[Federal Register Volume 61, Number 110 (Thursday, June 6, 1996)]
[Notices]
[Pages 28841-28844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14155]



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DEPARTMENT OF COMMERCE
[C-508-605]


Industrial Phosphoric Acid from Israel; Final Results of 
Countervailing Duty Administrative Reviews

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

ACTION: Notice of Final Results of Countervailing Duty Administrative 
Reviews.

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[[Page 28842]]

SUMMARY: On March 4, 1996, the Department of Commerce (the Department) 
published in the Federal Register its preliminary results of two 
administrative reviews of the countervailing duty order on industrial 
phosphoric acid from Israel. The reviews cover the periods January 1, 
1992 through December 31, 1992 and January 1, 1993 through December 31, 
1993. We have completed these reviews and determine the net subsidy to 
be 3.84 ad valorem for all companies for the period January 1, 1992 
through December 31, 1992, and 5.49 percent ad valorem for all 
companies for the period January 1, 1993 through December 31, 1993. We 
will instruct the U.S. Customs Service to assess countervailing duties 
as indicated above.

EFFECTIVE DATE: June 6, 1996.

FOR FURTHER INFORMATION CONTACT: Brian Albright or Cameron Cardozo, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone: 
(202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On March 4, 1996, the Department published in the Federal Register 
(61 FR 8255) the preliminary results of two administrative reviews of 
the countervailing duty order on industrial phosphoric acid from 
Israel. The Department has now completed these administrative reviews 
in accordance with section 751 of the Tariff Act of 1930, as amended 
(the Act).
    We invited interested parties to comment on the preliminary 
results. On April 2, 1996, case briefs were submitted by the Government 
of Israel (GOI) and Rotem Amfert Negev Ltd. (Rotem), a producer of the 
subject merchandise that exported industrial phosphoric acid to the 
United States during the 1992 and 1993 review periods (respondents), 
and FMC Corporation and Monsanto Company (petitioners). On April 9, 
1996, rebuttal briefs were submitted by the respondents and 
petitioners.
    The reviews cover the periods January 1, 1992 through December 31, 
1992 and January 1, 1993 through December 31, 1993. Each review covers 
one manufacturer/exporter of the subject merchandise, Rotem, which 
accounts for all of the exports of subject merchandise from Israel to 
the United States during the review periods, and ten programs.

Applicable Statute and Regulations

    The Department is conducting these administrative reviews in 
accordance with section 751(a) of the Tariff Act of 1930, as amended 
(the Act). Unless otherwise indicated, all citations to the statute and 
to the Department's regulations are in reference to the provisions as 
they existed on December 31, 1994. However, references to the 
Department's Countervailing Duties; Notice of Proposed Rulemaking and 
Request for Public Comments, 54 FR 23366 (May 31, 1989) (1989 Proposed 
Regulations), are provided solely for further explanation of the 
Department's countervailing duty practice. Although the Department has 
withdrawn the particular rulemaking proceeding pursuant to which the 
1989 Proposed Regulations were issued, the subject matter of these 
regulations is being considered in connection with an ongoing 
rulemaking proceeding which, among other things, is intended to conform 
the Department's regulations to the Uruguay Round Agreements Act. See 
Advance Notice of Proposed Rulemaking and Request for Public Comments, 
60 FR 80 (January 3, 1995); Antidumping Duties, Countervailing Duties: 
Notice of Proposed Rulemaking and Request for Public Comments, 61 FR 
7308 (February 27, 1996).

Scope of Review

    Imports covered by these reviews 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 Customs purposes. 
The written description remains dispositive.

Calculation Methodology for Assessment and Cash Deposit Purposes

    Because Rotem is the only manufacturer/exporter of the subject 
merchandise to the United States, Rotem's net subsidy rate is also the 
country-wide rate.

Privatization

    Previously, we have found that a private party purchasing all or 
part of a government-owned company can repay prior non-recurring 
subsidies on behalf of the company as part or all of the sales price. 
Accordingly, in the preliminary results, we calculated a ratio 
representing the amount of subsidies remaining with Rotem after each 
partial privatization in 1992 and 1993. To calculate the benefit 
provided to Rotem in 1992 and 1993, we multiplied the benefit 
calculated for Encouragement of Capital Investment Law grants (the only 
non-recurring allocable subsidies) for each period by the ratio 
representing the amount of subsidies remaining with Rotem after the 
partial privatization. Our analysis of the comments submitted by the 
interested parties, summarized below, has not led us to reconsider our 
methodology from the preliminary results.

