66 FR 50613, October 4, 2001
C-357-813
Investigation
Public Document
DAS III/Office VII:DM,TG,CH,HH
September 26, 2001
MEMORANDUM TO: Faryar Shirzad
Assistant Secretary
for Import Administration
FROM: Joseph A. Spetrini
Deputy Assistant Secretary
for AD/CVD Enforcement III
SUBJECT: Issues and Decision Memorandum in the Final Affirmative
Countervailing Duty Determination: Honey from Argentina
Summary
We have analyzed the comments submitted by interested parties in the
final determination of the above-mentioned countervailing duty (CVD)
investigation for calendar year 1999, the period of investigation (POI).
Our analysis of all of the issues and programs is set forth below. In
addition, we address below the comments submitted by the petitioners and
respondents. We recommend that you approve the positions we have developed
in this memorandum.
Subsidies Valuation Information
A. Aggregation
Under section 777A(e)(2)(B) of the Act, the Department may calculate a
single country-wide rate applicable to all exporters if the Department
determines it is not practicable to determine individual countervailable
subsidy rates due to the large number of exporters or producers involved
in the investigation or review.
In Honey from Argentina: Preliminary Affirmative Countervailing Duty
Determination and Alignment with Final Antidumping Determination on Honey
from the People's Republic of China, 66 FR 14521 (Preliminary
Determination), we explained our reasoning for conducting this
investigation on an aggregate basis. See Preliminary Determination, 66 FR
at 14522-23. We have received no comments from the parties regarding this
issue. Therefore, for purposes of this final determination, for the
reasons set forth in the Preliminary Determination, we are following the
statutory provision that permits the Department "to determine a single
countrywide subsidy rate to be applied to all exporters and producers."
See section 777A(e)(2)(B) of the Act.
B. Green Box Claims
On November 22, 2000, the GOA submitted a letter claiming "green box"
status for twenty-seven of the programs under investigation. Section
771(5B)(F) of the Act instructs the Secretary to treat as non-
countervailable domestic support measures that are provided with respect
to certain agricultural products listed in Annex 1 of the WTO Agreement on
Agriculture (Agriculture Agreement), provided such measures conform to the
criteria of Annex 2 of the same agreement. Furthermore, in accordance with
section 351.522(a) of the Department's regulations, the Department will
determine that a particular domestic support measure conforms fully to the
"green box" criteria in the Agriculture Agreement if it finds that the
measure (1) is provided through a publicly-funded program (including
government revenue foregone) not involving transfers from consumers; (2)
does not have the effect of providing price support to producers; and (3)
meets the relevant policy-specific criteria and conditions laid out in
Annex 2 of the Agriculture Agreement. Paragraph 2 of Annex 2 of the
Agriculture Agreement covers policies involving expenditures in relation
to programs which provide services or benefits to the agriculture or rural
community. According to section 351.301(d)(6) of the Department's
regulations, a claim that a particular agricultural support program should
be accorded "green box" status under section 771(5B)(F) of the Act must be
made by the competent government with the full participation of the
government authority responsible for funding and/or administering the
program. The GOA's request made reference to the specific paragraph(s) of
Annex 2 with which the particular programs were claimed to conform. The
GOA subsequently reduced to three the number of programs for which it
claims "green box" status: PROMEX Consortium for Honey Exportation
(PROMEX); PROAPI; and, the Law 22,913 Emergency Aid program. The "green
box" issues with respect to each of these programs are discussed in the
relevant program-specific sections below.
C. Allocation Period
In the Preliminary Determination, we identified the allocation period in
accordance with section 351.524(d)(2) of the Department's regulations
which directs us to rely on the average useful life (AUL) of renewable
physical assets for the industry concerned, as listed in the Internal
Revenue Service's (IRS) 1977 Class Life Asset Depreciation Range System,
as updated by the Department of Treasury. No parties provided information
or argument about the AUL issue. Therefore, we are using the 10-year AUL
as reported in the IRS tables to allocate any non-recurring subsidies
under investigation.
D. Benchmark Interest Rates and Discount Rates
In selecting benchmark interest rates for use in calculating the benefits
conferred by the various loan programs under investigation, we would
normally look for the interest rate a borrower had received on a
comparable commercial loan. See 19 CFR 351.505(a)(3)(i). However, since we
are conducting this investigation on the aggregate level, and we are not
examining individual companies, we have sought information on the national
average interest rates for comparable commercial loans. See 19 CFR
351.505(a)(3)(ii). The GOA provided information compiled by the Central
Bank of Argentina showing the national average interest rates for various
types of financing: fixed-rate and variable-rate; and denominated in
Argentine pesos or in foreign currency. For each loan program found to be
countervailable, we have selected a benchmark from the information
provided depending upon the terms and characteristics of the particular
loan program.
Section 351.524(d)(3) of the Department's regulations directs us
regarding the selection of a discount rate for the purposes of allocating
non-recurring benefits over time. Since we are conducting this
investigation on an aggregate basis under section 777A(e)(2)(B) of the
Act, we are using as the discount rate the average cost of long-term fixed-
rate loans in Argentina as reported by the GOA. See section
351.524(d)(3)(i)(B).
E. Denominators
In the Preliminary Determination, we explained in detail our methodology
for estimating the value of total honey production in Argentina during the
POI. 66 FR at 14524. While the GOA has provided additional information and
argument related to the value of domestic production, we do not consider
that information to provide the basis for changing the manner in which we
valued the domestic production denominator. See Department's Position on
Comment 2, below. We continue to use, as our denominator when calculating
the subsidy from federal domestic programs, the total production value
which we estimated using the production volume provided by the GOA prior
to the Preliminary Determination. We have used the relevant provincial
production value as our denominator when calculating the subsidy from
domestic subsidies provided at the provincial level. We have used the
total or provincial export values, as reported, as our denominators when
calculating the subsidy from programs we have determined to be export
subsidies.
As we did in the Preliminary Determination, to determine the final
subsidy from each provincial program that is attributable to exports of
honey to the United States we applied the following methodologies: (1) for
provinces for which we have reported export data, we weight-averaged the
subsidies from each provincial program by multiplying each subsidy by that
province's share of total honey exports, by value, to the United States
during the POI; and (2) for provincial domestic subsidy programs in
provinces that do not have reported exports of honey to the United States
during the POI, but do have reported honey production during the POI, and
for which the GOA did not specifically report that province had no exports
to the United States, we divided the benefits by the value of total
Argentine honey production during the POI.
II. Programs Determined to Confer Subsidies
A. Federal Programs
Argentine Internal Tax Reimbursement/Rebate Program (Reintegro)
The Reintegro program entitles Argentine exporters to a rebate of many
internal or domestic taxes levied during the production, distribution, and
sales process on many exported products. The Reintegro program provides a
cumulative tax rebate paid upon export, calculated as a percentage of the
"free on board" (FOB) invoice price of an exported product. Exports of
bulk and processed honey have been eligible for Reintegro since at least
1996.
In the Preliminary Determination, we found that the Reintegro program is
specific and provides a financial contribution. We found the Reintegro
program to be specific because receipt of the Reintegro is contingent upon
export performance. See section 771(5A)(B) of the Act. We found that the
Reintegro program provides a financial contribution since the GOA makes a
direct transfer of funds to exporters. See section 771(5)(D)(i) of the
Act.
In order to determine if the Reintegro program conferred a
countervailable benefit, we would normally examine whether the amount
remitted or rebated to Argentine honey exporters exceeds the amount of
prior-stage cumulative indirect taxes paid on inputs that are consumed in
the production of the exported honey, making normal allowances for waste.
See section 351.518(a) of the Department's regulations. If the amount
rebated exceeds the amount of prior-stage cumulative indirect taxes paid
on inputs that are consumed in the production of the exported honey, the
excess amount is found to be the benefit.
However, there is an exception to this rule under section 351.518(a)(4)(i-
ii) of the Department's regulations. Section 351.518(a)(4)(i-ii) of the
Department's regulations states that the Department will consider the
entire amount of the tax rebate or remission to confer a benefit unless
the Department finds that:
(i) The government in question has in place and applies a system or
procedure to confirm which inputs are consumed in the production of the
exported products and in what amounts, and to confirm which indirect taxes
are imposed on these inputs, and the system or procedure is reasonable,
effective for the purposes intended, and is based on generally accepted
commercial practices in the country of export; or
If the government in question does not have a system or procedure in
place, if the system or procedure is not reasonable, or if the system or
procedure is instituted and considered reasonable, but is found not to be
applied or not to be applied effectively, the government in question has
carried out an examination of actual inputs involved to confirm which
inputs are consumed in the production of the exported product, in what
amounts and which indirect taxes are imposed on the inputs.
In the Preliminary Determination, we found that the GOA did not
demonstrate that it had in place a system or set of procedures to confirm
which inputs are consumed in the production of the exported products and
in what amounts, and to confirm which indirect taxes are imposed on these
inputs. As such, we preliminarily determined that the requirements for non-
countervailablity set forth in section 351.518(a)(4)(i) of the
Department's regulations were not met.
In Exhibit 9 of its January 2, 2001, questionnaire response, the GOA
submitted a report entitled "Reintegros for Argentine Honey Exports,"
prepared at the request of the GOA in December 2000 by EcoLatina, a
consulting firm (EcoLatina Report). The EcoLatina Report's goal was to
determine the proportion of accumulated indirect tax incidence in the
chain of value for bulk honey produced and distributed in Argentina in
relation to bulk honey's FOB export value.
In the Preliminary Determination, we found that the EcoLatina Report was
not a "reasonable examination" of actual inputs involved to confirm which
inputs are consumed in the production of exported bulk and processed
honey, in what amounts, and which indirect taxes are imposed on those
inputs. As such, we found that the requirements for non-countervailablity
set forth in section 351.518(a)(4)(ii) of the Department's regulations
were not met. Accordingly, because we found the GOA had not met the
requirements for non-countervailablity set forth in section
351.518(a)(4)(i-ii), we found the entire amount of the Reintegro for bulk
and processed honey to be countervailable. Because we found the entire
Reintegro countervailable under section 351.518(a)(4)(i-ii), we did not
address the Reintegro program's countervailablity under section
351.518(a)(2) of the Department's regulations.
Since the Preliminary Determination, the GOA has provided additional
information regarding the Reintegro Program. In addition, the Department
conducted verification of the GOA's questionnaire responses regarding the
Reintegro Program. The Department's findings at verification are detailed
in the memorandum to file "Countervailing Duty Investigation of Honey from
Argentina Verification Report for the Argentine Internal Tax
Reimbursement/ Rebate Program (Reintegro)," dated August 23, 2001
(Reintegro Verification Report). Based on further analysis of the record
evidence and the results of verification, we determine that the GOA was
unable to demonstrate that it had a reasonable and effective system as set
forth in section 351.518(a)(4)(i) of the Department's regulations. See the
Department's Position on Comment 4 below.
Moreover, a thorough analysis of the EcoLatina Report confirmed that the
report: 1) was not based on a representative sample of Argentine
beekeepers; 2) did not test the inputs and indirect tax incidence
identified in the report against actual company experience; 3) overstated
the costs on which it based its calculation of the indirect tax incidence
for bulk honey, as well as the taxes paid on the listed inputs; and, 4)
did not isolate indirect taxes. As such, the EcoLatina Report cannot be
considered a reliable examination as required by section 351.518(a)(4)(ii)
of the Department's regulations. Based on an analysis of the record
evidence and the results of verification, the Department continues to find
that the entire Reintegro for bulk and processed honey confers a
countervailable benefit. See the Department's Position on Comment 5 below.
Because the Reintegro is calculated as a percentage of the FOB value of
the exports, the percentage rebated serves as the subsidy rate. To
calculate a single subsidy rate for subject merchandise, which includes
both bulk and processed honey, we weight-averaged the Reintegro rates for
bulk and processed honey by the FOB value of exports to the United States
of bulk and processed honey during the POI. Thus, we determine that
Reintegro provided a countervailable subsidy of 4.16 percent ad valorem.
As noted in the Preliminary Determination, in April 2000, the Reintegro
rate for bulk honey increased to 5.4 percent while the rate for processed
honey increased to 12 percent. These April 2000 changes in the Reintegro
rates for bulk and processed honey constituted program-wide changes in
accordance with sections 351.526(b)(1-2) of the Department's regulations.
Therefore, consistent with section 351.526(c)(1) of the Department's
Regulations, for the purposes of establishing the cash deposit rate of
estimated countervailing duties we weight-averaged the Reintegro rates
then in effect (5.4 percent for bulk honey and 12 percent for processed
honey) by the FOB value of exports of bulk and processed honey to the
United States during the POI. The cash deposit rate applicable to this
program is 5.48 percent ad valorem.
2. BNA Pre-Financing of Exports Regime for the Agriculture Sector
The Pre-Financing of Exports Regime for the Agriculture Sector program
was established by the Banco de la Nacion de Argentina (BNA), a government-
owned bank, pursuant to Annex B to the BNA Circular No. 10715/I. This line
of credit is offered by BNA for the financing of agricultural products for
exports. All applicants must submit an irrevocable letter of credit opened
to his/her order, or a firm offer or firm purchase order stating the terms
and conditions of the export transaction, or a confirmation obtained from
the intervening broker. This line of credit is offered in U.S. dollars, at
a variable interest rate tied to LIBOR plus a spread added by the BNA. The
additional spread is calculated based on the credit risk of the borrower
as determined on a case-by-case basis by the BNA. Financing under this
line of credit is available for up to 80 percent of the FOB value of the
export goods. Financing can be granted for a maximum period of 180 days
with an extension of 90 days. During the POI, there were loans outstanding
to honey exporters under this program. These lines of credit are specific
within the meaning of section 771(5A)(B) of the Act because they are
contingent upon export performance; there is a financial contribution
through the provision of loans, under section 771(5)(D)(i) of the Act.
There is a benefit to the extent that the interest rates on these loans
are lower than the interest rates on comparable commercial loans. See
section 771 (5)(E)(ii) of the Act.
The GOA reported that there were five loans granted under this program to
honey producers that were outstanding during the POI. Two of the loans
were shown to have been provided for honey exports to a country other than
the United States; two of the loans were shown to have been provided for
honey exports to the United States. The fifth loan was not tied to an
export destination; however, it is included in our benefit calculation as
discussed below.
To determine the benefit for the two loans that were provided for honey
exports to the United States, we applied our standard short-term loan
methodology. We multiplied the difference between the actual interest rate
and the benchmark interest rate by the loan principal amount and the
number of days outstanding. As discussed in the "Benchmark Interest Rates
and Discount Rates" section, above, we chose for our benchmark interest
rate a rate that most closely resembles the terms of this program. We then
divided the sum of the benefits by the value of honey exports to the
United States during the POI.
For the fifth loan, we determined the benefit in the same way we
determined the two loans tied to U.S. exports. However, because the
documentation reviewed at verification did not indicate the destination of
the export shipment financed, we were unable to tie this loan to U.S.
exports or exports to any other particular destination. See Memorandum to
the File, Countervailing Duty Investigation: Honey from Argentina (C-357-
813): Verification Report for the Government of Argentina, dated August
29, 2001, (Verification Report) at 39. Therefore, we divided the benefit
from this loan by the value of total exports of honey from Argentina to
all destinations. See 19 CFR 351.525(b)(2),(4); Countervailing Duties:
Final Rule, 63 FR 65348, 65400 (November 25, 1998) (Preamble). We then
summed the resulting subsidy rates to determine the countervailable
subsidy rate from the BNA Prefinancing of Exports Regime for the
Agriculture Sector to be 0.042 percent ad valorem.
3. Regional Productive Revitalization: National Program for the Promotion
and Development of Local Productive Initiative (Dinamizacion Productiva
Regional Nacional de Promocion y Fomenta de la Iniciativa Productiva Local)
The GOA established the "Regional Productive Revitalization: National
Program for the Promotion and Development of Local Productive Initiative"
(Regional Productive Revitalization Program) to strengthen the economies
of small and medium-sized towns in the Argentine interior. The program was
established in 1995 with funds from the national treasury allocated for
use by the provinces. The objective of the program was to address
financial emergencies in the provinces. Although the program was
administered at the national government level, it was established to
address what was recognized as regional economic devastation in the
provinces. The program discontinued granting new credits in the beginning
of 1999. However, the program remains operational as long as the loans
granted continue to be serviced. The program provided credit for the
acquisition of capital goods, technology, working capital, training needs,
and technical assistance.
In our Preliminary Determination, we found this program de jure
regionally-specific under section 771(5A)(D) of the Act. We also found
that this program provided a financial contribution in the form of a
transfer of funds, as defined by section 771(5)(D)(i) of the Act. See 66
FR at 14521. We found that a benefit had been conferred under section
771(5)(E) of the Act because there was a difference in the amount the
recipient of the loan paid on the loan and the amount the recipient would
have paid on a comparable commercial loan during the POI. See 66 FR at
14521. Based on the results of verification, we continue to find this
program countervailable on the same basis we found it countervailable in
the Preliminary Determination.
For the Preliminary Determination, in the absence of information showing
principal and interest payments, we calculated the loan benefits based on
the assumption that the total loan principal was outstanding during the
POI. See 66 FR at 14528. At verification, we examined the loan files for
the two loans which had been provided to honey producers. For one loan, we
established that principal payments had been made and we have adjusted our
benefit calculation accordingly. We have calculated the benefit for the
loan by multiplying the principal outstanding during the POI by the
difference between the loan interest rate and the benchmark interest rate.
