Roses, Inc. v. US

• Decision Date: 03 July 1990
• Docket Number: Court No. 84-5-00632.
• Citation: 743 F. Supp. 870
• Parties: ROSES, INC., California Floral Trade Council, and Floral Trade Council, Plaintiffs, v. The UNITED STATES, Defendant, Anapromex, Defendant-Intervenor.
• Court: U.S. Court of International Trade

743 F. Supp. 870

ROSES, INC., California Floral Trade Council, and Floral Trade Council, Plaintiffs, v. The UNITED STATES, Defendant Anapromex, Defendant-Intervenor.

Court No. 84-5-00632.

United States Court of International Trade.

July 3, 1990.

Stewart and Stewart, (David Scott Nance and Geert De Prest at the hearing, Eugene Stewart, Terence P. Stewart and Geert De Prest, Washington, D.C., on the brief), for plaintiffs.

Stewart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice, (Jeanne E. Davidson at the hearing, Sheila N. Ziff on the brief), of counsel (Andrea Dynes at the hearing, Gaylin Soponis on the brief), Atty. Adviser, U.S. Dept. of Commerce, Washington, D.C., for defendant.

Porter, Wright, Morris & Arthur, (Leslie Alan Glick), Columbus, Ohio, for defendant-intervenor.

MEMORANDUM AND ORDER

RESTANI, Judge:

Plaintiffs move for judgment on the administrative record of Certain Fresh Cut Flowers From Mexico, 49 Fed.Reg. 15007 (1984) (Final Determination). The International Trade Administration (ITA or Commerce) conducted this investigation under section 303 et seq. of the Tariff Act of 1930, as amended, 19 U.S.C. § 1303 et seq. (1982), and determined that "no benefits that constitute bounties or grants within the meaning of section 303 of the Tariff Act of 1930, as amended (the Act), are being provided to producers or exporters in Mexico of fresh cut flowers, ..." Final Determination at 15007.

Plaintiffs challenge this determination, claiming that ITA's finding that financing provided to Mexican flower growers did not constitute a bounty or grant because it was not provided to a specific enterprise or industry, or group of enterprises or industries, was not supported by substantial evidence in the record or was otherwise not in accordance with law.

BACKGROUND

On September 30, 1983, ITA received a petition from the California Floral Trade Council, Floral Trade Council, and Roses, Inc., filed on behalf of the United States industry producing fresh cut flowers. Administrative Record Document (A.R.Doc.) 1. The petition alleged that manufacturers, producers or exporters in Mexico of certain fresh cut flowers received, directly or indirectly, bounties or grants within the meaning of section 303 of the Act, including (1) exemption of import duties; (2) preferential long and short term financing, loan guarantees, and reimbursement to commercial banks funding technical services to flower growers, all through a government program called the Funds Established with Relationship to Agriculture (FIRA); (3) financing for investment credit through the Special Trust for Agricultural Finance (FEFA); (4) marketing services provided by the Instituto Mexicano de Comercio Exterior (IMCE); and (5) a state grant to the University of Floriculture which provides research and development and manpower training for the Mexican flower industry. Id.

Commerce found the petition to contain sufficient grounds upon which to initiate a countervailing duty investigation and, on October 26, 1983, published its notice of Initiation of Countervailing Duty Investigation; Certain Fresh Cut Flowers from Mexico, 48 Fed.Reg. 49531 (1983). Commerce announced that, in addition to petitioner's allegations, it would investigate certain other Mexican programs previously found to confer bounties or grants. Id. Commerce also investigated an export subsidy allegation.¹ See Postponement of Countervailing Duty Investigation; Certain Fresh Cut Flowers From Mexico, 48 Fed.Reg. 55492 (1983).

On February 1, 1984, ITA published its Certain Fresh Cut Flowers from Mexico; Preliminary Negative Countervailing Duty Determination, 49 Fed.Reg. 4023 (1984). The notice stated that Commerce had preliminarily determined that one flower company, Florex S.P.R. (Florex), had received one FIRA loan during the period of investigation, that is, January 1, 1982 to September 30, 1983, and that ITA required more information on FIRA. The notice stated, in part:

The government of Mexico stated that only one flower company received a loan through FIRA. The loan was granted to Florex S.P.R. in 1983 to enable it to purchase the assets of another company, Flores de Occidente. In order to determine whether benefits received under FIRA are countervailable, we need to determine whether FIRA benefits may be contingent upon exports and/or whether FIRA is targeted to a "specific enterprise or industry, or group of enterprises or industries" within Mexico as specified in section 771(5)(B) of the Act.