Analysis of Programs

    Based upon our analysis of the questionnaire response, 
verification, and written comments from the interested parties we 
determine the following:

I. Programs Conferring Subsidies

A. Encouragement of Capital Investments Law (ECIL) Grants

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to reconsider our findings in the preliminary results. On 
this basis, the net subsidy for this program is 3.82 percent ad valorem 
for 1992 and 5.47 percent ad valorem for 1993.

B. Long-term Industrial Development Loans

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. We received no 
comments on our preliminary results and our findings remain unchanged 
in these final results. On this basis, the net subsidy for this program 
is 0.01 percent ad valorem for 1992 and less than 0.005 percent ad 
valorem for 1993.

C. Exchange Rate Risk Insurance Scheme

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to reconsider our findings in the preliminary results. On 
this basis, the net subsidy for this program is zero for 1992 and 0.02 
percent ad valorem for 1993.

D. Encouragement of Industrial Research and Development Grants (EIRD)

    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise for the 1992 review 
period. We received no comments on our preliminary results and our 
findings remain unchanged in these final results.

[[Page 28843]]

On this basis, the net subsidy for this program is less than 0.005 
percent ad valorem for 1992.

II. Program Not Conferring Subsidies

Law for the Encouragement of the Business Sector (Absorption of 
Workers)

    In the preliminary results, we found that this program did not 
confer countervailable benefits on the subject merchandise. Since we 
received no comments on our preliminary results, our findings remain 
unchanged in these final results.

III. Programs Found Not To Be Used

    We determine that Rotem did not apply for or receive benefits under 
the following programs during the 1992 and 1993 review periods:
    A. Reduced Tax Rates under ECIL;
    B. ECIL Section 24 Loans:
    C. Preferential Accelerated Depreciation under ECIL;
    D. Labor Training Grants; and
    E. Dividends and Interest Tax Benefits under Section 46 of the 
ECIL.