We chose for our benchmark interest rate a rate from information provided
by the Central Bank of Argentina that most closely resembles the terms of
this program. See "Benchmark Interest Rates and Discount Rates,"above.
For the other loan, documentation examined at verification showed that no
principal or interest payments had been made and that program officials
had no expectation that the loan would be repaid. Therefore, for purposes
of this final determination, we consider that this loan has been forgiven
during the POI and we are treating this loan forgiveness as a grant in
accordance with section 351.508(a) of the Department's regulations. We
have determined the value of the loan forgiveness by accruing interest for
each year from the year the loan was granted to the POI. To calculate the
benefit, we have allocated the resulting grant amount over the AUL of 10
years. See section entitled "Allocation Period," above. We have used an
appropriate discount rate, as discussed in the "Benchmark Interest Rates
and Discount Rates" section, above. We then divided the two benefit
amounts attributable to the POI by the value of honey produced in
Argentina during the POI to calculate an ad valorem subsidy rate of 0.112
percent.
B. Provincial Government Programs
Buenos Aires Honey Program
In 1996, the Province of Buenos Aires created the Buenos Aires
(Bonaerense) Honey Development Program to increase provincial honey
production, and improve production efficiency and quality. Through the
program, the Banco de la Provincia de Buenos Aires (Banco Provincia), a
bank owned by the government of the Province of Buenos Aires, provides two
types of credit lines to honey producers in the province: the Line of
Credit for Working Capital; and the Line of Credit for the Acquisition of
Capital Goods. Eligibility for both credit lines requires honey producers
to enroll in the Province's Registry of Honey Producers. In addition, the
province provides technical assistance to beekeepers and honey producers.
Line of Credit for Working Capital
The Line of Credit for Working Capital enables beekeepers to finance
their operating expenses. There are three elements of this line of credit
for which beekeepers can apply. The first type of loan is for exploitation
purposes. Beekeepers applying for this loan must have a minimum of fifteen
beehives. This line offers US$15.00 per active producing beehive with no
limit on the number of beehives. The term for repayment of the loan may
not exceed nine months from the date of the loan, and principal and
interest are payable at the end of the term. This line of credit also
allows pre-production cash advances for the purpose of acquiring inert
material for beehives. Financing in this case is limited to 50 percent of
the value of the goods to be acquired, not exceeding US$30 per beehive,
and interest rates are variable. The second type provides pre-export
financing at a lower interest rate. The third type of loan has a 180-day
maturity, and interest rates are between 13 and 16 percent. Applicants for
this type of loan are small producers, not exporters or "acopiadores"
(middle men).
In our Preliminary Determination, we found these loans to be de jure
specific under section 771(5A)(D)(i) of the Act because they were limited
to honey producers; we found the pre-export financing to confer an export
subsidy because it was limited to exporters under section 771(5A)(B) of
the Act. We found that a financial contribution was conferred in the
transfer of funds through loans under section 771(5)(D)(i) of the Act. We
determined the benefit by comparing the interest rate charged on loans
provided under this program to the commercial interest rates for loans
that most closely resemble loans under this program under section
771(5)(E)(ii) of the Act. See 66 FR at 14532. Based on the information in
the record, including the results of verification, which show that the
characteristics of these loans were developed to meet the needs of
beekeepers/honey producers (Verification Report at 28-29), we continue to
find these three lines of credit countervailable for the same reasons
articulated in the Preliminary Determination.
For those loans provided for exports, we multiplied the loan balance
outstanding during the POI by the difference between the interest rate and
the benchmark (see "Benchmark Interest Rates and Discount Rates" section,
above), and the number of days the loans were outstanding during the POI,
and divided this amount by the value of honey exports from the province of
Buenos Aires. We then determined the subsidy attributable to subject
merchandise from this program by multiplying the calculated subsidy rate
by the percentage that honey from the Province of Buenos Aires represents
of total Argentine honey exports to the United States during the POI.
For all other loans under this line of credit, we multiplied the balance
outstanding during the POI by the difference between the interest rate and
the benchmark (see "Benchmark Interest Rates and Discount Rates" section,
above), and the number of days the loans were outstanding during the POI,
and divided this amount by the value of honey production in Buenos Aires
during the POI. We then determined the subsidy attributable to subject
merchandise from this program by multiplying the calculated subsidy rate
by the percentage that honey from Buenos Aires represents of total exports
of honey to the United States. See section entitled "Denominators," above.
We summed the subsidies from these lines of credit to determine and
overall countervailing duty rate under this program of 0.003 percent ad
valorem.
Line of Credit for the Acquisition of Capital Goods
The Line of Credit for the Acquisition of Capital Goods under the Buenos
Aires Honey Program was implemented by the Banco Provincia through
Circular "A" No. 13,854 in July 1997, pursuant to an agreement between the
Banco Provincia and Banco de Inversion y Comercio Exterior S.A. (BICE),
and utilizes funding provided through the BICE Norms 006 and 006/1. The
BICE is a GOA entity which functions as a "second-tier" bank, lending
money to other banks (both commercial and other government-owned or
controlled banks) for the purpose of implementing government lending
programs.
Beekeepers are eligible to receive financing for the acquisition of
capital goods including beehives, new nuclei, inert material, and
extraction and processing material, among other goods. Financing for this
line of credit carries a maximum repayment term of five years. Interest
rates are variable and are based on LIBOR, plus a spread added by the
BICE, and a spread added by the Banco Provincia. The spreads given by both
the BICE and Banco Provincia vary depending upon the repayment schedule of
the loan.
In the Preliminary Determination, we found this financing to be de jure
specific under section 771(5A)(D)(i) of the Act because it is limited to
honey producers, and to provide a financial contribution in the transfer
of funds through loans under section 771(5)(D)(i) of the Act. We
determined whether there was a benefit by comparing the interest rate
charged on loans provided under this program to commercial interest rates
and therefore found a benefit, in accordance with section 771(5)(E)(ii) of
the Act. See 66 FR at 14532.
Based on the information in the record, including the results of
verification, which shows that this line of credit is specific to honey
producers, we continue to find this line of credit countervailable for the
same reasons articulated in the Preliminary Determination.
Because these are long-term loans, we calculated the benefit by
multiplying the outstanding loan balance during the POI by the difference
between the interest rate charged under the program and the benchmark
interest rate (see "Benchmark Interest Rates and Discount Rates" section,
above) in accordance with section 351.505(a)(2)(iii) of the Department's
regulations, and divided this amount by the value of honey production in
the Province of Buenos Aires during the POI. We then determined the
subsidy attributable to subject merchandise from this program by
multiplying the calculated subsidy rate by the percentage that honey from
the Province of Buenos Aires represents of total honey export to the
United States during the POI. See section entitled "Denominators," above.
On this basis, we find the countervailable subsidy to be 0.117 percent ad
valorem.
c. Technical Assistance
At verification, we learned that in addition to the lines of credit
available under the Buenos Aires Honey Program, the provincial Agriculture
Ministry also provides technical assistance, training in the art of
beekeeping, at no charge to honey producers. See Verification Report at
27. Buenos Aires officials were unable to quantify the value of such
assistance provided during the POI, but they did indicate that there are
ten technicians who provide this assistance. Based on information provided
at verification, we find that this program is de jure specific under
section 771(5A)(D)(i) of the Act because it is limited to honey producers.
Furthermore, because this program provides services, in the form of
technical assistance to honey producers, we find that there is a financial
contribution under section 771(5)(D) of the Act. A benefit is conferred
under section 771(5)(E)(iv) of the Act because services are being provided
free of charge, which we determine constitutes less than adequate
remuneration. We value the benefit, in the absence of more precise
information, as the salaries of the ten technicians whose work is devoted
to providing technical assistance to honey producers in Buenos Aires. We
have used the average annual provincial government salary, as discussed at
verification (see Id.), and multiplied that by ten to account for the ten
technicians. We then divided that amount by the value of honey production
in the Province of Buenos Aires during the POI. We then determined the
subsidy attributable to subject merchandise from this program by
multiplying the calculated subsidy rate by the percentage that honey from
the Province of Buenos Aires represents of total honey exports to the
world during the POI. See section entitled "Denominators," above. On this
basis, we find the countervailable subsidy to be 0.045 percent ad valorem.
2. Province of Chaco Line of Credit Earmarked for the Honey Sector
The Ministry of Production in the province of Chaco, through Provincial
Law No. 4320, issued Decree No. 2076/96 in December 1996 to establish an
emergency line of credit following a natural disaster that affected the
agricultural production of the province. Through this decree, the Ministry
allocated funds specifically to assist the beekeeping sector. Financing is
provided by the Nuevo Banco del Chaco S.A. (Chaco Bank), acting as an
agent of the Government of Chaco Province. Terms and conditions for this
line of credit are in accordance with Resolution No. 196/96. To be
eligible for this line of credit, beekeepers must have no outstanding debt
with the Provincial Government. Each producer can receive a maximum loan
of 10,000 pesos and the principal is repayable in four equal annual
installments following a two-year grace period (interest is payable during
the grace period). Funding is utilized for the purpose of acquiring
capital goods for beekeeping activity. The interest rate is 12 percent
plus applicable taxes and fees. In September 1999, an additional
allocation of funds was made in accordance with Resolution No. 253/99, and
offered under the same loan terms and conditions as described above.
In our Preliminary Determination, we found that the program did not
qualify as disaster relief under section 357.502(f) of the Department's
regulations because the line of credit was created specifically to assist
the beekeeping sector of the Province of Chaco. We further found this
program countervailable because it is specific to the honey sector in
accordance with section 771(5A)(D)(i) of the Act, and provides a financial
contribution in the form of loans funded by the provincial government
within the meaning of section 771(5)(D)(i) of the Act. We calculated the
benefit using the standard loan methodology and found a benefit to exist
within the meaning of section 771(5)(E)(ii) of the Act. In the absence of
information indicating any repayments of principal, we assumed the entire
loan balance remained outstanding. See 66 FR at 14533. Based on our
verification of this program, we continue to find that it is
countervailable.
After the Preliminary Determination, the GOA provided, and we verified,
information showing the actual outstanding loan balances. Thus, we have
adjusted our calculations to take account of this information. As we did
for our Preliminary Determination, see 66 FR at 14533, we have identified
the benchmark rate as the interest rate for these loans which most closely
resembles loans a honey producer could obtain on the market. See 19 CFR
351.505; Preamble, 63 FR 65348, 65363 (November 25, 1998). Because these
are long-term loans, we calculated the benefit by multiplying the
outstanding loan balance during the POI by the difference between the
interest rate charged under the program and the benchmark interest rate
(see "Benchmark Interest Rates and Discount Rates," above) in accordance
with section 351.505(a)(2)(iii) of the Department's regulations, and
divided this amount by the value of honey production in the Province of
Chaco during the POI. We then determined the subsidy attributable to
subject merchandise from this program by dividing the amount allocable to
the POI by the total value of Argentine honey production during the POI.
See section entitled "Denominators,"above. On this basis, we find the
countervailable subsidy to be 0.027 percent ad valorem.
3. Province of San Luis Honey Development Program
The San Luis Honey Development Program (Honey Program) was created in
1990 by the Ministry of Social Development of the province of San Luis.
The Honey Program promotes honey production to supplement the income of
disadvantaged people in underdeveloped areas in the province of San Luis.
In our Preliminary Determination, we found that the Honey Program provided
assistance in two forms: leasing agreements and credit lines.
a. Leasing Agreements
The leasing component of the program was carried out in two different
stages each governed by a contract for the rental of hives. The first
stage was implemented by forming groups of 10 people. Each group received
10 beehives per year for three years. In addition, each group was provided
extraction equipment and training. Repayment for the extraction equipment
and beehives was made to the Bank of San Luis. The repayment term for the
beehives was 24 installments over eight years with a one-year grace
period.
In our Preliminary Determination, we determined that the leasing
component of the Honey Program was de jure specific under section
771(5A)(D)(i) of the Act because it was only available to the honey
industry in the Province of San Luis and that it provided a financial
contribution under section 771(5)(D)(i) of the Act. See 66 FR at 14534.
At verification, San Luis officials were unable to substantiate the
amounts actually spent on the leasing agreements that were reported in the
response. See Verification Report at 31-36. Instead, they provided
alternative source documentation from the province's "Cuenta General Del
Ejercicio" (General Accounts) for the years 1994 through 1999. San Luis
officials also provided documentation showing that the repayment terms
were 15 payments over five years, instead of 24 payments over eight years,
and that the applicable interest rate was five percent. However, San Luis
officials were unable to demonstrate that any program participants had
repaid any principal or interest as dictated by the terms of the leasing
agreements. See Id.
Based on the results of verification, we find it appropriate to change
our calculation of the benefit arising from the leasing component. For the
years 1998 and 1999, San Luis officials were able to provide information
from the General Accounts showing the actual expenditures for the
provision of beekeeping equipment under this program. Because San Luis
officials were unable to provide actual expenditures for beekeeping
equipment for the years 1994 through 1997, we have calculated the amount
of those expenditures in the following manner. We averaged the ratios of
the 1998 and 1999 Honey Program beekeeping equipment expenditures to the
total expenditures for the Honey Program in 1998 and 1999. We then
multiplied this average ratio by the total expenditures for each year 1994
through 1997.
In addition, the results of verification indicate that program
participants have not paid any interest or repaid any principal on these
leases. Because these leases essentially function as loans, and the
results of verification indicate that there is no expectation by
Provincial officials that the loans will be repaid in the future, see Id.,
we consider that these loans have been forgiven during the POI. See
section 351.508(a) of the Department's Regulations. To value the loan
forgiveness, we have taken each year's leasing amount, for the years 1994
through 1998, plus the accrued interest through 1999, when the loans were
effectively forgiven. We have summed those amounts and added the leasing
amount for 1999. We allocated this sum over the 10-year average useful
life of assets (AUL) used in the honey industry. See "Benchmark Interest
Rates and Discount Rates," and "Allocation Period" sections, above. We
have divided the amount allocable to the POI by the total value of
Argentine honey production during the POI. We therefore determine that the
countervailable subsidy to be 0.020 percent ad valorem.
b. CFI Lines of Credit
In our Preliminary Determination, we found that the Federal Investment
Board (CFI) Credit for Small Business Ventures program also made lines of
credit available through the San Luis Honey Development Program. See
discussion in "Credit for Small Business Ventures"section, below. In our
Preliminary Determination, we found that these CFI lines of credit were de
jure specific under section 771(5A)(D)(i) of the Act because these CFI
lines of credit appeared to been offered as part of the San Luis Honey
Development Program and thus, were available only to the honey industry in
the Province of San Luis. See 66 FR at 14534, 14535.
Based on the results of verification, we have determined that the San
Luis Honey Development Program did not have any provisions for lines of
credit. See Verification Report at 31. Although the CFI did make some
loans through the Credit for Small Business Ventures Program to the honey
sector in San Luis, this was done independently of the San Luis Honey
Development Program. Moreover, there is no evidence that provincial
government officials in San Luis make any decisions regarding CFI Credit
for Small Business Ventures Program loans to any sector including honey.
As such, for our final determination, we find that the CFI Credit for
Small Business Ventures Program loans to the honey sector in San Luis are
not part of the San Luis Honey Development Program. They are instead part
of the CFI Credit for Small Business Ventures Program which is discussed
in more detail in the "Programs Found Not to Confer Subsidies" section,
below.
Programs Determined Not to Confer Subsidies
Federal Programs
1. BNA Line of Credit for Working Capital and Investment Purposes
This line of credit is offered to businesses in all economic sectors in
Argentina, and to agricultural and livestock producers associated with
agricultural cooperatives. In the Preliminary Determination, we found that
these lines of credit are not de jure specific or de facto specific under
section 771(5A)(D)(iii) of the Act because these credit lines were used by
a broad range of borrowers, both within and outside the agricultural
sector, and there was no apparent concentration of lending to any group of
borrowers. Thus, there was no basis for concluding that benefits under
this program were specific to an enterprise, industry or group of
enterprises or industries under section 771(5A) of the Act. As a result,
we preliminarily determined that the lines of credit offered under the BNA
Line of Credit for Working Capital and Investment Purposes are not
countervailable subsidies under section 771(5) of the Act. See 66 FR at
14535.
Since our Preliminary Determination, the GOA has provided information
showing that there were three loans granted to the honey industry under
this line of credit that were outstanding during the POI. However, in this
final determination, based on information provided since the Preliminary
Determination and examined during verification, we determine that there is
still no basis for finding either de facto or de jure specificity under
section 771 (5A) of the Act. As a result, we find that the BNA Line of
Credit for Working Capital and Investment Purposes is not countervailable.
2. Global Credit Program for Micro and Small Businesses
The Global Credit Program was begun in 1992 when loan agreements were
signed with the Inter-American Development Bank. The Global Credit Program
for Micro and Small Businesses is administered by the Ministerio de
Economia y Obras y Servicios Publicos (The Ministry of Economy and Public
Services or MECON) through the Secretaria de la Pequena y Mediana Empresa
(the Argentine Small Business Administration or the SEPyME). The SEPyME
was established in 1992 to serve new and existing micro- and small
businesses involved in primary or industrial production, or services. The
goals of the program are to increase the access of micro- and small
businesses to credit and technical assistance in an attempt to raise
employment and income levels through increased productivity, and to
develop and strengthen the technical support groups that supply training,
technical assistance and other services to micro- and small businesses.
