz, the National Territory of Tierra del Fuego, the Antarctic, the Falkland Islands and part of the Patagonian region located in the Province of Buenos Aires). According to petitioners, pursuant to Law 2,333/83, the GOA offers reimbursement of national income taxes to companies in the named region. 

                        Petitioners have provided information supporting their allegation of import duty exemptions for capital goods under this program (                        *See*                         section I.J. above). However, petitioners have not provided information establishing that there is also an income tax reimbursement program under this regional promotion scheme. Therefore, we are not including this program in our initiation.                     

### Distribution of Copies of the Petitions 

In accordance with section 702(b)(4)(A)(i) of the Act, copies of the public version of the petition have been provided to the representatives of Argentina. We will attempt to provide copies of the public version of the petition to all the exporters named in the petition, as provided for under section 351.203(c)(2) of the Department's regulations. 

### ITC Notification 

Pursuant to section 702(d) of the Act, we will notify the ITC of this initiation. 

### Preliminary Determination by the ITC 

The ITC will determine by November 20, 2000, whether there is a reasonable indication that an industry in the United States is materially injured, or is threatened with material injury, by reason of imports of honey from Argentina. A negative ITC determination will result in the investigation being terminated; otherwise, the investigation will proceed according to statutory and regulatory time limits. 

This notice is published pursuant to section 777(i) of the Act. 

Dated: October 26, 2000.

Troy H. Cribb,

Acting Assistant Secretary for Import Administration.

[FR Doc. 00-28190 Filed 11-1-00; 8:45 am] 

BILLING CODE 3510-DS-P