In our `Final Negative Countervailing Duty Determination: Fresh Asparagus from Mexico' (48 F.R. 21618), we stated that the agricultural sector constitutes more than a single group of industries within the meaning of the Act. According to information from the Mexican government, it appears that FIRA is available to a broad range of agricultural products, and possibly even for some non-agricultural enterprises. If this is the case, FIRA would not be countervailable based on our reasoning in Fresh Asparagus. Further, it does not appear that the Florex loan is targeted for exports. However, more information is needed on this program, because it is not clear from the response exactly what types of products are eligible to receive FIRA financing.

49 Fed.Reg. at 4023-24.

ITA preliminarily determined that all other programs which it investigated did not confer bounties or grants or were not used by producers or exporters of cut flowers. Id. at 4024-25.

Commerce then verified the following facts regarding the FIRA program in general. The purpose of FIRA is to develop and support agriculture in Mexico and most support is to the small agricultural producer. A.R. Doc. 74 at 2. Of all credit granted by FIRA, 80.8% went to producers of basic food products and livestock (including grains, fruits, tomatoes, chilis, onions, lettuce, carrots, potatoes, beans, milk, meat, pork, cold cuts, sugar, oil, lard, corn, wheat, rice, eggs, cotton, honey, livestock, and bread), to fill the agricultural needs of the Mexican people. A.R. Doc. 74 at 2-3. The program for low income producers (i.e., peasant farmers who have not yet reached the basic subsistence level and who generally have no other source of income besides agricultural production) is the most important for FIRA. 33.9% of FIRA financing went to low income producers; smaller amounts went to producers in other income categories. A.R. Doc. 74 at 3-4.

In addition to support for basic foods, FIRA provides support for fishing and forestry industries, producers of agricultural tools, feed, and a variety of processed and canned products. A.R. Doc. 74 at 2. Only 8.6% of FIRA credit was used to finance exports. A.R. Doc. 74 at 3. All growers of flowers for export are in the highest income category under FIRA; this category received the smallest percentage of FIRA financing. A.R. Doc. 74 at 7. Of the producers and exporters of cut flowers subject to the Commerce investigation, only one company, Florex, received a FIRA loan during the period of investigation.² A.R. Doc. 74.

With regard to Florex, ITA verified that: In May of 1983, Florex received a FIRA loan of 70 million pesos to enable it to acquire another corporation. A.R. Doc. 74 at 9. The interest rate on the loan to Florex was approximately 60 percent because of FIRA participation; absent FIRA participation, funding would have been at a higher rate. A.R. Doc. 74 at 9-10. See also A.R. Exhibit 7.

On April 16, 1984, Commerce published its Final Determination. ITA determined that 16 programs, either alleged by petitioners to confer bounties or grants or investigated as announced in the initiation, either were not used by Mexican flower growers or were suspended. Regarding FIRA, Commerce determined that its

main objective ... is to develop Mexico's agricultural sector. To meet this objective FIRA provides short- and long-term financing, loan guarantees, and technical support to firms involved in agricultural production. The Fund for Agricultural Finance (FEFA) and the Fund for Technical Assistance and Guarantee for Agriculture Credit (FEFA) are two of the principal funds which operate under FIRA. FEFA was created in August of 1965 and provides investment funding to producers. FEGA was created in December of 1972 and guarantees credits granted to low-income growers. FEGA also reimburses banks for technical services provided through the banks to growers. Two FIRA loans were outstanding during the period of investigation to cut flower producers exporting to the United States.

FIRA does not confer an export bounty or grant because it does not operate, and is not intended, to stimulate export over domestic sales. Furthermore, it is not offered contingent upon export performance. In fact, most of FIRA's financing is given to producers who do not export. For FIRA to be considered a domestic bounty or grant, it must be "provided or required by government action to a specific enterprise or industry, or group of enterprises or industries" within Mexico as specified in section 771(5)(B) of the Act. In our Final Negative Countervailing Duty Determination; Fresh Asparagus from Mexico (48 F.R. 21618), we stated that the agricultural sector constitutes more than a single group of industries within the meaning of the Act. We reaffirm that decision made in Fresh Asparagus. Agriculture is more than a specific industry or group of industries. Producers of a wide variety of products including fruits and vegetables, livestock, grains, meat product, milk, and eggs are eligible for FIRA financing. Producers of agricultural tools may also receive financing under FIRA. FIRA loans are also provided to the fishing and the forestry industries. Approximately one-third of Mexico's labor force is employed in agriculture. The FIRA program is generally available to, and used by, wide ranging and diverse industries that constitute a substantial portion of the Mexican

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