The Global Credit Program provides services for all borrowers from micro
industries from different sectors. Micro and small businesses that have
sales of less than two hundred thousand pesos/dollars per year without VAT
and employ fewer than 20 people were eligible to receive assistance under
the Global Credit Program.
In the Preliminary Determination, we found that this program was neither
de jure nor de facto specific, based on the fact that these lines of
credit were used by a broad range of borrowers and there was no apparent
concentration of lending to any category of borrowers. See 66 FR at 14535.
The information reviewed at verification confirmed the wide sectoral
distribution of lending under this program. See Verification Report at 15,
16. Therefore, we find that the Global Credit Program is not
countervailable.
3. Credit for Small Business Ventures
The Federal Investment Board (CFI) administers the Credit for Small
Business Ventures program. The CFI is an assembly of provincial
representatives established by an agreement among Argentina's provinces,
the municipality of Buenos Aires, and the National Territory of Tierra del
Fuego, Antarctic, and the Islands of the South Atlantic. The CFI promotes
the development of small business ventures through the financing of
economically viable projects designed to increase productivity and
employment, and improve income distribution. Eligibility for this program
is limited to applicants whose net worth does not exceed US$200,000 and
who are planning economically viable projects designed to increase
production and generally improve the welfare of the population. The CFI
can finance up to 100 percent of the investment for the acquisition of
capital goods, working capital, and training. The repayment term for
capital goods financing is up to four and one half years and the repayment
term for working capital financing is up to two and one half years.
In the Preliminary Determination, we found this program to be not
countervailable because it was neither de jure or de facto specific to an
enterprise or industry or group thereof. Under section 351.502(e) of the
Department's regulations, a subsidy is not specific solely because it is
limited to small firms. In addition, the GOA provided information which
shows that small companies in many industries received CFI financing and
which demonstrates that no industry is a predominant user of the program,
or has received a disproportionately large share of the loans. See 66 FR
at 14535. At verification, we reviewed source material which confirmed the
information provided for the record. See Verification Report at 9.
Therefore, for purposes of this final determination, we determine the CFI
Credit for Small Business Ventures Program to be not countervailable.
4. National Income Tax Exemption Pursuant to Article 20(1) of Law 20,628
In our Preliminary Determination, we found that this program was not
countervailable.
There is no evidence on the record or arguments from the parties that
would lead us to reconsider our determination. Therefore, we continue to
find this program not countervailable.
5. Law 22,913 Emergency Aid/Emergency Agricultural and Livestock Law
In 1983, Law 22,913 established an agricultural disaster relief program
administered by the National Commission on Agricultural Emergencies
(CNEA). The purpose of the program is to provide financial, tax and
transportation relief to areas designated to be in a state of emergency or
state of disaster. The Secretary of Agriculture heads the implementation
of the emergency assistance. Types of emergencies eligible for assistance
under this program include extraordinary or unpredictable climatological,
or physical disasters such as floods, earthquakes, and volcanos.
Biological disasters such as disease or pests also renders farmers
eligible to receive emergency assistance.
We preliminarily determined that Law 22,913 is not countervailable in
accordance with section 351.502(f) of the Department's regulations. See
Preliminary Determination at 14536. According to section 351.502(f) of the
Department's regulations, the Department will not find disaster relief
countervailable when "such relief constitutes general assistance available
to anyone in the area affected by the disaster." At verification, we
reviewed information that confirmed that the Emergency Aid is provided in
a manner consistent with section 351.502(f) of the Department's
regulations.
Therefore, for purposes of this final determination, we find that
assistance provided under Law 22,913 Emergency Aid/Emergency Agricultural
and Livestock Law is not countervailable. The GOA claimed that Law 22,913
was entitled to "green box" treatment and was therefore not
countervailable. However, because we determine that this program is not a
countervailable subsidy under section 351.502(f) of the Department's
regulations, we do not need to examine the GOA's "green box" claim.
6. BICE Norm 007: Line of Credit Offered to Finance Industrial Investment
Projects, and Projects to Restructure and/or Modernize the Argentine
Industry
Through Norm 007, the BICE offers a line of credit to finance industrial
investment projects, directed to both the production sector and the
services sector. Financing is available for all economic sectors for up to
90 percent of the total value of the eligible projects, for either the
acquisition of capital goods and new or second-hand productive goods, or
investment projects. Credit under this program was available to projects
requiring between US $100,000 and US $10 million for a period of up to 10
years, including a two-year grace period on principal. Interest rates were
determined on a case-by-case basis.
In our Preliminary Determination, we did not make a finding with respect
to whether this program is countervailable because we did not have enough
information on the record to do so. See 66 FR at 14539. In response to a
supplemental questionnaire sent out after our Preliminary Determination,
the GOA provided information showing that one loan to the honey industry
was granted in 1997. We examined documents showing that the Norm 007 line
of credit was made up of two parts, for the financing of capital goods and
for new or second-hand productive goods, and for investment projects for
all economic sectors. This line of credit has been used by a broad range
of industries.
At verification, we explored whether provision 2.3 of the Norm 007
regulations, which provides for the construction of warehouses for
products for sale in foreign markets, renders Norm 007 financing specific
to exports. We are satisfied with the information that was provided at
verification that the receipt of loans under this line of credit is not
contingent upon export performance or anticipated exportation. The Norm
007 regulations specify that virtually all types of economic activity are
eligible for financing under this line of credit. Funding for the
construction of warehouses, as described in provision 2.3, is one of many
types of industrial investment projects that BICE Norm 007 line of credit
finances. Nothing in the record supports a finding that the loan granted
in 1997 to the honey industry was tied to export performance. We therefore
find that the BICE Norm 007 is not countervailable because this line of
credit is neither de jure nor de facto specific within the meaning of
section 771(5A) of the Act. However, if a countervailing duty order is
issued and administrative reviews are requested, we intend to examine
whether the honey industry has received any loans under BICE Norm 007 for
export-related purposes.
PROAPI
The GOA established PROAPI as a project for honey sector research,
development, and technology transfer. PROAPI was created by the National
Institute for Agricultural and Livestock Technology (INTA) in 1995, and
was initially funded by both INTA and the Argentine Technology Fund
(FONTAR), an IDB-funded project. FONTAR provided a loan to PROAPI through
the BNA, while INTA supplied an equivalent amount of in-kind services,
equipment and overhead expenses.
According to the GOA, PROAPI has been self-sustaining since 1998, and now
finances itself entirely through the sale of goods and services produced
from the project. These goods and services are reportedly sold at market
rates. Furthermore, according to the GOA, the terms of the IDB/FONTAR loan
initially funding PROAPI require that PROAPI achieve a twelve percent rate
of return, and that, because of this, PROAPI must make returns on sales
greater than its costs.
The goods provided to honey producers under PROAPI during the POI were
fertilized queen bees and a disease control product called "BeeVar." The
services provided during the POI were inspection and certification
services for live beehive materials and sponsorship for trade fairs.
However, when PROAPI sponsored trade fairs, it did so in name only; PROAPI
did not provide benefits to individual trade fair participants or groups.
As explained at verification, this sponsorship amounted to inclusion of
the PROAPI logo, as an imprimateur, in the materials prepared by the trade
show participants, who were producing and selling propolis, not honey.
According to the GOA, PROAPI is the only Argentine supplier of BeeVar, and
of inspection and certification services for live beehive material.
In accordance with section 771(5B)(F) of the Act, the Secretary will
treat as non-countervailable domestic support measures that are provided
with respect to certain agricultural products listed in Annex 1 of the
Agriculture Agreement, provided such measures conform to the criteria of
Annex 2 of the same agreement ("green box" subsidies). Furthermore, in
accordance with section 351.522(a) of the Department's regulations, the
Department will determine that a particular domestic support measure
conforms fully to the "green box" criteria in the Agriculture Agreement if
it finds that the measure (1) is provided through a publicly-funded
program (including government revenue foregone) not involving transfers
from consumers; (2) does not have the effect of providing price support to
producers; and (3) meets the relevant policy-specific criteria and
conditions laid out in Annex 2 of the Agriculture Agreement. Paragraph 2
of Annex 2 of the Agriculture Agreement covers policies involving
expenditures in relation to programs which provide services or benefits to
the agriculture or rural community. According to section 351.301(d)(6) of
the Department's regulations, a claim that a particular agricultural
support program should be accorded "green box" status under section
771(5B)(F) of the Act must be made by the competent government with the
full participation of the government authority responsible for funding
and/or administering the program. The GOA claimed that the entire PROAPI
program was non-countervailable as a "green box" subsidy.
Since the Preliminary Determination, we have received no additional
information or arguments from the parties with respect to the provision of
inspection and certification services and sales of BeeVar. Therefore for
the reasons stated in the Preliminary Determination, see 66 FR at 14530-
31, we continue to find that the provision of inspection and certification
services is entitled to "green box" treatment under section 771(5B)(F) of
the Act and that the sales of BeeVar are not made for less than adequate
remuneration.
However, with respect to the third element of PROAPI, sales of fertilized
queen bees, we stated in the Preliminary Determination, that it is not
clear whether goods could be considered "benefit" as described in
Paragraph 2 of Annex 2 of the Agriculture Agreement. Even if goods could
be considered "benefits" under paragraph 2 of Annex 2 of the Agriculture
Agreement, such benefits must meet the policy-specific conditions set
forth in subparagraphs (a) through (g). Based upon our review, nothing in
any of these paragraphs should be construed to cover the provision of a
key component in the production of a specific product. The provision of a
good, such as fertilized queen bees, involved in the production of honey,
cannot be considered to be research (subparagraph a), pest and disease
control (subparagraph b), training (subparagraph c), extension and
advisory services (subparagraph d), inspection services (subparagraph e),
marketing and promotion services (subparagraph f), or infrastructural
services (subparagraph g). Accordingly, in our Preliminary Determination,
we found that the provision of fertilized queen bees cannot meet the
"green box" requirements set forth in Annex 2, and we analyzed whether the
provision of queen bees is countervailable under the countervailing duty
statute.
The provision of fertilized queen bees under PROAPI is specific to the
honey industry pursuant to section 771(5A)(D)(iii) of the Act. The
provision of fertilized queen bees provides honey producers with a
financial contribution through the provision of goods and services under
section 771(5)(D)(iii) of the Act.
As noted above, section 771(5)(E) of the Act provides that in the case of
goods or services provided, a benefit is conferred where such goods and
services are provided for less than adequate remuneration. In accordance
with section 351.511(a)(2)(i) of the Department's regulations, the
adequacy of such remuneration is determined in relation to prevailing
market conditions for the goods or services in the country which is
subject to the investigation. In the Preliminary Determination, we found
that PROAPI's sales of fertilized queen bees were made for less than
adequate remuneration because, although the GOA had provided narrative
information regarding market prices of fertilized queen bees, this
information was undocumented and it showed that the average price at which
fertilized queen bees are sold is higher than the prices charged by
PROAPI. Since the Preliminary Determination, the GOA has provided
documentation of this narrative information, including invoices showing
the prices at which fertilized queen bees were sold. This information was
discussed and examined at verification. See Verification Report at p. 27.
The documentation shows that prices for fertilized queen bees ranged from
7.5 to 10 pesos during the POI. PROAPI's price for fertilized queen bees
during the POI was 10 pesos. Therefore, we now determine that PROAPI's
sales of fertilized queen bees were not made for less than adequate
remuneration in accordance to section 771(5)(E)(iv) of the Act, and
therefore this program is not countervailable.
B. Provincial Government Program
Exemption from Municipal Gross Income Tax Contingent on Export Activity
Pursuant to Article 116(12) of Law 150 (Buenos Aires Gross Income Tax
Exemption)
Article 109 of Law 150 (the Buenos Aires Tax Code), imposes a turnover
tax upon each transaction of commerce, industry, professional services, or
any other business activity which occurs in the City of Buenos Aires. The
GOA has stated that the gross income tax on sales of bulk and processed
honey occurring within the City of Buenos Aires is 1.5 percent. Article
116(12) of the Buenos Aires Tax Code exempts export revenue from the local
turnover tax.
Section 351.517(a) of the Department's regulations states that in the
case of an exemption upon export of indirect taxes, a benefit exists only
to the extent that the Department determines that the amount exempted
"exceeds the amount levied with respect to the production and distribution
of like products when sold for domestic consumption." In our Preliminary
Determination, we found that information on the record of this review
indicated that the turnover tax is an indirect tax levied on business
transactions for export and that the amount exempted by the Buenos Aires
Gross Income Tax Exemption does not exceed the amount levied with respect
to the production and distribution of like products when sold for domestic
consumption. See Preliminary Determination at 14534. As such, the
Department preliminarily determined that, for purposes of this
investigation, the Buenos Aires Gross Income Tax Exemption did not confer
a countervailable benefit. We also noted that if we had found the
Reintegro to be not countervailable, this exemption from a final stage
indirect tax would need to be reexamined to ensure that exporters in the
city of Buenos Aires were not receiving both a rebate of these same
indirect taxes under the Reintegro Program as well as an exemption of
these indirect taxes upon export.
At verification, the GOA confirmed that section 116, subsection 12 of the
Fiscal Code of municipality of Buenos Aires, exempted income obtained from
exports from the turnover tax. Because we have found the entire amount of
the Reintegro to be countervailable, we find that this exemption from an
indirect tax does not confer a countervailable benefit.
Programs Determined to be Not Used
A. Federal Programs
1. BICE Norm 011: Financing of Production of Goods Destined for Export
Through Norm 011, the BICE offers a line of credit which finances the
production of goods destined for export as well as the transformation,
modernization, repair or assembly of goods imported under the temporary
import regime. As a second-tier bank, the BICE offers this credit line to
the "Participating Agents" (the first-tier banks) which the BICE considers
eligible to participate. BICE determines the interest rate that it will
charge to the Participating Agent, and the interest rate ultimately
charged to the borrower is determined by the Participating Agent.
We preliminarily determined that this program was not used based on
information supplied by the GOA indicating that the BICE did not grant any
loans through this line of credit to honey producers or exporters that
were outstanding during the POI. See Preliminary Determination at 14537.
At verification, we confirmed that there were no loans outstanding to
honey producers or exporters under this program during the POI. See
Verification Report at 8. Therefore, for purposes of this final
determination, we find that this program was not used.
2. BNA Line of Credit to the Agricultural Producers of the Patagonia
(Regulation Annex to Circular BNA No. 10,111/1)
The BNA offers a line of credit to the agricultural producers in the
Patagonian region (the provinces of Rio Negro, Neuquen, Chubut, Santa
Cruz, Tierra del Fuego, Antarctica, and the islands of the South Atlantic)
to promote and finance investments oriented to diversifying production
activities in eligible provinces. This line of credit is limited to those
producers who had previously obtained loans pursuant to the credit line
"Supervised Loans for the Agricultural and Agro-Industrial Production"
that was implemented by the Board of Directors of the BNA in May 1992.
This line of credit offers long-term loans generally granted for
investment purposes.
We preliminarily determined that this program was not used during the POI
based on information provided by the GOA. See Preliminary Determination at
14537. At verification, we confirmed that honey producers and exporters
did not receive this financing. See Verification Report at 42. We
therefore continue to find that this program was not used by honey
producers and exporters during the POI.
3. BNA Financing for the Acquisition of Goods of Argentine Origin and
Line of Credit for the Acquisition of Industrial and Agricultural
Machinery, Silos and Transportation Vehicles
In our Preliminary Determination, we found that the BNA Financing for the
Acquisition of Goods of Argentine Origin and the Line of Credit for the
Acquisition of Industrial and Agricultural Machinery, Silos and
Transportation Vehicles were countervailable as import substitution
subsidies under section 771(5A)(C) of the Act. See Preliminary
Determination at 14527, 14528, 14530. In the Preliminary Determination, we
estimated the value of loans provided under these lines of credit using
facts available because the GOA did not provide any information on the
loans provided to the honey sector. Subsequent to the Preliminary
Determination, the GOA reported that these two programs were not used by
honey producers or exporters during the POI.
At verification, BNA officials explained the process they used to
determine that there were no loans to honey producers during the POI, and
we were able to test the reasonableness of the process. See Verification
Report at 42, 43. Based on the results of verification, we find that there
were no loans to the honey sector outstanding during the POI that were
provided under the BNA Financing for the Acquisition of Goods of Argentine
Origin or the Line of Credit for the Acquisition of Industrial and
Agricultural Machinery, Silos and Transportation Vehicles. As a result,
these programs were not used during the POI.
4. "Production Pole" Program for Honey Producers
The GOA established the "Production Pole" program to provide assistance
to small businesses pursuant to Decree 1304/94. The Production Pole
program was created to integrate different producers and manufacturers of
each of the production sectors in the Argentine provinces. The program
attempts to stimulate business initiatives with the ultimate purpose of
enhancing the quality of the regional producers and increasing their
products' marketability. Businesses interested in participating in a
production pole enter into an agreement with the national and the
provincial government and the respective municipality. The administering
authority provides technical advice, grants for capital goods and working
capital.
