Roses Inc. v. US, 84-05-00632.

• Decision Date: 16 September 1991
• Docket Number: No. 84-05-00632.,84-05-00632.
• Citation: 774 F. Supp. 1376
• Parties: ROSES INC., California Floral Trade Council, and Floral Trade Council, Plaintiffs, v. The UNITED STATES, Defendant, and Anapromex, Defendant-Intervenor.
• Court: U.S. Court of International Trade

774 F. Supp. 1376

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

No. 84-05-00632.

United States Court of International Trade.

September 16, 1991.

Stewart and Stewart, Eugene L. Stewart, Terence P. Stewart and Geert De Prest, Washington, D.C., for plaintiffs.

Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, U.S. Dept. of Justice, Civil Div., Jeanne E. Davidson, Andrea Fekkes Dynes, Office of the Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, D.C., of counsel, for defendant.

Porter, Wright, Morris & Arthur, Leslie A. Glick, Columbus, Ohio, for defendant-intervenor.

OPINION

RESTANI, Judge:

This case is before the court on plaintiffs' motion for judgment on the agency record. Plaintiffs, representatives of United States fresh cut flower producers, contend that in its second remand determination, issued on April 1, 1991, the Department of Commerce ("Commerce") violated this court's instructions contained in the remand order and issued a final negative countervailing duty determination that is not supported by substantial evidence on the record and is contrary to law. For the reasons set forth in the following paragraphs, the court finds that Commerce's determination is supported by substantial evidence of record and is in accordance with law.

Background

I. The statutory framework.

For almost a century, United States tariff laws have provided for the imposition of countervailing duties in certain cases where foreign producers have received a bounty or grant, and hence an unfair competitive advantage, in the form of a subsidy from their government. See generally Zenith Radio Corp. v. United States, 437 U.S. 443, 98 S.Ct. 2441, 57 L.Ed.2d 337 (1978). In theory, countervailing duties subordinate immediate consumer welfare (consumers would naturally prefer the lower prices attached to the good) to the overall health of the economy (unsubsidized domestic firms may be unable to compete with subsidized foreign firms). Under United States law, Commerce may impose countervailing duties upon imported merchandise if it determines that a foreign nation is providing, directly or indirectly, a subsidy with respect to the manufacture, production, or exportation of a class or kind of merchandise imported, or sold for importation, into the United States.¹

A central issue in countervailing duty law involves the definition of a "bounty" or "grant."² In the case of domestic subsidies (those not contingent on exportation of the product), the law requires that some sort of benefit be conferred upon a "specific enterprise or industry or group of enterprises or industries" before countervailing duties may be assessed. See 19 U.S.C. § 1677(5) (1988). It is this last requirement, that of benefit to a specific enterprise or industry or group of enterprises or industries, which has proved to be a focal point for litigation in the countervailing duty area.

Before case law forced a change, Commerce adhered to the position that benefits generally available to a wide range of enterprises or industries were not countervailable. In Cabot Corp. v. United States, 9 CIT 489, 620 F.Supp. 722 (1985), appeal dismissed, 788 F.2d 1539, 1544 (1986) (Cabot I), the court rejected Commerce's rule, holding that generally available benefits might indeed constitute specific grants upon specific identifiable enterprises or industries if in fact they were bestowed in such a manner so as to benefit only specific identifiable enterprises or industries. In 1988, Congress codified the holding in Cabot I by way of a "Special rule" added in the Omnibus Trade and Competitiveness Act. See House Comm. on Ways and Means, Trade and International Economic Policy Reform Act of 1987, H.Rep. No. 40 (Part I), 100th Cong., 1st Sess. 123 (1987). See also Roses, Inc. v. United States, 14 CIT ___, ___, 743 F.Supp. 870, 876-77 (1990).