Analysis of Comments

    Comment 1: Petitioners argue that the Department was incorrect in 
treating a portion of the price paid by the public for shares in Israel 
Chemicals Ltd. (ICL), the parent company of Rotem Fertilizers, Ltd., as 
partial repayment of prior non-recurring subsidies. According to the 
petitioners, Rotem clearly received subsidies that are actionable under 
U.S. countervailing duty law, and nothing happened in the partial 
privatizations that in any way reduced or diminished those subsidies. 
Rotem was the same company after the partial privatization of ICL; the 
only change that occurred as a result of privatization was in the 
makeup of the shareholders of ICL.
    To support their argument, petitioners point out that the Court of 
International Trade (CIT) recently ruled on privatization accomplished 
through the sale of stock. In British Steel PLC v. United States, 879 
F.Supp. 1254, 1277 (1995) (British Steel), the CIT stated that ``* * * 
when a bona fide purchaser in an arm's length transaction buys all or 
some of the stock of a government-owned corporation, none of the 
subsidy is repaid by that purchase.'' Under the CIT's analysis in 
British Steel, state petitioners, there clearly should be no reduction 
in prior subsidies paid to Rotem as a result of the so-called partial 
privatization.
    Petitioners continue that the Department's justification for 
treating a part of the price paid for government shares in a 
privatization as a repayment of prior subsidies is based in large part 
on the ``theory,'' elaborated upon in the Final Countervailing Duty 
Determination; Certain Steel Products from Austria, 58 FR 37262 (July 
9, 1993) (General Issues Appendix), that the new private shareholders 
will operate the newly privatized company differently from the way in 
which the government operated the old ``subsidized'' company. Much of 
this rationale is, in petitioners' view, highly speculative. Whatever 
factors motivated private parties to invest in ICL, those parties have 
no ability to change or affect the management or business operations of 
ICL, since the GOI still owns 75 percent of the outstanding shares and 
maintains absolute authority over fundamental corporate decisions. In 
conclusion, the Department should make no adjustment for any so-called 
subsidy ``repayments.''
    In rebuttal, the respondents state that the Department's repayment 
methodology was upheld in a recent decision by the Court of Appeals for 
the Federal Circuit (CAFC) in Saarstahl v. United States, Slip Op. 94-
1457, -1475 (Fed. Cir., March 12, 1996). The CAFC observed that, ``in 
the absence of explicit mandates [from Congress], Commerce's approach 
must be accorded deference.'' Also, according to respondents, the 
petitioners'' reliance on British Steel to support their position is 
misplaced. To the extent that one judge on the CIT may disagree with 
the Department's repayment methodology, that disagreement is overridden 
by the CAFC's ruling in Saarstahl, which affirmed the Department's 
repayment methodology. As a result, according to respondents, the 
petitioners' arguments should be disregarded.
    Department's Position: We disagree with petitioners. The 
Department's position on privatization was recently upheld by the CAFC 
in its Saarstahl decision, where the court affirmed the Department's 
position that privatization does not as a matter of law extinguish 
prior subsidies. We are also not deferring to the CIT's decision in 
British Steel because it does not represent a final and conclusive 
court decision and may yet be appealed. Moreover, neither the CAFC nor 
the CIT specifically addressed the issue of the Department's repayment 
methodology. Accordingly, we are following our privatization and 
repayment methodology outlined in the General Issues Appendix.
    Comment 2: The respondents state that the Department calculated 
separate ``shares of subsidies remaining after privatization'' for 1992 
and 1993 and then applied those separate calculations to each year's 
subsidies. Thus, for 1992, the Department multiplied the ECIL grants by 
94.55 percent and for 1993, by 98.80 percent. Respondents believe that 
this method overstates the share of subsidies remaining after 
privatization for 1993. The percentages should be applied cumulatively, 
not separately. Accordingly, state respondents, the effect of 
privatization is cumulative. For 1993, therefore, the share of 
subsidies remaining should be 98.90 x 94.55, or 92.73 percent. Thus, 
the Department should use 92.73 percent to calculate the share of 
subsidies remaining.
    Department's Position: In our calculations of the subsidies 
remaining after the 1993 privatization, we have taken into account the 
reduction of subsidies which occurred as the result of the 1992 
privatization. We first multiplied each allocated non-recurring subsidy 
amount by 94.55 percent, the percentage of subsidies remaining after 
the 1992 privatization. These adjusted grant amounts were summed for 
the 1993 period, and multiplied by 98.80 percent, which is the share of 
subsidies remaining after the 1993 privatization. As a result, the 
Department properly accounted for both the 1992 and 1993 repayment of 
subsidies as a result of privatization.
    Comment 3: The respondents state that the Department did not take 
into account the depreciation of the shekel in its calculation of the 
benefit from the ECIL grants. Since Rotem keeps its records in dollar 
terms (the grants are issued in shekels), the respondents argue that 
the calculation should take the erosion of the shekel into account. 
According to the respondents, the calculation should include the 
portion of principal allocated to a particular year plus dollar-linkage 
differences on that principal from the date the grant was received. 
Otherwise, the respondents conclude that the Department's methodology 
overstates the benefits from the grants. Finally, to avoid double-
counting the portion of benefit derived from the dollar-linkage, which 
has already been accounted for according to the present formula, this 
methodology should apply only to grants from 1993 forward.
    The petitioners contend that the respondents' argument ignores the 
Department's long-standing practice of not reevaluating its allocation 
of non-recurring subsidies over time based upon subsequent events. 
Depreciation (or, for that matter, appreciation) of the Israeli shekel 
is clearly one of the kinds of ``subsequent events in the marketplace'' 
that should not be taken into account in determining and allocating the 
net subsidy received by Rotem from non-recurring grants. Accordingly, 
petitioners state that

[[Page 28844]]