According to the GOA, there is one production pole that benefitted the
honey sector which was established prior to the enactment of Decree
1304/94. However, pursuant to section 5 of Decree 1304/94, certain groups
that had entered into agreements similar to those under the Production
Pole program are eligible for benefits under Decree 1304/94. A preexisting
honey production pole in the municipality of Castelli, Chaco Province
(Castelli Honey Production Pole), is one of the groups that qualified
under section 5 of Decree 1304/94.
In our Preliminary Determination, we found that the Castelli Honey
Production Pole only received grants under this program during 1994. See
66 FR at 14537. These were grants for working capital and grants for the
acquisition of capital equipment. Such grants are treated as non-recurring
and are allocated over time, provided they do not meet the exception
outlined in section 351.524(b)(2) of the Department's regulations, i.e.,
the grant amount is not greater than 0.5 percent of total sales in the
year of receipt. Because this is a GOA program, the appropriate
denominator for conducting the 0.5 percent test is the value of Argentine
production (as a proxy for sales) in the year the grants were approved.
Since we did not have that information on the record, we used as our
denominator the value of Argentine honey production during 1999. See 66 FR
at 14537, 14538. The grants under the "Production Pole" program were
significantly less than 0.5 percent and therefore would have been expensed
in the year of receipt, 1994. Therefore, we preliminarily determined that
the Production Pole for Honey program was not used by producers or
exporters of honey to the United States during the POI. See 66 FR 14537,
14538.
At verification, we were unable to examine documents showing the
termination of the Production Pole program. However, even if we find the
benefits under the Castelli Honey Production Pole countervailable, the
value of the grants under this "Production Pole" does not change from our
Preliminary Determination. As a result, the grant amounts are
significantly less than 0.5 percent of the value of total honey production
during 1999 (as a proxy for 1994). See Preliminary Determination at 14537,
14538. Therefore, the "Production Poles" program was not used during the
POI.
5. Enterprise Restructuring Program (PRE)
The Secretary for Small and Medium-Sized Enterprises administers the PRE
which was established in 1997 by the Government of Argentina. The purpose
of the program is to assist small and medium-sized businesses in
increasing competitiveness. Companies receive direct support, information
gathering (through a business information system made available
nationwide), and business re-orientation support. The PRE program also
makes management consultants available to small and medium-sized
businesses.
The PRE is available to any Argentine small and medium-sized enterprise
that meets PRE qualifications, possesses a tax identification number, and
whose imported products do not represent more than 25 percent of its
sales. Assistance under this program is not limited to any sector or any
geographic region.
We found that this program was not used in our Preliminary Determination
because no disbursements had been made before March 2000, see 66 FR at
14538. At verification, we confirmed that no funds were disbursed under
this program during the POI. See Verification Report at 17. Therefore, we
determine that this program was not used by honey producers or exporters
during the POI.
6. Government Backed Loan Guarantees (SGR)
Under Law 24,467, the GOA established the Reciprocal Guarantee Company
(SGR). The SGR is essentially a new type of legal entity under Argentine
corporate law which can be formed for the specific purpose of reducing the
credit risks confronting small and medium-sized businesses. While several
GOA agencies have regulatory authority over the SGRs, none of them have
direct administering authority over them. The SGRs consist of small and
medium-sized enterprises and large companies and banks that join together
for the purpose of minimizing the credit risks facing the small and medium-
sized companies who are part of the SGR. The purpose of the SGR is to
issue certificates of guarantee to the small and medium-sized business
members of the SGR so that those companies have greater access to sources
of financing. There have been only five SGRs organized under Law 24,467,
none of which involve honey producers or exporters. We found in our
Preliminary Determination, see 66 FR at 14538, that this program was not
used by honey producers or exporters during the POI. For purposes of this
final determination, we continue to find that this program was not used
during the POI.
7. Fundacion Export*Ar
The GOA's Fundacion Export*Ar (Export*Ar) program was founded in 1993;
its objective is the promotion of Argentine exports. To achieve this
objective, the program provides advice to small and medium-sized
businesses, supplies information on international markets and purchasers,
and organizes participation in trade missions, fairs, seminars and
meetings. All information services provided under Export*Ar are offered
free of charge, but participants in trade fairs must pay for their
participation. Such participants must pay all costs associated with their
participation, along with at least fifty percent of the cost of their
exhibition space. Export*Ar pays the remainder of the costs.
The GOA reported that, during the POI, general export promotion
information, in the form of profiles and studies of potential markets, and
reports on trade opportunities, was made available to members of the honey
industry by Export*Ar. A honey producer/exporter also participated in one
Export*Ar-sponsored overseas trade show during the POI. This trade show
was held in the United States.
Based on verification, we find that the information services provided by
Export*Ar constitute general export promotion activities, and, as such are
not countervailable in accordance with section 351.514 of the Department's
regulations. With regard to the financial assistance provided to honey
producers/exporters during the POI to attend an overseas trade fair, we
preliminarily determined that such financial assistance was not part of
general export promotion activities, and was thus a countervailable export
subsidy within the meaning of section 771(5) of the Act. See Preliminary
Determination at 14527. This financial contribution provided a benefit
equivalent to the amount of the grant, and the grant was specific within
the meaning of section 771(5A)(B) of the Act because receipt of the grant
was tied to the anticipated exportation of honey to the United States. See
Preliminary Determination at 14527.
In the April 30, 2001 supplemental questionnaire response, the GOA
provided documentation supporting their claim that participants in trade
fairs pay their own expenses. At verification, we examined this
information. We found that a honey producer was among the eight businesses
using the exhibition space which had been rented by Pro-Mendoza. Pro-
Mendoza is the province of Mendoza's export promotion program. The total
space used by Pro-Mendoza was 18 square meters. We verified that Pro-
Mendoza paid for the space it used. Although the GOA had reported that all
of the space used by Pro-Mendoza was used by the honey producer, the
documentation showed that there was only one honey producer among the
eight businesses using the space. Although the record does establish that
Fundacion Export*Ar received payment from Pro-Mendoza, we do not have any
information regarding the specifics of Pro-Mendoza's operations or related
to whether Pro-Mendoza received payment from the eight participants.
However, the total value of any potential benefit to the honey producer
utilizing this space is so small that it would have no measurable impact
on the overall subsidy rate (i.e., the rate is significantly less than
0.001 percent). See e.g. Live Swine From Canada, Final Results of
Countervailing Duty Administrative Review, 63 FR 47255, 47236 (September
4, 1998) (Swine). Accordingly, we have not included the benefits from
Fundacion Export*Ar in the calculated subsidy rate for the POI.
B. Provincial Government Programs
1. Province of Chubut Honey Program under Law No. 4430/98
Law No. 4430/98 was promulgated in 1998 to provide support to the
provincial honey industry, instructing executive government agencies to
implement programs to develop honey production, standardization,
processing, industrialization, marketing, use of products and byproducts,
and to support and encourage research, experimentation and training geared
toward the development and use of apiarian byproducts. The only portion of
Law No. 4430/98 which has thus far been implemented is Article 5.9, which
was implemented in 1999 via Decree 491. This article authorizes measures
necessary for the opening of lines of credit in official government and
private regional banks, with promotional interest rates and loan
structures in alignment with the goals of commercial and industrial honey
production. On March 24, 1999, CORFO, the agency which implements
agricultural policy in Chubut, issued Resolution 057/99, creating the
Honey Activity Development Program to provide the credit lines approved
under Decree 491. This program provides lines of credit for the
acquisition of beekeeping material; interest-free loans are provided for
five-year terms, with principal repayments due annually. Given the stated
repayment terms, the first repayments of principal on loans issued under
this program were not due until June 2000.
In accordance with 351.505(b) of the Department's regulations, benefits
resulting from countervailable loans are considered to have been received
in the year in which the firm otherwise would have had to make a payment
on the comparable commercial loan. Because the repayment terms on long-
term commercial loans would not likely differ significantly from repayment
terms on these loans, and because the first payments on these loans were
scheduled in June 2000, after the POI, we determine that no benefits were
received from these loans during the POI. Therefore, for purposes of this
final determination, we find this program to be not used during the POI.
2. Province of Santiago del Estero: Creditos de Confianza (Trust Credits)
In 1997, the Government of Santiago del Estero authorized the Trust
Credits program. The program was administered by the Government of
Santiago del Estero through the private sector entity Grupo Taxco S.A. The
line of credit provided under this program is designed for low-income
honey producers. However, there were no exports to the United States of
honey produced in the Province of Santiago del Estero. Therefore, for
purposes of this final determination, we find this program not used by
honey producers or exporters during the POI.
Entre Rios Honey Program: Law No. 7435/84
The Entre Rios Honey Program is a provincial honey development program
originally established in 1984. As detailed in Law No. 7435/84, the
program was designed to provide a wide range of services and support for
promoting honey production in the province. However, the only function
performed by the Government of Entre Rios (GER) pursuant to Law No.
7435/84 is that it puts on presentations and exhibitions related to
beekeeping activities throughout the province.
The GOA provided information showing the total expenditures by the
Province of Entre Rios for putting on these representations and
exhibitions. These expenditures were so small that the total value of any
potential benefit to honey producers in Entre Rios utilizing this space
would have no measurable impact on the overall subsidy rate (i.e. the rate
is less than 0.001 percent). See Swine, 63 FR at 47236. Accordingly, we
have not included the benefits from the Entre Rios Honey Program in the
calculated subsidy rate for the POI.
Programs Determined to be Terminated
Federal Programs
1. PROMEX Consortium for Honey Exportation
The GOA's PROMEX export promotion program was created in 1990 with joint
funding from the World Bank and the Inter-American Development Bank (IDB).
PROMEX provided export promotion assistance to small and medium-sized
businesses. PROMEX was terminated in 1998, and the last grant provided
under this program was distributed in September 1997. We verified the
termination of this program and found no evidence of a replacement
program. See Verification Report at 23.
Export promotion assistance is normally treated as a recurring benefit.
Since the last grant under this program was distributed in 1997, there are
no residual benefits after the date of the grant distribution. Therefore,
the termination of this program constitutes a program-wide change in
accordance with section 351.526 of the Department's regulations. We note
that the GOA submitted a "green box" claim for this program, but since we
have determined that it has been terminated, we need not address this
issue for purposes of this final determination.
2. Regional Promotional Scheme-Reimbursement "Patagonico": Exemption of
Import Duties on Capital Goods
The GOA administered a regional promotion regime for provinces in the
Patagonian region, including 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. The program, implemented via Decree 2332/83, provided
exemptions or deductions from import duties on capital goods utilized in
certain industrial activities. The program was terminated as of December
31, 1983.
Even assuming that benefits provided under this program were non-
recurring and should be allocated over the honey industry's 10-year AUL,
there would be no benefits from this program allocable to the POI.
Therefore, we determine that this program has been terminated in
accordance with section 351.526 of the Department's regulations.
Provincial Program
Formosa Honey Program/Undomesticated Bee Development Project
In the Province of Formosa, the SubSecretary of Planning and Investment
Projects administered the Undomesticated Bee Development Project. This
program was funded by the Food and Agriculture Organization (FAO) and was
established in 1990 to help rural low income families increase their
standard of living by providing them with beekeeping activities.
Based on our analysis of the information on the record, we find that the
project stopped receiving funds in 1992, ceased operations in 1996, and
that no funds were made available for this program after 1996.
Accordingly, we find this program to be terminated in accordance with
section 351.526(d) of the Department's regulations.
VI. Programs Determined Not to Exist
A. Federal Programs
1. BNA Warrant-Based Export Financing
The warrant is a financing instrument that was created by Law 9643/14 in
1914 to secure commercial lending transactions. A warrant and a
certificate of deposit can be issued upon the storage of products in a
certified warehouse, under certain conditions. Both the certificate of
deposit and the warrant are negotiable instruments. The certificate of
deposit is a legal title to the stored goods. A warrant is a financing
instrument attached to the certificate of deposit, which may be used to
secure commercial financing. Once detached from the certificate of
deposit, the warrant can be pledged as collateral, thereby perfecting a
security interest in the stored goods. A warrant credit is only granted
for goods held physically in the warehouse, as long as they are
commodities. Commodities are considered by the Central Bank as preferred
guarantees. A warrant can be pledged as collateral for a financing
transaction if the owner of the instrument endorses it to the lending
institution. For transactions using warrants as a guarantee, a term of up
to 180 days is allowed. Law 9643 indicates that warrant-based financing
can be used as a form of export prefinancing. In our Preliminary
Determination, we found that the BNA Warrant-Based Export Financing
program is a de jure specific export subsidy pursuant to section
771(5A)(B) of the Act. See Preliminary Determination at 14529.
At verification, we examined information showing that the warrant is a
negotiable instrument and is used in the same manner. Banks generally
consider a warrant to be a guarantee, like any other negotiable
instrument. Therefore, the use of warrants is not a program but a
financial instrument that the BNA and other banks in Argentina use as a
source of guarantees. Furthermore, we find that the warrant is generally
used in securing financing and is not solely an instrument for export
financing. We therefore determine that the BNA Warrant-Based Export
Financing Program does not exist.
2. Honey-Specific Line of Credit Program for the Pre-Financing of
Development Expenses Associated with Export Sales
We initiated on the Honey-Specific Line-of-Credit Program for the Pre-
Financing of Development Expenses Associated with Export Sales. However,
we have found that the Honey-Specific Line-of-Credit Program for the Pre-
Financing of Development Expenses Associated with Export Sales is the same
as one of the lines of credit available under the Buenos Aires Honey
Program. See Preliminary Determination at 14539. See the discussion in the
section on "Buenos Aires Honey Program" above. Therefore, we find that
this program does not exist.
B. Provincial Government Programs
1. La Pampa Lines of Credit
We initiated on La Pampa Lines of Credit. However, we found La Pampa
Lines of Credit are the same lines of credit as those offered under the
Federal Investment Board's (CFI's) "Credit for Small Business Ventures"
program. See Preliminary Determination at 14539. We have obtained no
additional information which would lead us to alter this determination.
Therefore, for purposes of this final determination, we find that this
program does not exist.
2. Province of San Luis: Creditos de Confianza (Trust Credits)
In our Preliminary Determination, we found that this program does not
exist. See 66 FR at 14539. We have obtained no additional information
which would lead us to alter this determination. Therefore, for purposes
of this final determination, we find that this program does not exist.
VII. Analysis of Comments
Comment 1: Initiation Standard
The Government of Argentina (GOA) argues that the petition which was
filed on September 30, 2000, was deficient in that it did not address the
provisions of Annex 2 of the Agriculture Agreement. The GOA maintains that
consistency with Annex 2 is one of the basic elements which must be
alleged in a petition for the imposition of countervailing duties on an
agricultural product listed in Annex 1 of the Agriculture Agreement (honey
is therein listed). Further, the
Department's failure to require petitioners to address the provisions of
Article 6 and Annex 2 is
contradictory to the international obligations, outlined in Article 13 of
the Agreement, to show "due restraint . . . in initiating any
countervailing duty investigation" if the subsidies alleged comply with
Article 6 of the Agreement.
The GOA notes that the statute requires petitioners to allege the
elements necessary for the imposition of countervailing duties, and that
the allegation must be accompanied by information reasonably available to
petitioners; the GOA argues that the petition fails on both counts.
According to the GOA, the petition alleged the elements required in a
countervailing duty investigation of a non-agricultural product, but
failed to address the relevant exception for agricultural products
provided in section 771(5B)(F) of the Act: "{d}omestic support measures
that are provided with respect to the products listed in Annex 1 to the
Agreement on Agriculture, and that the administering authority determines
conform fully to the provisions of Annex 2 to that Agreement, shall be
treated as non-countervailable."
Because honey is listed in Annex 1, the GOA argues that petitioners had a
burden to address this exception and allege that the subsidies provided to
honey producers do not comply with the provisions of Annex 2. Further,
petitioners' failure to meet this statutory obligation cannot be cured by
the Department after initiation; the statute is clear that the obligations
to allege the necessary elements and provide the information reasonably
available lie solely with petitioner. The Department's obligation under
the statute, the GOA maintains, is "to determine whether the petition
alleges the elements necessary for the imposition of a duty." Section
771a(c)(1)(A) of the Act. The GOA contends that the statute does not
permit the Department to overlook these requirements at the initiation
stage in order to develop information; the requirements for initiation and
preliminary determination are separate in the relevant WTO agreements and
the U.S. statute and the Department must meet the requirements at every
stage.
Finally, the GOA argues, the United States has the additional obligation
under the Agriculture Agreement to show due restraint in initiating
countervailing duty investigations if the subsidies conform fully with the
provisions of Article 6 of the Agreement.
Petitioners argue that the "due restraint" requirement does not apply
under the circumstances of this case. Petitioners cite to the Statement of
Administrative Action which indicates the interpretation that the "due
restraint" requirement "entail{s} a commitment to refrain from self-
initiating CVD investigations with respect to products subject to Annex 2
domestic support measures during {the implementation} period." Uruguay
Round Trade Agreements, Texts of Agreements, Implementing Bill, Statement
of Administrative Action, and Required Supporting Statements, H.R. Doc.
103-316 at 938, 1994 (SAA). Thus, according to petitioners, this
requirement only applies to investigations which are self-initiated by the
Department and because the instant countervailing duty investigation was
initiated based on a petition filed by the domestic industry, the "due
restraint" requirement was not relevant to the Department's initiation.