Therefore, the appropriate standard now focuses "on the de facto case by case effect of benefits provided to recipients rather than on the nominal availability of benefits." Cabot Corp. v. United States, 12 CIT 664, 674, 694 F.Supp. 949, 957 (1988) (Cabot II); see also Roses, 743 F.Supp. at 879 (citing Saudi Iron and Steel Co. (Hadeed) v. United States, 11 CIT 880, 884, 675 F.Supp. 1362, 1367 (1987)). Recently, in PPG Industries, Inc. v. United States, 928 F.2d 1568 (Fed.Cir.1991), the Federal Circuit sustained Commerce's conclusion that a foreign government's exchange risk program and natural gas subsidy program did not target specific companies because they were in fact used by a wide variety of industries. Id. at 1577-79. The court found that the existence of eligibility requirements per se does not suffice to denote a specific class, although the requirements, if narrowly tailored, may operate in a de facto manner to benefit a specific industry or group of industries. The court continued to adhere to the principle that the statute requires a case by case analysis to determine whether there has been a bestowal of benefits upon a specific class, i.e., it remains paramount that a discrete class of beneficiaries exist.³

II. The factual background.

On April 16, 1984, Commerce published its final negative countervailing duty determination in the investigation of Certain Fresh Cut Flowers from Mexico, 49 Fed. Reg. 15007 (1984).⁴ In this determination, Commerce found that no benefits constituting bounties or grants were being provided to producers or exporters of fresh cut flowers in Mexico.

One of the programs found not to be countervailable was the Funds Established with Relationship to Agriculture ("FIRA").⁵ The FIRA program consists of three trusts which are administered by the Bank of Mexico. These trusts provide short- and long-term financing, loan guarantees, and technical support for the producing firms. The purpose of FIRA is to develop and support Mexican agriculture, especially small agricultural producers. FIRA provides support for basic foods, fishing and forestry industries, producers of agricultural tools, feed, and a variety of processed and canned products. One exporter of fresh cut flowers, Florex, received a FIRA loan during the period of the investigation.

In its final determination, Commerce found that during the period of investigation FIRA did not confer an export bounty or grant because it did not operate, and was not intended, to stimulate export over domestic sales. FIRA financing was not offered contingent upon export performance and, in fact, was given primarily to non-exporting producers. Commerce's determination of no domestic subsidy was based on its finding that FIRA loans were not targeted to any specific enterprise or industry, or group of enterprises or industries. This finding was based on Commerce's conclusion that agriculture was more than a specific industry or group of industries and the FIRA program was generally available to, and used by, wide-ranging and diverse industries.

Following plaintiffs' judicial challenge to this final determination, this court issued an opinion, Roses, 743 F.Supp. 870, remanding the case to Commerce for further consideration as to the domestic subsidy determination. Id. at 881. In accordance with this court's opinions in PPG and subsequent cases, the court stated that the appropriate test should have been "whether a competitive advantage in fact was bestowed on a specific enterprise or industry, or a group thereof, by the program at issue." Id. at 879. The court specifically ordered Commerce to perform further investigation and to "focus on whether an advantage in international commerce has been bestowed on a discrete class of grantees despite nominal availability, program grouping, or the absolute number of grantee companies or `industries.'" Id. at 881.

Accordingly, Commerce re-evaluated its determination and issued its initial remand results on October 1, 1990. Commerce concluded that "both de jure and de facto analyses lead to the conclusion that the FIRA program did not provide a subsidy, or a bounty or grant, to a specific enterprise or industry, or group of enterprises or industries." Remand Document ("Remand Doc.") 4 at 6.⁶ Finding that the FIRA program had a single set of policy objectives and maintained a unitary administrative structure, Commerce reiterated its earlier conclusion that the program was designed to foster the development of agriculture in general. Remand Doc. 4 at 13. Accordingly, Commerce affirmed its earlier determination.

On October 26, 1990, this court held a hearing to discuss the results of the remand determination. At the hearing the court stressed that the actual effects of the program must be assessed. The court stated that Commerce does not perform a proper de facto analysis if it merely looks at the number of companies that receive benefits under the program; the discretionary aspects of the program must be considered from the outset. See Transcript of October 26, 1990 Hearing at 20, 32-33.

Following the hearing, the court issued an order, Roses, Inc. v. United States, No. 84-05-00632, (CIT Oct. 26, 1990) ("remand order"), in which it directed Commerce to reexamine the issue of countervailability anew. The court again stated that countervailability must be assessed despite nominal availability of benefits under the program, program grouping, or the absolute number of grantees under the program. Specifically, the court instructed Commerce to "examine the levels of discretion employed in bestowing benefits both within the horticulture section and in comparison with other FIRA units," and "examine the policies behind loans both within the horticultural section and in comparison with other FIRA units." Id. Commerce should, the court stated, focus on determining whether a discrete class of grantees is subsidized. The court explained that although FIRA's general...