Rotem's so-called ``linkage'' argument must be rejected.
    Department's Position: We disagree with respondents. Rotem received 
the ECIL grants in shekels and the Department appropriately allocated 
the grant amounts to the review periods according to our variable rate 
grant methodology, which accounted for the hyperinflation rates that 
existed in Israel when some of the grants were provided. See Final 
Affirmative Countervailing Duty Determination: Certain Carbon Steel 
Butt-Weld Pipe Fittings from Israel, 60 FR 10569 (February 27, 1995). 
The fact that Rotem records the grant values in their books in dollars 
is irrelevant. As we explained in the General Issues Appendix at 
37,263, ``the countervailable subsidy (and the amount of the subsidy to 
be allocated over time) is fixed at the time the government provides 
the subsidy.'' We continued that ``the statute does not permit the 
amount of the subsidy, including the allocated subsidy stream, to be 
reevaluated based upon subsequent events in the marketplace.'' Id. As a 
result, we cannot alter our grant allocations based on the fluctuations 
in the value of the shekel against the U.S. dollar.
    Comment 4: Respondents argue that the Department's calculation 
methodology ignores the fact that Rotem's fixed assets are reduced for 
tax purposes by the value of the grants. Thus, respondents argue, 
because the true value of the grants is eroded by a concomitant tax 
increase, the grant benefit should be reduced by 36 percent, the 
current tax rate.
    Petitioners argue that the tax impact of the subsidy received by 
Rotem is irrelevant and that Rotem's argument to have the tax impact 
considered is flawed because it seeks to have the Department consider 
subsequent economic events. Petitioners state that the critical factor 
in countervailing duty law is not subsequent economic impact or 
continuing competitive benefit, but rather the receipt of a subsidy. 
Therefore, petitioners argue, the tax effect should not be considered.
    Department's Position: We disagree with respondents. In calculating 
the amount of a countervailable benefit, the Department's long-standing 
practice is to ignore the secondary tax consequences of the benefit. 
See  Sec. 355.46(b) of the 1989 Proposed Regulations. See also, e.g., 
Final Affirmative Countervailing Duty Determinations: Certain Steel 
Products from Belgium, 58 FR 37273 (July 9, 1993), and, Final 
Affirmative Countervailing Duty Determination; Fresh and Chilled 
Atlantic Salmon from Norway, 56 FR 7678 (February 25, 1991). Thus, the 
tax effect of the grants received by Rotem is not pertinent to the 
Department's calculation of the benefit.
    Comment 5: Respondents argue that the Department's rounding of the 
countervailing duty rates in the 1992 and 1993 reviews is either 
inconsistent or incorrect. Rotem's rate for 1992, 3.84 percent, is 
rounded to two decimal places. In contrast, Rotem's rate for 1993, 5.50 
percent, is either rounded to only one decimal place, or incorrectly 
rounded to two decimal places from 5.494 percent. Therefore, 
respondents argue that the Department change either the 1992 rate to 
3.8 percent, or the 1993 rate to 5.49 percent.
    Department's Position: We agree with the respondents. We have now 
accurately rounded the rate for the 1993 review to be 5.49 percent.
    Comment 6: Respondents argue that the benefit rate from the 
Exchange Rate Risk Insurance Scheme (EIS) should not be included in the 
cash deposit rate because the program was terminated in 1993. 
Respondents point to information submitted by the GOI in the 
questionnaire response demonstrating that the EIS was terminated in 
1993.
    Petitioners rebut that Rotem's receipt of residual EIS benefits 
will depend on such variables as the date of export shipment, the date 
of delivery, the date of payment, and the length of time necessary for 
EIS processing and payment. According to petitioners, in view of these 
uncertainties, which preclude the determination of a fixed date for the 
actual termination of EIS benefits to Rotem, the Department should 
continue to include EIS benefits in the cash deposit rate.
    Department's Position: The Department's practice, as outlined in 
section 355.50(d)(1)(2) of the 1989 Proposed Regulations, is not to 
adjust the cash deposit rate when it determines that residual benefits 
may continue to be bestowed under a terminated program. The Department 
noted in the 1991 review of IPA from Israel that the EIS was terminated 
in 1993. See Industrial Phosphoric Acid from Israel; Final Results of 
Countervailing Duty Administrative Review, 59 FR 5176 (February 3, 
1994). In that review, we included the rate from the EIS in the cash 
deposit rate because residual benefits continued to be available. The 
Department has verified that the GOI will continue to honor outstanding 
claims as long as they are made within three years of the date of 
export. See, Final Affirmative Countervailing Duty Determination: 
Certain Carbon Steel Butt-Weld Pipe Fittings from Israel, 60 FR 10573 
(February 27, 1995). Therefore, because residual benefits continue to 
be available under this program, we have not adjusted the cash deposit 
rate.

Final Results of Review

    For the period January 1, 1992 through December 31, 1992, we 
determine the net subsidy to be 3.84 percent ad valorem for all firms. 
For the period January 1, 1993 through December 31, 1993, we determine 
the net subsidy to be 5.49 percent ad valorem for all firms.
    The Department will instruct the U.S. Customs Service to assess the 
following countervailing duties:

------------------------------------------------------------------------
        Manufacturer/exporter                   Period            Rate  
------------------------------------------------------------------------
All companies........................  1992...................      3.84
All companies........................  1993...................      5.49
------------------------------------------------------------------------

    The Department will also instruct the U.S. Customs Service to 
collect a cash deposit of estimated countervailing duties, as provided 
by section 751(a)(1) of the Act, of 5.49 percent of the f.o.b. invoice 
price on all shipments of the subject merchandise from Israel entered, 
or withdrawn from warehouse, for consumption on or after the date of 
publication of the final results of this review.
    This notice serves as a reminder to parties subject to 
administrative protective order (APO) of their responsibility 
concerning the disposition of proprietary information disclosed under 
APO in accordance with 19 CFR 355.34(d). Timely written notification of 
return/destruction of APO materials or conversion to judicial 
protective order is hereby requested. Failure to comply with the 
regulations and the terms of an APO is a sanctionable violation.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

    Dated: May 23, 1996.
Paul L. Joffe,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-14155 Filed 6-5-96; 8:45 am]
BILLING CODE 3510-DS-P