Further, petitioners note another reason that the "due restraint"
provision is irrelevant to the Department's initiation is the fact that
many of the subsidies in this case are export subsidies and petitioners
interpret Article 13 as suggesting that this provision is limited to
domestic subsidies.
Petitioners note the statutory requirements that a petition allege "the
elements necessary for the imposition of a countervailing duty . . .
accompanied by information reasonably available to the petitioner
supporting those allegations," (Section 771(b)(1) of the Act) and the
absence of statutory requirements regarding the elements of Annex 2 of the
Agriculture Agreement at the initiation stage. Petitioners argue that the
categories of non-countervailable subsidies listed in Section 771(5B) of
the Act, including the "green box" criteria, do not constitute a basic
element of countervailability controlling the allegations in a petition
and the Department's analysis at initiation. Rather, according to
petitioners, the statute, at Section 771(5B)(A), states that the issue of
whether the subsidies in question constitute non-countervailable subsidies
must be determined in an investigation. Petitioners argue that whether a
particular subsidy satisfies the criteria of Annex 2 is a substantive
question that is reserved for an investigation, in which the Department
gathers the information necessary to conduct the thorough analysis that
"green box" claims require. This analysis, according to petitioners, is
clearly distinguishable from the necessarily cursory analysis which the
Department performs in the 20-day period prior to initiation, and which
was appropriately and lawfully performed by the Department for the
Preliminary Determination.
Finally, petitioners contend that the GOA's arguments wrongly place the
burden of making the "green box" showing on petitioners, a burden which
petitioners believe the Department's regulations show belongs to the
respondent government: "{a} claim that a particular subsidy or subsidy
program should be accorded non-countervailable status under . . . section
771(5B)(F) of the Act ("green box" subsidies) must be made by the
competent government with the full participation of the government
authority responsible . . ." 19 CFR 351.301(d)(6). Given that petitions
need only include "information reasonably available" to petitioners,
petitioners argue that it would be illogical and unreasonable to require
petitioners to make the detailed showing required by the "green box"
provisions of Annex 2 on the basis of limited public information.
Petitioners conclude that the GOA essentially argues for a new initiation
standard for cases involving agricultural products, a standard which would
require a complete Annex 2 analysis by petitioners and the Department
prior to initiation. In petitioners' view, this is contrary to the statute
and the Department's regulations which make clear that the Annex 2 "green
box" criteria are separate and distinct exceptions to the basic elements
of countervailablity and that these criteria must be addressed by the
responding government rather than by petitioners and the Department at
initiation.
Department's Position:
We agree, in part, with the petitioners. To the extent that the GOA
raises arguments concerning the application of the Agriculture Agreement,
these arguments are addressed by reference to the U.S. countervailing duty
law, implemented by the Uruguay Round Agreements Act which is consistent
with the United States' international obligations under the WTO.
The Statement of Administrative Action ("SAA") sets forth the
understanding of the United States with respect to what is meant by
showing due restraint in initiating any countervailing duty procedures.
"The Administration understands this requirement to entail a commitment to
refrain from self-initiating CVD investigations with respect to products
subject to Annex 2 domestic support measures during {the nine year period
commencing in 1995}." SAA at 938. Because this was not a self-initiation,
the due restraint provision of the Agriculture Agreement does not apply.
The Department properly initiated this investigation under U.S. law.
Under section 702(b)(1) of that Act, "{a} countervailing duty proceeding
shall be initiated whenever an interested party . . . files a petition
with the administrating authority, on behalf of an industry, which alleges
the elements necessary for imposition of {countervailing duties}." The
petition must be "accompanied by information reasonably available to the
petitioner supporting those allegations." See Id. Under section 701(a) of
the Act, the petitioner must allege that there is "a countervailable
subsidy." Section 771(5)(A) of the Act defines a countervailable subsidy
as a subsidy which is specific under section 771(5A) of the Act. A subsidy
occurs when a government or public entity of a country provides a
financial contribution, which provides any form of income or price support
within the meaning of Article XVI of the GATT 1994, or makes a payment to
a funding mechanism to provide a financial contribution, or entrusts or
directs a private entity to make such a financial contribution, and this
financial contribution confers a benefit. Section 771(B) of the Act. The
petitioners addressed all of these elements in the petition. See, e.g.,
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)).
The GOA argues that the petition should have addressed whether the
subsidies constituted "green box" subsidies under Annex 2 of the
Agriculture Agreement. However, pursuant to the Department's regulations,
whether a subsidy qualifies as a "green box" subsidy is not an issue to be
addressed by the petition. Rather, section 351.301(d)(6) of the
Department's regulations clearly states that it is the respondent
government that must make "{a} claim that a particular subsidy should be
accorded non-countervailable status . . . under section 771(5B)(F) of the
Act . . . ." (1) This regulatory requirement reflects the fact that the
responding government is the party in control of and which has access to
the information necessary for a "green box" analysis. The government must
make such a claim 40 days before the scheduled date for the preliminary
determination in a countervailing duty investigation. 19 CFR
351.301(d)(6)(i). Therefore, this is not an issue that the petitioners are
required to address in the petition, but one which the respondent
government is properly required to address during an investigation.
Indeed, as the investigation progressed, the relevance of the GOA's
claims under of Annex 2 of the Agriculture Agreement diminished. While
initially claiming that twenty-seven programs qualified for "green box"
treatment in a November 22, 2000 letter, the GOA reduced that claim to
only three programs in a January 18, 2001 response. With respect to the
three remaining programs, PROMEX, PROAPI, and the Law 22,913 Emergency Aid
Program, as discussed above in the relevant program-specific sections, we
have found the Law 22,913 Emergency Aid Program to be not countervailable
under a regulatory exception for disaster relief programs; we have found
PROMEX to be terminated; and we have found that certain elements of the
PROAPI program meet the "green box" criteria and are therefore not
countervailable, and that one element of PROAPI is not countervailable
because the goods provided under this program are not provided for less
than adequate remuneration.
Comment 2: Denominator
The GOA argues that the Department should modify the figure used in the
calculations for the denominator representing the value of total domestic
honey production. This figure, the GOA maintains, was corrected during
verification and verified.
Department's Position:
At verification, the GOA did provide additional information regarding the
value of domestic honey production during the POI. See Verification Report
at 1-2. However, the sources and assumptions on which this information was
based were undocumented. The GOA is essentially arguing for a denominator
which is built up by adding to the volume and value of exports a volume
for domestic consumption based on the 1988 agricultural census. The GOA
valued this volume of domestic consumption by reference to an average per
kilo value. However, this value, which is more than double the per unit
F.O.B. value of exported honey, and which the GOA explained resulted from
the Ministry of Agriculture's semiannual survey of the most important
honey packers, was supported only with anecdotal information which was
either dated April 1999 or undated. Id. at 2. The GOA did not provide a
document which showed the annual average price of honey. We have several
concerns with respect to the information provided. First, the starting
point for the GOA's exercise is not the production volume by province
which the GOA provided in the questionnaire response (which was also not
completely verifiable). Second, the source of the information regarding
domestic honey consumption is more than ten years old, and thus, in our
view, is not usable because it is so old. Third, the per-unit value which
the GOA advocates using to value the "constructed" domestic production
volume does not represent an annual average. Therefore, we do not believe
it is appropriate to adjust the domestic production figures for use as our
denominator when calculating the countervailable subsidy from domestic
subsidy programs.
Comment 3: Argentine Internal Tax Reimbursement/Rebate Program (Reintegro)
Petitioners assert that unless the GOA satisfies at least one of the
alternative tests laid out in sections 351.518(a)(4)(i-ii) of the
Department's regulations, the Department must consider the entire amount
of the rebate to confer a countervailable benefit. Petitioners maintain
that the record evidence and verification demonstrate that the GOA does
not have a reasonable system and has not performed a reasonable
examination (the alternative tests contemplated in sections
351.518(a)(4)(i-ii) of the Department's regulations). As such, petitioners
argue that the Department must continue to consider the entire Reintegro
to confer a countervailable benefit.
The GOA acknowledges that section 351.518(a)(4)(i-ii) of the Department's
regulations instructs the Department to consider the entire amount of a
tax rebate to confer a benefit unless the Department finds that the
government in question satisfies at least one of the alternative tests.
The GOA also acknowledges that in the Preliminary Determination, the
Department found that the GOA had not satisfied either test. However, the
GOA contends that the Department's long-standing policy regarding benefits
from indirect tax rebate schemes such as the Reintegro Program has been
that only the excessive portion of an indirect tax rebate should be
considered the benefit. As such, the GOA asserts that the Department
"broke with past practice and misapplied the rules established by the WTO,
which have been incorporated into U.S. law," by treating the entire amount
of the Reintegro as a countervailable benefit.
Department's Position:
Section 351.518(a)(4)(i-ii) of the Department's regulations clearly
instructs the Department to consider the entire amount of a tax rebate to
confer a benefit unless the Department finds that the government in
question satisfies at least one of the alternative tests. In the
Preliminary Determination, we found that the GOA had not demonstrated that
it: 1) had in place a reasonable and effective system/procedure as
contemplated by section 351.518(a)(4)(i); or 2) conducted a reliable
"examination," as contemplated in section 351.518(a)(4)(ii). See 66 FR at
14524. An analysis of the record evidence and the results of verification
reaffirmed the Department's finding that the GOA does not have a
reasonable system and has not performed a reasonable examination as
contemplated by the relevant regulations. See Department's Position on
Comments 4 and 6, below. As such, we will continue to treat the entire
Reintegro for bulk and processed honey as a countervailable benefit.
Comment 4: The System for Determining the Reintegro
Petitioners argue that the Department's Preliminary Determination
considered the record evidence provided by the GOA in support of its claim
that it derived the Reintegro rebate from a systematic analysis of the
inputs consumed in the production of honey and the indirect taxes imposed
on those inputs. Petitioners contend that information provided since the
Preliminary Determination and the results of verification confirm the
Department's finding that "no systematic collection and analysis of
information on the honey industry was ever undertaken to measure the
industry's indirect tax incidence on its production inputs."
Petitioners maintain that the Department examined the two components of
the system identified by the GOA, the Agriculture Secretariat's data-
gathering efforts and the 1997 AFIP Honey Report (AFIP Report) .
Petitioners cite the Department's Preliminary Determination which states
the following about the two components of the GOA's system/procedure:
{w}hile the GOA apparently gathers various types of information from a
number of sources about the honey sector and its production processes and
costs, it has provided no evidence demonstrating that there was or is a
system or set of procedures in place that is followed to determine the
specific inputs consumed in {the} production of honey and the indirect tax
incidence on those inputs. Moreover, the GOA did not explain, let alone
substantiate, the process through which it analyzed the general
information collected on the honey industry to determine the specific
Reintegro rate for bulk and processed honey exports.
. . . this study appears to deal primarily with improving the efficiency
of tax payments from the honey sector and increasing the tax compliance
from the honey sector with respect to direct taxes. As such, it is not
clear how this study is relevant to the establishment of the appropriate
levels of Reintegro applicable to bulk and processed honey. In addition,
the GOA did not explain how the guidelines listed in the 1997 AFIP study
were, if ever, used to confirm the appropriate level of Reintegro for bulk
and processed honey.
See 66 FR at 14525.
Petitioners argue that the results of verification confirm that the
manner in which the GOA collects and analyzes producer cost and tax data
underscores the absence of any systematic approach to the Reintegro for
honey. Petitioners contend that verification demonstrated that the GOA has
no centralized control over data collection and is unable to confirm the
extent to which the Agriculture Secretariat's questionnaires are actually
distributed to producers and reflected in the GOA's database. Petitioners
also contend that the GOA's "system" is deficient and demonstrates that it
is unlikely that the GOA's honey producer database presents a complete and
accurate picture of honey industry costs.
According to petitioners, the "system" envisioned in section
351.518(a)(4)(i) of the Department's regulations implies an ongoing
process that routinely analyzes and collects data, and provides results
based on that data. Petitioners argue that the GOA's attempt to document
its system is really an attempt to string together several functions by
government agencies unrelated to the assignment of Reintegro rates.
Petitioners argue that if the GOA had a system to collect and integrate
data from the various sources, there would be some form of "written
documentation relying on those sources, establishing the appropriate tax
incidence, and recommending a particular Reintegro rate." Petitioners
contend that the record contains no documentary evidence substantiating
the Reintegro rates for honey.
Petitioners also argue that the results of verification support the
Department's preliminary finding that the AFIP Report was not relevant to
the establishment or the confirmation of the appropriate levels of
Reintegro applicable honey. Petitioners maintain that at verification, the
GOA's honey expert "could not provide a specific answer for how the GOA
used the AFIP Report to establish or revise the Reintegro rates for
honey."
The GOA disagrees with the Department's preliminary conclusion that it
does not have in place a "system or procedure" within the meaning of
section 351.518(a)(4)(i) of the Department's regulations and the WTO
Agreement on Subsidies and Countervailing Measures. The GOA accepts that
its system for honey is different from its systems for other sectors
(e.g., textiles and steel). However, the GOA argues that its system for
honey reflects the atomized nature of the Argentine honey sector and the
GOA's lack of available resources to conduct audits of this dispersed
sector. Rather, the GOA asserts that its system for honey, as verified by
the Department, relies heavily on informal, but constant, contact with the
honey sector in Argentina. The GOA concedes that, although the system does
not rely heavily on written documentation or well-maintained records, it
is a "system" based on actual information from the producers.
Department's Position:
Section 351.518(a)(4)(i)of the Department's regulations states that the
government in question must have in place and apply a reasonable and
effective system to confirm which inputs are consumed in the production of
the exported product and in what amounts, and to confirm which indirect
taxes are imposed on these inputs. In the Preliminary Determination, we
found that the GOA had not demonstrated that it had a reasonable and
effective system or procedure as contemplated by section 351.518(a)(4)(i)
i)of the Department's regulations. The results of verification have
confirmed that the GOA does not have a reasonable system as contemplated
by the relevant regulation.
Throughout the proceeding the GOA claimed that its system for the honey
sector reflects the atomized nature of the Argentine honey sector and its
lack of available resources for conducting audits of this dispersed
sector. The GOA has also attempted to explain its inability to provide any
documentation or working papers that link its system to the Reintegro rate
with the claim that its contact with honey sector, though informal, is
constant.
The GOA was able to provide some documentation (e.g., questionnaires)
which shows its efforts to obtain cost and production information from the
honey sector. See the GOA's
February 14, 2001, submission at exhibit 1. The GOA also provided a copy
of the AFIP Report (see the GOA's May 22, 2001 submission) and implied
that it was used to "corroborate the Reintegro rates applied to honey."
See the GOA's April 30, 2001 submission at page 5.
However, the GOA was unable to document any link whatsoever between the
few documents it submitted, its "system," and the establishment of or the
multiple revisions to the Reintegro rates for honey. See Reintegro
Verification Report at 6. At verification, the GOA was unable to document
how many honey producers responded to its questionnaires. More
importantly, the GOA was unable to demonstrate how the AFIP Report was
used to "corroborate the Reintegro rates applied to honey." Id. Indeed,
one GOA official stated that "the AFIP study has been criticized by the
honey sector and it was not necessarily the basis for the Reintegro rates
for honey." Id. In addition, the GOA was unable to provide: 1) the data on
which the GOA relied to establish the Reintegro rates for honey; 2)
worksheets depicting how the Reintegro rates were calculated; or 3) how it
determined, in April 2000, that 5.4 percent was the highest level of
Reintegro for bulk honey "permissible under the international rules." See
Id.; the GOA's February 14, 2001 submission at page 1.
As such, the documentary evidence and the results of verification do not
demonstrate that the GOA had, or has, in place a reasonable and effective
system to confirm which inputs are consumed in the production of the
exported products and in what amounts, and to confirm which indirect taxes
are imposed on these inputs. Rather, while the record indicates that the
GOA gathers information from several sources about the honey sector and
its production processes and costs, there is no evidence demonstrating
that there was, or is, a reasonable and effective system in place that is
used to determine the specific inputs consumed in production of honey and
the indirect tax incidence on those inputs.
Moreover, the GOA was unable to substantiate the process through which it
analyzed the general information collected on the honey industry to
determine the specific Reintegro rate for bulk and processed honey
exports. Therefore, we continue to find that the requirements for non-
countervailablity set forth in section 351.518(a)(4)(i) of the
Department's regulations have not been met.
Comment 5: The Credibility of the EcoLatina Report
Petitioners assert that the credibility of the EcoLatina report is
suspect. Petitioners contend that since the report was undertaken in
December 2000, it is a post-hoc analysis of the Reintegro undertaken in
the specific context of this case and against the specific backdrop of the
Department's regulations. Petitioners also contend that, even though the
GOA could not demonstrate the parameters pursuant to which the EcoLatina
Report was commissioned, the record demonstrates that EcoLatina did not
operate independently of the GOA while preparing this study. On this
basis, petitioners argue that the EcoLatina Report cannot be considered an
independent and "reasonable" examination of bulk honey inputs and indirect
taxes imposed on those inputs.
The GOA argues that nothing in the SCM agreement or the Department's
regulations address a timing requirement for when a responding government
must conduct its examination. The GOA contends that the examination
language was added to the SCM Agreement at the request of developing
countries which were unable to maintain the monitoring systems or
procedures described in section 351.518(a)(4)(i) of the Department's
regulations. Moreover, the GOA argues that preparing an examination "only
makes sense at a time other than in the normal course of the government's
analysis of the program."
Department's Position:
We agree with the GOA. Section 351.518(a)(4)(ii) of the Department's
regulations states that if the responding government does not have a
reasonable and effective system, it may carry out "an examination of
actual inputs involved to confirm which inputs are consumed in the
production of the exported product, in what amounts and which indirect
taxes are imposed on the inputs." As such, the fact that the EcoLatina
Report was undertaken after the initiation of this investigation has no
bearing on the credibility of the report.
Also, the fact that the EcoLatina Report relied on information provided
by the GOA is not, in and of itself, reason to doubt the credibility of
the report. The reasoned analysis of data collected from a representative
sample of honey producers would be acceptable, regardless of the source of
the sample. However, the Department determines that the GOA was unable to
demonstrate that the data it provided to EcoLatina was representative of
the Argentine honey sector. See Department's Position on Comment 6, below.
Moreover, even if it were representative, there was no nexus in the
EcoLatina Report between the "sample" from which inputs and costs were
derived and the actual indirect tax incidence on such inputs. As such, we
determine that the entire Reintegro confers a countervailable benefit.
Comment 6: The EcoLatina Report: Examination of Indirect Tax Incidence
for the Argentine Honey Sector
The GOA argues that the Department's reasons in the Preliminary
Determination for rejecting the EcoLatina Report are unreasonable and do
not justify countervailing the entire Reintegro for bulk and processed
honey. The GOA states that the Department faulted the EcoLatina Report
because it: 1) was not representative of the sector; 2) was not based on
an examination of actual producer, acopiador, or exporter experience; and,
3) did not address processed honey.
According to the GOA, the basic assumption of the EcoLatina Report (i.e.,
the "representative beekeeper" with 250 hives) is not the anomaly
portrayed in the Department's Preliminary Determination and in the
Reintegro Verification Report. Rather, the information on the record
demonstrates that the concept of a representative producer with 250 hives
is: 1) a normal assumption for those who study the Argentine beekeeping
sector; and 2) well established from previous analyses of the honey sector.
The GOA further argues that, since the concept of a representative
producer with 250 hives is well-established, the Department's concerns
that EcoLatina did not attempt to validate the "statistical
representativeness" of the representative producer are misplaced.
Specifically, the GOA cites to pages 19-26 of exhibit 2 and exhibit 12 of
the Reintegro Verification Report, which the GOA claims support the
concept of a representative producer with 250 hives. Moreover, the GOA
maintains that considering the lack of resources available and the large
number of dispersed producers, it is unreasonable for the Department to
expect either the GOA or EcoLatina to revalidate the representative
producer by collecting and reviewing the data of a statistically
meaningful number of producers.
The GOA states that there is no requirement in the international
agreement or U.S. law requiring that a tax incidence study examine actual
producers, acopiadors, or exporters. The GOA concedes that in previous
cases, in which the Department has examined the Reintegro Program in
Argentina, specific company information has been used as the basis for the
tax incidence study. However, the GOA argues that the honey sector is very
different from other sectors that have been the subject of countervailing
duty investigations. Because the GOA does not have unlimited resources to
sample the estimated 25,000 beekeepers, the Agriculture Secretariat's
regular contact with honey sector: 1) is a reasonable source of
information on the sector; and 2) data developed from Agriculture
Secretariat's information was a reasonable basis for the EcoLatina Report.
The GOA also maintains that there is no requirement in the international
agreements, U.S. law, or Department practice that indirect tax studies
examine all products within the scope of the Department's investigation.
Rather, the GOA argues that the Department's past policy in Argentine
cases has been to use a tax incidence study on the product that represents
the majority of exports to the United States. The GOA claims that
processed honey represents approximately 0.7 percent of subject
merchandise shipped to the United States. As such, the GOA contends that
the failure of the EcoLatina Report to address processed honey is not a
basis for rejecting the examination.
Petitioners argue that the fact that there are a large number of honey
producers in Argentina does not alter the GOA's burden under section
351.518(a)(4)(ii) of the Department's regulations to prepare a reliable
examination. Petitioners maintain that the Department concluded that the
EcoLatina Report was not the "reasonable examination" envisioned in
section 351.518(a)(4)(ii) of the Department's regulations because it: 1)
was based on data for a producer category that accounted for only 24
percent of Argentine honey production; 2) did not test the inputs and
indirect tax incidence identified in the report against actual company
experience; 3) overstated the costs on which it based its calculation of
the indirect tax incidence for bulk honey, as well as the taxes paid on
the listed inputs; and 4) did not address the cost structure and tax
incidence for processed honey.
According to petitioners, the results of verification demonstrate that
none of the above defects have been cured by the GOA. Rather, the results
of verification have further highlighted why the EcoLatina Report is not a
reasonable examination of honey inputs for purposes of assessing the
Reintegro amount. As such, petitioners argue, the Department should affirm
its Preliminary Determination that the GOA did not carry out a reliable
examination of the inputs consumed in honey production, and, continue to
countervail the entire amount of the Reintegro.
According to petitioners, the methodology EcoLatina used to develop and
validate the representative producer was faulty. EcoLatina simply accepted
representative producer information provided by the GOA instead of
collecting and analyzing relevant information from a statistically viable
sample of Argentine honey producers. See Reintegro Verification Report at
7. In addition, EcoLatina did not consider producer characteristics such
as price, cost, and hive yield when developing the representative
producer. See Id.
Petitioners argue that verification demonstrated that EcoLatina's tax
incidence calculations were faulty. Petitioners contend that the taxes
used in EcoLatina tax incidence calculation were not limited to indirect
taxes assessed on inputs that are physically consumed in the production of
bulk honey. See Id. Specifically, petitioners contend that EcoLatina's tax
incidence calculation included direct taxes paid at the producer level. In
addition, petitioners contend that the calculation also includes taxes
paid by acopiadors and exporters, who, by definition, are not involved in
the production process of bulk honey. For the above reasons, in the
petitioners' view, the EcoLatina Report cannot be considered a reasonable
examination as contemplated in section 351.518(a)(4)(ii) of the
Department's regulations.
Department's Position:
We agree with petitioners, in part. In our Preliminary Determination, we
found that, pursuant to section 351.518(a)(4)(ii) of the Department's
regulations, the EcoLatina Report was not a "reasonable examination" of
actual inputs involved to confirm which inputs are consumed in the
production of exported bulk and processed honey, in what amounts, and
which indirect taxes are imposed on those inputs. The evidence on the
record and results of verification confirm that the EcoLatina Report
cannot be considered a reliable examination as contemplated by the
relevant regulation.
The "basic assumption" of the EcoLatina Report is that a producer with
250 hives is representative of the Argentine honey sector. The EcoLatina
Report divides Argentina's 25,000 beekeepers into four categories
depending on the level of dedication to beekeeping (i.e., full-time or
part-time beekeepers) and on the number of hives. The report's
representative producer with 250 hives fits into a category (200 to 499
hives) that accounts for 24 percent of Argentine beekeepers. See page 7 of
exhibit 9 of the GOA's January 2, 2001, submission.
At verification, we attempted to determine what methodology EcoLatina
used to determine that a beekeeper with 250 hives was representative of
the Argentine honey sector. EcoLatina stated that it attempted to develop
a representative producer who, in terms of number of hives, yield per
hive, and dedication to beekeeping was consistent with most Argentine
beekeepers. However, the results of verification indicate the following.
EcoLatina did not take into account hive yields when developing the
representative producer. See Reintegro Verification Report at 8. In
addition, EcoLatina specifically targeted its fieldwork at middle-tier
beekeepers with between 50 and 500 hives. EcoLatina excluded all
information from producers that fell outside these parameters, even though
honey producers with fewer than 50 hives or more than 500 hives account
for more than half of Argentina's beekeepers. See Id. at 9; page 7 of
exhibit 9 of the GOA's January 2, 2001, submission.
We asked EcoLatina and the GOA to provide documentation showing their
analyses or calculations which demonstrate that a producer with 250 hives
was representative of the 25,000 Argentine beekeepers. The GOA provided
three documents which contain honey production information for a beekeeper
with 250 hives. See exhibits 3 and 12 of the Reintegro Verification
Report. In addition, the GOA showed us a copy of the 1988 agricultural
census which showed that honey producers in Argentina had an average of
250 hives. GOA officials stated that their analysis showed that the
average number of hives per beekeeper had not changed since 1988.
In exhibit 12 of the Reintegro Verification Report, the GOA provided
another report that showed yield, price, and income information for a
producer with 250 hives. An examination of this document indicates that
the producer with 250 hives was developed based on a sample of 25
beekeepers and does not describe this producer as "representative" of the
Argentine honey sector. Moreover, this document provides similar
information for two producers with 67 and 595 hives, respectively. As
such, it is not clear how the document validates the GOA's assumption,
included in the EcoLatina report, that the representative producer has 250
hives.
We note that other information on the record also does not corroborate
the GOA's contention that the average number of hives per beekeeper is 250
and that this number has remained the same since the 1988 agricultural
census. For instance, a 1995 "Productos Apicolas" study states that there
were 16,000 beekeepers who maintained 1.8 million hives (112.5 hives per
beekeeper). See page 11of exhibit 3 of the Reintegro Verification Report.
Moreover, the December 2000 EcoLatina Report states that 25,000 beekeepers
maintained 2.8 million hives (112 hives per beekeeper). See page 6 of
exhibit 9 of the GOA January 2, 2001 submission. Thus, the record shows
that there was a more than 50 percent increase in both total hives and
beekeepers in the Argentine honey sector between 1995 and 1999. Such
information calls into question the representativeness of the EcoLatina
Report's "basic assumption."
As we stated in the Preliminary Determination, we do not disagree that it
would be a burden for the GOA to collect the necessary data from the
thousands of honey producers in Argentina or that the use of an
alternative method for collecting the necessary information automatically
invalidates the data. However, the results of verification and the record
evidence demonstrate that the basic assumption of the EcoLatina Report (a
representative producer with 250 hives) was not representative of the
Argentine honey sector. Rather, the record evidence fails to document any
basis for the EcoLatina Report's representative producer with 250 hives
other than: the average number of hives shown in the 1988 agricultural
census; and the GOA's unsubstantiated claim that it has verified the
average number of hives per producer.
Given the tremendous growth in Argentine honey production since 1988, it
seems unlikely that the average number of hives per producer has not
changed since 1988. Indeed other record evidence shows that the average
number of hives per producer was 112 in 1995 and 1999. Moreover, the fact
that the Agriculture Secretariat claims that analysis of information it
gathered from the Argentine honey sector corroborated the
representativeness of the beekeeper with 250 hives indicates that it does
not collect and analyze information from a representative sample of
Argentine honey producers. Based on instructions from the GOA for doing
its study, EcoLatina focused its limited fieldwork on beekeepers who fit
this profile and disregarded any information from beekeepers who did not
fit these parameters. As such, we cannot consider that the representative
producer or the EcoLatina Report are representative of the honey sector in
Argentina.
Moreover, the identification of inputs and indirect tax incidence (which
had been collected from public sources) were not tested against actual
company information or experience. As noted in the EcoLatina Report
itself, the tax incidence at the producer level accounts for the vast
majority of the claimed indirect tax incidence on exports of Argentine
bulk honey. As such, the reliability of the EcoLatina Report could not be
verified.
Comment 7: The EcoLatina Report: Indirect Taxes
The GOA contends that the WTO Subsidies Agreement and section
351.518(a)(4) of the Department's regulations set forth alternative tests
for the non-countervailablity of indirect tax rebate schemes. The GOA
argues that it satisfied at least one of the two alternative tests based
on a reasonable interpretation of the WTO standards. The GOA also argues
that the Department must enter into the details of the calculation
prepared by EcoLatina to determine whether the rebates were "excessive."
The GOA concedes that some of the taxes included in the EcoLatina Report
may not meet the international standard for indirect taxes. The GOA also
concedes that some of the inputs considered in the EcoLatina Report may
not meet the consumed in production standard. However, the GOA argues that
the Department normally conducts an analysis of the taxes and inputs
depicted in studies and determines what portion, if any, of the rebates
are excessive.
The GOA states that the Department has conducted this type of input-
specific and tax-specific analysis in all prior Argentine cases, even
those for which it has not accepted the study serving as the basis for the
reintegro level. Certain Apparel From Argentina; Final Results of
Countervailing Duty Administrative Review, 54 FR 22466 (May 24, 1989)
(Certain Apparel from Argentina). The GOA claims that, the Department's
practice in prior cases has been to perform a calculation to determine
which of the taxes were allowable, and to what extent. The GOA claims that
the Preliminary Determination marked the first instance where the
Department did not perform such an analysis.
The GOA argues that an analysis of the tax and input information in this
case shows that the level of indirect taxes exceeded the Reintegro.
Moreover, the GOA argues that the Department's final determination must
recognize that a country may rebate prior-stage cumulative indirect taxes,
as well as indirect taxes on the sale of the product itself. The GOA
claims that there is no doubt that the permissible rebate is not limited
to the prior-stage cumulative indirect taxes imposed during the production
process. The GOA claims that the Department has recognized in other
Argentine investigations that the reintegro program is designed to rebate
both prior-stage cumulative taxes and final stage taxes.
The GOA states that in Certain Apparel from Argentina, the Department
found that the prior-stage tax incidence was not fully justified by the
study. The Department stated:
In this review, the Government of Argentina did not provide sufficient
information on the level of prior-stage taxes. Therefore, we have not
accepted any prior-stage taxes. We have accepted the following final-stage
taxes: the turnover tax, the insurance tax, the stamp tax, the bank debits
tax, the municipal tax, and the foreign exchange tax. On this basis we
determined the amount of the allowable tax rebate to be 4.27 percent ad
valorem.
The GOA contends that the above passage demonstrates that the
Department's practice has been to perform a calculation to determine which
of the taxes are allowable, and to what extent.
The GOA maintains that the record establishes that indirect taxes are
paid not only at the production stage, but also on the sale of honey to
middlemen and to exporters. The GOA argues that there is no basis for
disallowing the rebate of the indirect taxes on the honey as it is sold
and distributed prior to export.
Petitioners maintain that the statute and regulations distinguish between
cumulative and non-cumulative taxes, and the allowable rebates. As such,
petitioners maintain that the GOA's argument that cumulative indirect
taxes rebated by Reintegro are permissible is misplaced.
Petitioners contend that under sections 351.518(a)(4)(i-ii), the
Department must continue to find the entire Reintegro to be a
countervailable benefit.
Department's Position:
Record evidence, including the EcoLatina Report, shows that Argentine
bulk honey exports to the United States go through a producer stage,
acopiador (i.e., middleman) stage and exporter stage. As such, the
producer stage and the acopiador stage are the two prior stages while the
exporter stage is the final stage.
In our questionnaires and at verification, we asked the GOA to
demonstrate how it determined that the taxes identified at the producer
stage in the EcoLatina Report's tax incidence calculation were indirect
taxes which were assessed on inputs consumed in the production of bulk
honey. At verification, the GOA conceded that the EcoLatina Report's tax
incidence calculation included: taxes that were not indirect taxes and
taxes on items that could not be considered to be inputs consumed in the
production of bulk honey. These facts notwithstanding, the GOA now argues
that the Department should conduct its own analysis of the production
stage inputs and taxes depicted in the EcoLatina Report to determine the
actual prior-stage cumulative indirect tax incidence on inputs consumed in
the production of bulk honey.
However, section 351.518(a)(4)(ii) of the Department's regulations states
that the Department will consider the entire amount of the tax rebate or
remission to confer a benefit unless the Department finds that the
government in question has carried out a reliable examination to confirm
which inputs are consumed in the production of the exported product and in
what amounts. Furthermore, we must be able to examine which indirect taxes
are imposed on the inputs. For this final determination, we have
determined that the GOA has not undertaken a reliable examination as
contemplated in section 351.518(a)(4)(ii). See Department's Position on
Comment 6. As such we cannot use the EcoLatina Report as the basis of an
analysis to determine the actual prior-stage cumulative indirect tax
incidence on inputs consumed in the production of bulk honey
We disagree with the GOA's argument that the Department must allow the
rebate of the prior-stage indirect taxes on the sale of bulk honey as it
moves through from the production and distribution chain. As noted above,
the producer stage and the acopiador stage are considered prior stages.
Section 351.518 of the Department's regulations, which addresses the
rebate of indirect taxes assessed at prior stages, specifically limits
allowable rebates on prior stage cumulative indirect taxes to indirect
taxes assessed on inputs consumed in the production process. The EcoLatina
Report's tax incidence calculation for the producer stage does not isolate
the discrete turnover taxes at each stage and more importantly, we
disagree that the specific expenses that the GOA is arguing to include in
such a calculation would be allowed because many of the inputs are not
consumed in production
The GOA itself, does not have a system in place to clearly distinguish
prior stage and final stage tax incidence for the purpose of the
Reintegro. Furthermore, even if the Department were convinced that the
information in the EcoLatina Report with respect to the exporter stage
were reflective of actual exporter experience, it is not possible for the
Department to quantify the final stage indirect tax incidence because it
is not clear that the tax incidence reported for the exporter includes
only indirect taxes.
To the extent that the GOA raises arguments based on the WTO Agreements,
U.S. law, as implemented through the URAA, is consistent with the WTO
obligations of the United States.
Comment 8: Buenos Aires Honey Program: Specificity of the Line of Credit
for Working Capital
The GOA maintains that the Department erred in finding that loans under
the first element of the line of credit for working capital are de jure
specific pursuant to section 771(5A)(D)(i) of the Act. The GOA argues that
the Banco de la Provincia de Buenos Aires ("Banco Provincia") offers two
main lines of credit: (i) a line of credit for working capital, and (ii) a
line of credit for the acquisition of capital goods. The Line of Credit
for Working Capital offered by the Banco Provincia is aimed at financing
operating expenses and is made available to honey producers for two
purposes: (i) to finance operating expenses; and/or (ii) to acquire inert
material for the beehives. The GOA further contends that, through the
Banco Provincia's Line of Credit for Working Capital, honey producers may
obtain two different interest rates: (i) the general market interest rate
offered by the Banco Provincia to all sectors, and (ii) the market
interest rate applicable to the Banco's Provincia's line of credit for the
pre-financing of exports. According to the GOA, the Line of Credit for
Working Capital is not limited solely to honey producers but is offered to
the public, as respondent contends was explained to the Department by
officials of the Banco Provincia.
The GOA further argues that the Line of Credit for Working Capital was
established through a system created by both the Government of the
Province of Buenos Aires and by the Banco Provincia. The system enabled
beekeepers to have a working capital line of credit extended to them by
the Banco Provincia. The GOA contends that the applicable interest rate is
the same for every sector and terms and conditions of the loans are
adjusted to the seasonal characteristics of each productive sector: the
length of the loans is tied to the production cycle and the harvest
season; the financing limits are determined in accordance with the
characteristics of each particular productive sector; and, the repayment
schedule is adjusted to the structure of cash flows of each particular
sector. Consistent with the structure of cash flows of the beekeeping
sector, the GOA states that the principal and interest accrued on the
loans are repayable in full at maturity. Furthermore, the GOA maintains
that other characteristics of this financing were also adjusted to the
particularities of the beekeeping sector, using the value of the material
to be acquired with the financing as a reference.
The GOA concludes that loans offered under the Banco Provincia's Line of
Credit for Working Capital are not limited to honey producers but are made
available to the public. Accordingly, the GOA argues that these loans do
not meet the specificity requirement set forth by 771(5A)(D)(i) of the
Act, and therefore do not constitute a countervailable subsidy.
Petitioners claim that the Department should affirm its preliminary
finding concerning the countervailability and measurement of benefits from
the Buenos Aires Honey Program. Specifically, petitioners argue that both
the Line of Credit for Working Capital and the Line of Credit for the
Acquisition of Capital Goods are de jure specific, a finding supported by
the GOA's admission that the terms and conditions for both lines were
"adjusted to the seasonal characteristics of the beekeeping sector."
Petitioners conclude that while the Banco Provincia may make available
lines of credit for working capital and for the acquisition of capital
goods to other sectors, the Department is not investigating such financing
but rather is examining the specific lines of credit that are available
for beekeepers in the Province of Buenos Aires.
Department's Position:
As discussed in the Buenos Aires Honey Program section above, we continue
to find that the Line of Credit for Working Capital is specific on the
basis that it is limited to honey producers. The Banco Provincia is a
provincial government-owned bank. The provincial government and the Banco
Provincia have tailored a line of credit specifically for the honey
industry. As such, this line of credit is specific.
Comment 9: Buenos Aires Honey Program: Specificity of the Line of Credit
for the Acquisition of Capital Goods
The GOA maintains that financing under the Buenos Aires Honey Program
Line of Credit for the Acquisition of Capital Goods is not de jure
specific pursuant to section 771(5A)(D)(i) of the Act. The GOA argues that
this line of credit was created just as the Line of Credit for Working
Capital by both the Government of the Province of Buenos Aires and the
Banco Provincia: Banco Provincia established a system in which a line of
credit for the acquisition of capital goods could be extended to
beekeepers. This line is available to all sectors, including honey, and is
not limited to honey producers. The GOA asserts that the financing for the
Line of Credit for the Acquisition of Capital Goods has three sources of
funding (i) funds obtained from the BICE; (ii) the Banco Provincia's
own funds; and (iii) funds obtained from foreign financial institutions.
Funding through BICE was implemented pursuant to an agreement between the
Banco Provincia and the BICE's use of funds is offered under the BICE
Lines 006 and 006/1, and the results of verification support this. Banco
Provincia Exhibit 2. See Verification Report at 29.
The GOA states that the terms and conditions for the Line of Credit for
the Acquisition of Capital Goods are similar to the terms and conditions
of the Line of Credit for Working Capital, in that the loan
characteristics are adjusted to the particular characteristics of each
productive sector. The GOA refers to Banco Provincia's internal Circular
"A" No. 13,854 (see Exhibit 39 of the January 2, 2001 response) which
describes the terms and conditions for honey producers. The applicable
interest rate is the same for every sector. The GOA concludes that the
record shows that financing under the Line of Credit for the Acquisition
of Capital Goods does not meet the specificity requirements set forth by
771(5A)(D)(i) of the Act, and thus, the Department should determine that
financing under this line of credit does not constitute a countervailable
subsidy.
Petitioners argue that the Line of Credit for the Acquisition of Capital
Goods is de jure specific because, as the GOA admits, this line of credit
is specific to honey producers in that the terms and conditions for both
lines were "adjusted to the seasonal characteristics of the beekeeping
sector." Petitioners conclude that while the Banco Provincia may make
available lines of credit for working capital and for the acquisition of
capital goods to other sectors, the Department is not investigating such
lines but rather is examining the specific lines that are available for
beekeepers in the Province of Buenos Aires.
Department's Position:
As discussed in the Buenos Aires Honey Program section above, we
determine that the Line of Credit for the Acquisition of Capital Goods is
de jure specific on the basis that its availability is limited to honey
producers. The provincial government and the Banco Provincia have tailored
a line of credit specifically for the honey industry. As such, this line
of credit is specific.
Comment 10: Buenos Aires Honey Program: Benchmark Rate
The GOA maintains that the Department improperly used the annual average
interest rate for personal loans during 1999 as the benchmark interest
rate for calculating the loan benefits under the Buenos Aires Honey
Program Line of Credit for Working Capital. In doing so, the GOA argues
that the Department did not follow the Department's regulations pursuant
to section 771(5)(E)(ii) of the Act, which directs the Department to
compare the amount the recipient pays on the loan to the amount the
recipient would pay on a comparable commercial loan which the recipient
could obtain on the market. The GOA contends that the Department's
regulations define what a "comparable" loan is, placing the primary
emphasis on similarities in the structure, the maturity, and the currency
in which the loans are denominated. Furthermore, the GOA argues, the
Department's regulations specify that the Department should use as a
benchmark an interest rate for a loan which the firm "could actually
obtain on the market." As such, the Department must rely on the actual
experience of a firm for acquiring comparable commercial loans and in this
case, the Department must use a national average interest rate for
comparable commercial loans.
The GOA argues that the record clearly demonstrates that the investigated
lines of credit offered by government-owned banks are of the same
structure and characteristics of any other commercial loan in the market.
Furthermore, according to the GOA, the record demonstrates that the
applicable interest rates provided by the Banco Provincia are close to the
national average interest rates published by the Argentine Central Bank
for each type of loan.
The GOA maintains that the Department's utilization of the national
average interest rate for personal loans as the benchmark rate assumes:
(i) the Line of Credit for Working Capital is comparable to personal
loans; (ii) the only credit available to the honey sector for working
capital is through a personal loan; and, (iii) such a presumption implies
that all small and medium-sized beekeepers are not creditworthy. The GOA
contends that commercial loans do not have the same characteristics,
structure, maturity, or purpose as personal loans.
The GOA concludes that, since the Department decided to conduct the
investigation on an aggregate basis, the Department should compare the
interest rates charged by the Banco Provincia on its loans for working
capital with the average annual interest rates charged by other commercial
banks for working capital financing loans. The correct interest rate to
use as a benchmark, according to respondent, is the national average
interest rate published by the Central Bank of Argentina under the column
"Documentos a sola firma," and "De 90 y mas dias de plazo."
Petitioners contend that the GOA has: (1) failed to identify which
commercial loans should be used as the benchmark, and (2) has overlooked
the important point that personal loans are one of the few types of
financing that are actually extended to honey producers. In accordance
with section 351.505(a) of the Department's regulations, the benchmark
lending rate used to measure the benefit from government-provided loans to
small and medium-sized honey producers must reflect the type of financing
these producers could actually obtain on the Argentine market. As such,
petitioners assert that, given the nature of honey producers, the interest
rate on personal loans is the most appropriate benchmark. According to
petitioners, personal loans are the only type of financing available to
small-scale honey producers to cover their working capital expenses.
Petitioners contend that information acquired at verification supports
their argument. Specifically, petitioners cite the explanation given by
CFI officials that "beekeeping projects under the San Luis program,
however, are small, only 30 hives, and are therefore not profitable enough
to finance." Verification Report at 13. Petitioners state that the GOA has
failed to support its claim that the lines of credit offered by government-
owned banks are of the same structure and characteristics of any
commercial loans in the market.
Petitioners state that in accordance with section 351.505(2)(ii) of the
Department's regulations, the Department "does not consider a loan
provided under a government program, or a loan provided by a government-
owned special purpose bank, to be a commercial loan for purposes of
selecting a loan to compare with a government-provided loan." Thus, in
order to measure the benefit for small and medium-sized honey producers,
the Department should use in its final determination the benchmark lending
rate that reflects the interest rate charged on personal loans because
this is the only alternative that honey producers in Argentina have for
loans which they could actually obtain on the Argentine market.
Department's Position:
We have reconsidered our choice of benchmark interest rate for purposes
of calculating the benefit from the Line of Credit for Working Capital.
The loans under the Line of Credit for Working Capital are offered to
companies to finance their short-term credit needs. "Working Capital"
loans would not be offered to individuals. Therefore, we do not consider
the interest rate on personal loans to be an appropriate benchmark. We
disagree with the GOA that the "documentos a sola firma" rate provides the
appropriate benchmark. The preamble to section 351.505 of the Department's
regulations guides our choice of a benchmark. See 66 FR at 65362, 65363,
65364. We have identified a benchmark for a comparable commercial loan
which has the same characteristics (e.g., fixed interest rate versus
variable interest rate, short-term versus long-term, currency). See
"Benchmark Interest Rates and Discount Rates" section, above.
Comment 11: Chaco Line of Credit Earmarked for the Honey Sector
The GOA maintains that the Department improperly calculated the benefit
provided through this line of credit pursuant to Section 771(5)(E)(ii) of
the Act. The GOA asserts that the Department, in its Preliminary
Determination, countervailed the entire principal disbursed for Decree
2076/96 and Resolution 253/99 and did not account for the amounts
collected on such loans. The GOA argues that the Department should
consider the information provided after the Preliminary Determination in
which the GOA demonstrated that a significant portion of the amounts
disbursed pursuant to Resolution 253/99 were loans provided after the POI.
Thus, for purposes of calculating the benefit from these loans, the
Department should use the corrected information provided at verification
showing the outstanding balances as of December 31, 1999, for all loans
disbursed during 1997-1999 pursuant to Decree 2076/96 and Resolution
253/99. The GOA notes that the Verification Report incorrectly reports
that loans were disbursed with an interest rate of 7.52 percent during
1999, which respondent argues was the rate paid by the Province of Chaco
pursuant to Provincial Law 4331. The GOA also urges the Department to take
note of the actual interest rates applied to these loans.
Petitioners did not address this issue.
Department's Position:
As discussed in the Province of Chaco Line of Credit Earmarked for the
Honey Sector section above, we have amended our calculations with respect
to this loan program. First, the GOA provided and we were able to verify,
the outstanding balances as of December 31, 1999, for all loans disbursed
during 1997-1999 pursuant to Decree 2076/96 and Resolution 253/99.
Therefore, we have used these balances in our calculations. Second, as
the interest rate applied to these loans, we have used the interest rate
actually charged to honey producers.
Comment 12: San Luis Honey Development Program: Countervailability of the
Leasing Component
The GOA argues that the San Luis Honey Development Program's leasing
component was designed as a social development program to assist some of
the poorer residents in the province. The GOA contends that the
Department's decision to countervail a social development program to help
indigent people is unreasonable. The GOA maintains that the Honey Program
did not assist pre-existing honey producers, but rather, provided basic
beekeeping tools and training to people with no previous beekeeping
experience.
The GOA further argues that official records show that, in 1999, San Luis
produced only 700 tons of honey and did not make any exports to the United
States. The GOA contends that this level of production was not sufficient
to create a commercial market, and supports the assertion that San Luis
made no exports to the United States. Rather, the GOA argues that the
small volume of honey produced in San Luis was only sufficient for
personal consumption and limited sales in the local market.
Petitioners argue that the decision to countervail the San Luis Honey
Development Program is correct within the meaning of the statute because
this program provides a financial contribution which results in a benefit
and it is specific to honey producers. Further, petitioners argue that the
law does not have any special exceptions for a social welfare program.
Moreover, petitioners maintain that the Department has previously
countervailed programs that are of a social development or welfare
purpose. See, e.g., Final Affirmative Countervailing Duty Determination:
Certain Stainless Steel Wire Rod from Italy, 63 FR at 40485 (July 29,
1998) and Final Affirmative Countervailing Duty Determination: Certain
Pasta from Italy, 61 Fed. Reg. 30,294 (June 14, 1996) (countervailing
European Social Fund program designed to improve employment opportunities
and raise the standard of living in certain depressed regions).
Department's Position:
Neither the statute nor the Department's practice make any special
exceptions from countervailing duties for social development or welfare
programs. The record evidence demonstrates that the Honey Program provides
a financial contribution which results in a benefit specific to honey
producers pursuant to section 771(5A) of the Act. Therefore, the program
meets all three components of the countervailablity test. As such, we
continue to find the leasing agreement component of the San Luis Honey
Development Program to be countervailable.
The GOA provided detailed honey production and export statistics which
reported data on a province by province basis. See the GOA's January 1,
2001 submission. The 1999 production statistics identified fifteen
provinces that accounted for 100 percent of Argentina's reported honey
production, and that San Luis produced 700 tons of honey in 1999. The 1999
export statistics identified seven provinces with exports to United
States. However, these seven provinces accounted for only 81 percent of
Argentina's reported honey exports to the United States. We note that
nearly 20 percent of Argentina's exports to the United States during the
POI are from provinces "not identified." At verification, GOA officials
were unable to identify the provinces that accounted for these remaining
exports to the United States. See Verification Report at 2. Therefore,
based on the results of verification, we are unable to confirm that San
Luis did not make any exports to the United States in 1999. As facts
otherwise available, in accordance with section 776(a)(1) of the Act, and
since the GOA's production and export statistics show that the volume of
Argentina's 1999 exports to the United States exceeded its 1999
production, in our view, it is reasonable to assume that honey produced in
San Luis was part of the unidentified exports to the United States.
Comment 13: San Luis Honey Development Program: Leasing Component
Calculations
The GOA argues that if the Department continues to countervail this
program, it must change the benefit calculation based on revised
information provided at verification. The GOA claims that based on the
results of verification, the Department must use the honey program
spending amounts detailed in the 1994-1999 General Accounts in its benefit
calculation.
The GOA concedes that at verification, San Luis officials were unable to
substantiate the amounts spent on the leasing agreement that were reported
in the response. See Verification Report at 31-36. The GOA argues that the
Department should use disbursement figures from the province's General
Accounts for the years 1994 through 1999, even though, the GOA claims, the
spending amounts detailed in the 1994-1997 General Accounts include
spending not related to honey. Notwithstanding, the GOA contends that the
General Accounts are official documents and more reliable than the
information provided in their response.
Conversely, the GOA argues that the Honey Program spending amounts for
1998 and 1999 include salary and overhead expenses incurred by the
Province. The GOA contends that the actual amounts spent for beekeeping
equipment were indicated in documents provided at verification. See
Verification Report at 31-36 and San Luis Exhibits 4 and 10. The GOA
argues that the Department should use only the amounts spent on beekeeping
material in its benefit calculation for the years 1998 and 1999.
The GOA also argues that the Department should revise its benefit
calculation to reflect a five-year repayment period. The GOA contends that
the record evidence demonstrates that the leasing agreement terms were
changed to: 1) 15 equal payments over five years, with a one-year grace
period in 1993; and 2) the grace period was eliminated in 1996. See
Verification Report at 31-36.
In addition, the GOA argues that the Department should also include in
its calculations a five percent interest payment over the value of the
beekeeping materials provided plus the cost of transportation and
delivery. The GOA states that the 1996 amendments to the leasing agreement
set forth an annual interest payment equal to five percent of the value of
the beekeeping materials provided and the cost of transportation and
delivery.
Petitioners argue that if the Department accepts the General Accounts
data, the Department's benefit calculation should be revised to include
relevant expenses such as salaries and overhead, as well a profit margin.
Petitioners contend that if program participants had purchased the
beekeeping materials from a private company, they would have paid a higher
cost which would have included labor and overhead. Petitioners state that
the Department should create a commercial benchmark that estimates the
cost that the beekeepers would have paid to purchase the production
materials from a commercial entity. Petitioners argue that this benchmark
should include cost of labor, overhead, and a reasonable amount for
profit. Moreover, petitioners contend that the Department should increase
each figure by 18.06 percent to account for the profit that would have
been charged to the beekeepers by a private firm based on cost information
which was used in the companion antidumping case. See Memorandum to Neal
M. Halper Regarding Cost of Production and Constructed Value Adjustments
for the Preliminary Determination in Antidumping Duty Investigation of
Honey from Argentina, dated May 4, 2001.
Petitioners also maintain that, at verification, San Luis officials were
unable to document that any amounts, including principal or interest, were
repaid by program participants. As such, petitioners argue that the
Department's benefit calculation should not reflect any payments of
principal or interest.
Department's Position:
We agree with the GOA and petitioners, in part. As the GOA noted, at
verification, San Luis officials provided revised honey program spending
amounts based on their 1994-1999 General Accounts. We agree with the GOA's
claim that the General Accounts spending data are more reliable than the
information provided in their response. As discussed in the San Luis Honey
Development Program section above, we have used these spending figures in
our benefit calculation.
As discussed in the San Luis Honey Development Program section, we agree
with petitioners that the record does not demonstrate that there were any
repayments of principal or interest from the program participants or that
any such payments could reasonably be expected. See Verification Report at
31-36. As such, we are treating the leasing component as loans that have
been forgiven and have calculated the benefit in accordance with section
351.508(a) of the Department's regulations.
We have not made the petitioner's recommended adjustment for profit and
overhead. In considering that leases operate, in effect, like loans, any
calculation we do to determine the benefit has to relate to the nature of
the benefit.
Comment 14: CFI Credit for Small Business Ventures Program Loans to the
Honey Sector and De Jure Specificity
The GOA contends that the San Luis Honey Development Program and the CFI
Credit for Small Business Ventures Program are entirely different programs
and that there is no link between the two. The GOA contends that the only
form of assistance provided through the San Luis Honey Development Program
is the leasing of beekeeping equipment. The GOA maintains that the San
Luis Honey Development Program does not provide any financing through the
CFI Credit for Small Business Ventures Program or any other line of credit.
The GOA claims that the record evidence demonstrates that the San Luis
Honey Development Program is a social development program and the CFI
Credit for Small Business Ventures Program is a program which promotes the
development of small business ventures in all economic sectors nationwide,
including beekeeping. The GOA argues that the two programs are independent
of one another and they target mutually exclusive groups. The San Luis
Honey Development Program assists the unemployed and underemployed of the
province. Applicants who qualify for CFI financing are creditworthy owners
of profitable enterprises or projects engaged in a variety of economic
sectors in Argentina. As such, the GOA contends that while the CFI
provided loans to profitable honey producers in the Province of San Luis,
the CFI would never make loans to the individuals who participated in the
San Luis Honey Development Program.
Petitioners argue that the Department should not only affirm its decision
regarding CFI's Credit for Small Business Ventures program for loans to
the honey sector in San Luis, but also find all loans to the honey sector
under the various CFI programs to be specific and countervailable.
Petitioners contend that the results of verification established that
there is little or no difference between CFI's Credit for Small Business
Ventures Program loans to honey producers in San Luis and the other CFI
lines of credit. As such, petitioners argue that the Department should
also treat all CFI financing as de facto specific and calculate a benefit.
Department's Position:
We agree with the GOA. Based on the results of verification, we find that
while the San Luis Honey Development Program provided beekeeping equipment
through leases, it did not provide loans. Based on verification, we are
satisfied that the Province of San Luis did not provide any loans nor did
it have responsibility for or control of CFI funds which were lent to
small enterprises throughout Argentina, including beekeepers. As such, for
this final determination, we find that CFI Credit for Small Business
Ventures Program loans are not specific to the honey sector under section
771(5A)(D)(i) of the Act and that there are no lines of credit provided
through or under the San Luis Honey Development Program.
Comment 15: CFI Financing: De Jure/De Facto Specificity
Petitioners argue that because the Department found countervailable
certain CFI loans provided through second tier-banks in San Luis as part
of the San Luis Honey Development Program, the Department should
countervail all other CFI loans to honey producers. According to
petitioners, information examined at verification suggests that the
allegedly non-countervailable component of CFI also was channeled through
provincial banks. Such provincial governments have the discretion to
target CFI funds to certain sectors, including the honey sector. Such
targeting, petitioners argue, renders CFI financing de facto specific to
honey producers/exporters. Petitioners therefore urge the Department to
countervail all CFI loans to honey producers or exporters.
The GOA argues that the CFI Credit for Small Business Ventures Program
does not meet any of the specificity criteria set forth by section 771(5A)
of the Act, and thus cannot be considered a countervailable subsidy
pursuant to section 771(5A) of the Act. The GOA argues that petitioners'
request to countervail CFI financing is not supported by information on
the record and therefore, the Department must confirm its Preliminary
Determination that CFI Credit for Small Business Ventures Program is not
specific. The GOA further notes that CFI financing provides assistance to
small and medium-sized businesses (SMEs) in all economic sectors and is
aimed at promoting the development of small (micro) business ventures or
small undertakings across the country. The GOA maintains that the CFI
regulations indicate the availability of CFI financing for all micro and
small businesses, and there is clear evidence on the record to demonstrate
that none of the de facto specificity requirements set forth in section
771 (5A)(D)(iii) of the Act apply. The GOA notes, in addition, that the
information on the record, which the Department verified, demonstrates
that financing to all economic sectors has been consistent since the
inception of the program. According to the GOA, information provided at
verification reflects that no one activity financed was a predominant
benefactor and further demonstrates that the loans are widely dispersed
throughout the economy. Further, information on the record shows that CFI
financing has neither a specific program to target any one industry nor a
designated line of credit for a particular sector within a province. The
GOA maintains that the information on the record also shows that the
government does not play a role in determining who will receive CFI
financing and that it does not participate in the evaluation of loan
applications or other lending decisions. In addition, the GOA argues that
the record shows that neither the provinces nor the provincial banks have
discretion or control over the funds that are disbursed by the CFI.
Department's Position:
As discussed above in the section Credit for Small Business Ventures, we
are affirming our Preliminary Determination that CFI financing is not
provided on either a de jure or de facto basis to a specific enterprise or
industry or group thereof, and is, therefore, not countervailable.
Furthermore, evidence on the record demonstrates that neither the
provinces nor the provincial banks have discretion or control over how CFI
funds are disbursed.
Comment 16: CFI Credit for Small Business Ventures in the Province of San
Luis: Link between Programs
The GOA argues that the Department erred in finding that CFI lines of
credit are made available only to the honey industry in the Province of
San Luis. The GOA claims that the information on the record shows that the
CFI Credit for Small Business Ventures Program is a non-countervailable
nationwide program and it is not a provincial program. Specifically, the
record evidence shows that CFI financing is made available to a variety of
economic activities in the Province of San Luis, including the beekeeping
sector. As such, according to the GOA, there are no particular lines of
credit targeted to a specific sector or province including the Province of
San Luis.
Furthermore, the GOA asserts that there is no link between the San Luis
Honey Development Program and the CFI Credit for Small Business Ventures
Program. On the one hand, according to the GOA, the San Luis program is a
social development program aimed to provide assistance to unemployed and
underemployed people with little or no income and with no access to
credit. The CFI Credit for Small Business Ventures Program, on the other
hand, aims to promote the development of small business ventures in all
economic sectors nationwide, including the beekeeping sector. Therefore,
the GOA argues, they are two different programs. Further, the GOA asserts
that CFI loans have never been available to the uncreditworthy beekeeping
sector targeted by the San Luis Honey Development Program; the CFI
provides financing to profitable projects from existing beekeepers in the
Province of San Luis but not to participants in the San Luis Honey
Development Program. The GOA argues that the Department must determine
that loans provided to honey producers in the Province of San Luis under
the CFI Credit for Small Business Ventures Program are not de jure or de
facto specific subsidies and are therefore, not countervailable in
accordance with section 771(5A)(A) of the Act.
Petitioners argue that because the Department found countervailable
certain CFI loans provided through second tier-banks in San Luis as part
of the San Luis Honey Development Program, the Department should
countervail all other CFI loans to honey producers.
Department's Position:
As discussed in the Credit for Small Business Ventures Program section
above, evidence on the record demonstrates that CFI loans are not limited
to any specific sector or industry, or region within a specific province
and are therefore not specific countervailable under section 771(5A)(D) of
the Act. As further discussed in the section, San Luis Honey Development
Program, we have found no link between the provincial program and the CFI
program. Therefore, we are not countervailing the loans provided to honey
producers or exporters in the Province of San Luis or any other province.
Comments 17: Countervailability of BICE Norm 007
The GOA argues that the BICE does not provide any loans to the honey
sector because it is a second-tier bank, and therefore operates as a
source of funding for other first-tier commercial banks. The GOA argues
that the BICE's only clients are first-tier commercial banks and not the
public, and, as such, BICE loans do not provide a financial contribution
to the honey sector pursuant to section 771(5)(D) of the Act.
The GOA further argues that the Department incorrectly stated in its
Preliminary Determination that the BICE Line 007 is export-related, and
that there is no reference to improving export capacity as a requirement
for receiving financing under this line of credit. The GOA argues that
this line of credit provides financing for private sector projects in the
productive sectors of the economy, and that there is no indication that
improving export capacity is a requirement for receiving financing under
this line of credit. The GOA notes that the BICE does not require the Line
007 applicants to inform the BICE of the purpose for which financing under
this line of credit is used.
The GOA further argues that the BICE Line 007 is not a domestic subsidy
pursuant to section 771(5A)(D)(i) of the Act because this line is aimed at
a wide variety of industrial projects in general. The GOA further argues
that this is not an import substitution subsidy as defined by section
771(5A)(C) of the Act, and therefore there is no basis for determining
that this line of credit is specific.
The petitioners did not address this issue.
Department's Position:
We agree with the GOA. At verification, we found that the BICE Norm 007
line of credit was used by a broad range of borrowers and was not
contingent upon export performance. See BICE Norm 007 section, above. We
therefore find that this program is not countervailable.
See section 771(5) of the Act.
Comment 18: PROAPI'S Sales of Fertilized Queen Bees: Adequacy of
Remuneration
The GOA repeats its argument that the investigation of the PROAPI program
is contrary to U.S. law and in violation of the United States' WTO
obligations. Notwithstanding the allegedly improper initiation of an
investigation on the PROAPI Program, which was notified to the WTO by the
Government of Argentina, the GOA argues that the fertilized queen bees
sold by PROAPI were sold for adequate remuneration. Since the Preliminary
Determination, the GOA has provided additional information regarding
market prices for sales of fertilized queen bees, and according to the
GOA, this information was verified by the Department's examination of
invoices from Argentine firms which sell fertilized queen bees.
The petitioners did not address this issue.
Department's Position:
For the reasons stated in the Department's Position on Comment 1, above,
we determine that the Department's initiation of its investigation of the
PROAPI program was lawful. As indicated in the PROAPI section above, we
have examined and verified additional information provided by the GOA
since the Preliminary Determination regarding the prices at which
fertilized queen bees are sold in Argentina and we have determined that
PROAPI's sales of fertilized queen bees are made for prices which reflect
adequate remuneration.
Comment 19: Use of BNA Loan Programs
The GOA notes that the Department found in its Preliminary Determination
that all BNA financing facilities were countervailable based on facts
available because the GOA did not provide requested information regarding
the specific loans to honey producers that were outstanding during the POI
or the aggregate value of loans outstanding to the honey industry during
the POI. The GOA also notes that since the Preliminary Determination, the
GOA has provided to the Department information that shows that no loans
were provided to the honey sector during the POI under the BNA Financing
for the Acquisition of Goods of Argentine Origin and the Line of Credit
for the Acquisition of Industrial and Agricultural Machinery, Silos and
Transportation Vehicles line of credit, and that the Department verified
this information. As a result, the GOA argues that because these programs
provided no financial contribution to the honey sector during the POI they
are not countervailable.
Petitioners argue that the Department's verification report does not
clearly establish that there were no loans to honey producers under this
program. Petitioners maintain that at verification, the Department found
that only certain BNA regional offices and branches reported no loans to
honey. Petitioners further argue that the logical implication from this is
that there were other BNA regional offices and/or branches that provided
loans to honey producers under the BNA lines of credit. Petitioners
therefore argue that the Department should continue to treat this program
as countervailable in the final determination.
Department's Position:
We agree with the GOA. Since the Preliminary Determination, the GOA
provided information showing that there were no loans to honey producers
or exporters under the BNA Financing for the Acquisition of Goods of
Argentine Origin and the Line of Credit for the Acquisition of Industrial
and Agricultural Machinery, Silos and Transportation Vehicles lines of
credit.
At verification, the Department discussed at length with BNA officials
the process that was used to ensure that all loans to honey producers were
identified and reported. All area managers (thirty-eight in total)
responded to the BNA headquarters in Buenos Aires that a complete check
had been undertaken at all of their branches. See Verification Report at
42, 43. At verification, the Department tested these responses and found
them to be accurate. Section 351.307(b)(3) of the Department's regulations
state that "{i}f the Secretary decides that, because of the large number
of exporters or producers. . . , it is impracticable to verify relevant
factual information for each person, the Secretary may select and verify a
sample."
In the instant case, there are more than 600 branches of the BNA
throughout the country, including regional offices and local branches. It
would have been impracticable for Department officials to conduct
verification at all BNA offices. Petitioners argue that the logical
implication from the record is that, although the Department verified that
a sample of the BNA branches accurately reported no loans to honey
producers, the other branches could have provided such loans. However, we
are satisfied that the BNA developed a reasonable procedure for
identifying whether any loans had been provided by any of its branch
offices throughout Argentina to honey producers under the various lines of
credit. The Department tested the reasonableness and accuracy of the
procedure used by the BNA at several branches during verification and
found no loans to honey producers. The Department therefore agrees that
the GOA has established that there were no loans to honey producers under
the BNA Financing for the Acquisition of Goods of Argentine Origin and the
Line of Credit for the Acquisition of Industrial and Agricultural
Machinery, Silos and Transportation Vehicles lines of credit.
Comment 20: Countervailability of Fundacion Export*Ar Program
The GOA asserts that the Department incorrectly found in its Preliminary
Determination that a grant was conferred under the Fundacion Export*Ar
program to a honey producer for participation in a trade fair in the
United States. The GOA argues that information provided since the
Preliminary Determination and at verification shows that the space used by
the honey producer at the trade fair in the United States was only a small
part of the total space used and paid for by the participant. The GOA
further asserts that because the Department verified that Fundacion
Export*Ar provided no benefits to the honey sector during the POI, the
Department should change its affirmative finding of countervailability
from the Preliminary Determination to a negative finding.
Petitioners did not address this issue.
Department's Position:
As indicated in the Fundacion Export*Ar section above, we have taken note
of information provided by the GOA and verified since the Preliminary
Determination, however, we find no benefits were provided during the POI.
Should a countervailing duty order be issued in this case, we will
continue to examine whether countervailable benefits are being provided
under the Fundacion Export*Ar program.
Comment 21: Warrant-Based Financing
The GOA argues that the warrant-based financing system in Argentina does
not meet the standard of an export subsidy because warrant-based financing
is not specific to exporters. The GOA further contends that the warrant,
created by Law 9643/14, is a standard financing instrument used to secure
any type of commercial loan and that nothing in the law indicates that
warrant-based financing is either export related or contingent upon export
performance. The GOA adds that Law 9643 simply regulates two standard
negotiable instruments, i.e. the "Certificate of Deposit" and the
"Warrant." The GOA further argues that the Department erred in concluding
that warrant based financing is a de jure specific export subsidy, and
therefore does not meet the specificity requirements as set out in section
771(5A)(B) of the Act.
Petitioners argue that warrant-based financing provided through the BNA
represents a de jure specific export subsidy because Law 9643
"specifically indicates that warrant-based financing can be used as a form
of export prefinancing." As a result, petitioners contend that warrant-
based financing is a de jure specific export subsidy and, therefore, the
Department should continue to treat it as an export subsidy as in its
Preliminary Determination.
Department's Position:
We agree with the GOA. The warrant is a standard financing instrument
used in Argentina, and as such, it is not an "export pre-financing"
program, and it does not provide countervailable subsidies under section
771(5) of the Act.
VIII. Total Ad Valorem Subsidy Rate
We have revised the net subsidy rate that was calculated in the
Preliminary Determination. In accordance with section 777A(e)(2)(B) of the
Act, we have calculated an aggregate or industry-wide rate for all of the
producers/exporters of honey under investigation. We have determined that
the total estimated countervailable subsidy rate is 4.53 percent ad
valorem. However, due to a program-wide change, we have established a cash
deposit rate of 5.85 percent ad valorem in accordance with section 351.526
of the Department's regulations.
IX. Recommendation:
Based on our analysis of the comments received, we recommend adopting all
of the above positions. If these recommendations are accepted, we will
publish the final results of the determination in the Federal Register.
__________ __________
Agree Disagree
______________________
Faryar Shirzad
Assistant Secretary
for Import Administration
______________________
Date
________________________________________________________________________
footnote:
1. Petitioners argue that section 771(5B)(A) of the Act clearly states
that whether a subsidy is non-countervailable is to be addressed during
an investigation. However, section 771(5B)(A) applies only to so-called
"green light" subsidies, not "green box" subsidies.