[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13857-13863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7358]
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DEPARTMENT OF COMMERCE
[C-122-815]
Pure and Alloy Magnesium From Canada: Final Results of the First
(1992) Countervailing Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
reviews.
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SUMMARY: On March 19, 1996, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of
administrative review of the countervailing duty orders on pure and
alloy magnesium from Canada for the period December 6, 1991 through
December 31, 1992 (see Preliminary Results of First Countervailing Duty
Administrative Reviews: Pure Magnesium and Alloy Magnesium From Canada
(Preliminary Results), 61 FR 11186 (March 19, 1996)). We have
completed these reviews and determine the net subsidy to be 9.86
percent ad valorem for Norsk Hydro Canada, Inc. and all other
producers/exporters except Timminco Limited, which has been excluded
from these orders. We will instruct the U.S. Customs Service to assess
countervailing duties as indicated above.
EFFECTIVE DATE: March 24, 1997.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai, Office 1, Group 1,
AD/CVD Enforcement, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4087.
SUPPLEMENTARY INFORMATION:
Background
On March 19, 1996, the Department published in the Federal Register
the Preliminary Results of its administrative
[[Page 13858]]
reviews of the countervailing duty orders on pure and alloy magnesium
from Canada (61 FR 11186). The Department has now completed these
administrative reviews in accordance with section 751 of the Tariff Act
of 1930, as amended (the Act).
We invited interested parties to comment on the Preliminary
Results. On April 18 and 25, 1996, case briefs and rebuttals were
submitted by Norsk Hydro Canada, Inc. (NHCI), a producer of the subject
merchandise which exported pure and alloy magnesium to the United
States during the review period, the Government of Quebec (GOQ), and
the Magnesium Corporation of America (petitioner). At the request of
respondents, the Department held a public hearing on May 2, 1996.
Period of Review
The reviews cover the period December 6, 1991 through December 31,
1992. The reviews involve one company and the following programs:
Exemption from Payment of Water Bills, Article 7 Grants from the Quebec
Industrial Development Corporation (SDI), St. Lawrence River
Environment Technology Development Program, Program for Export Market
Development, the Export Development Corporation, Canada-Quebec
Subsidiary Agreement on the Economic Development of the Regions of
Quebec, Opportunities to Stimulate Technology Programs, Development
Assistance Program, Industrial Feasibility Study Assistance Program,
Export Promotion Assistance Program, Creation of Scientific Jobs in
Industries, Business Investment Assistance Program, Business Financing
Program, Research and Innovation Activities Program, Export Assistance
Program, Energy Technologies Development Program, and Transportation
Research and Development Assistance Program.
Applicable Statute and Regulations
The Department is conducting these administrative reviews in
accordance with section 751(a) of the Act. Unless otherwise indicated,
all citations to the statute and to the Department's regulations are in
reference to the provisions as they existed on December 31, 1994.
However, references to the Department's Countervailing Duties; Notice
of Proposed Rulemaking and Request for Public Comments, 54 FR 23366
(May 31, 1989) (Proposed Regulations), are provided solely for further
explanation of the Department's countervailing duty practice. Although
the Department has withdrawn the particular rulemaking proceeding
pursuant to which the Proposed Regulations were issued, the subject
matter of these regulations is being considered in connection with an
ongoing rulemaking proceeding which, among other things, is intended to
conform the Department's regulations to the Uruguay Round Agreements
Act. (See 60 FR 80 (Jan. 3, 1995)).
Scopes of the Reviews
The products covered by these reviews are shipments of pure and
alloy magnesium from Canada. Pure magnesium contains at least 99.8
percent magnesium by weight and is sold in various slab and ingot forms
and sizes. Magnesium alloys contain less than 99.8 percent magnesium by
weight with magnesium being the largest metallic element in the alloy
by weight, and are sold in various ingot and billet forms and sizes.
Secondary and granular magnesium are not included in the scope of the
orders. Pure and alloy magnesium are currently provided for in
subheadings 8104.11.0000 and 8104.19.0000, respectively, of the
Harmonized Tariff Schedule (``HTS''). Although the HTS subheadings are
provided for convenience and customs purposes, our written description
of the scope of this proceeding is dispositive.
Secondary and granular magnesium are not included in the scopes of
these orders. Our reasons for excluding granular magnesium are
summarized in the Preliminary Determination of Sales at Less Than Fair
Value: Pure and Alloy Magnesium from Canada (57 FR 6094, February 20,
1992).
Calculation Methodology for Assessment and Cash Deposit Purposes
Since NHCI is the only known producer/exporter subject to these
orders, we used its ad valorem subsidy rate to determine the country-
wide ad valorem subsidy rate. This ad valorem subsidy rate does not
apply to Timminco Limited because it has been excluded from these
orders.
Analysis of Programs
Based upon our analysis of our questionnaire responses and written
comments from the interested parties we determine the following:
I. Programs Conferring Subsidies
1. Exemption From Payment of Water Bills
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our findings from the Preliminary Results. On this
basis, the net subsidy rate for this program is as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI and All Other Producers/Exporters except Timminco Ltd. 1.31
------------------------------------------------------------------------
2. Article 7 Grants From the Quebec Industrial Development Corporation
In the preliminary results, we found that this program conferred
countervailable benefits on the subject merchandise. Our analysis of
the comments submitted by the interested parties, summarized below, has
not led us to change our findings from the Preliminary Results. On this
basis, the net subsidy for this program is as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI and All Other Producers/Exporters except Timminco Ltd. 8.55
------------------------------------------------------------------------
II. Programs Found Not To Be Used
In the preliminary results we found that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following programs:
St. Lawrence River Environment Technology Development
Program.
Program for Export Market Development.
Export Development Corporation.
Canada-Quebec Subsidiary Agreement on the Economic
Development of the Regions of Quebec.
Opportunities to Stimulate Technology Programs.
Development Assistance Program.
Industrial Feasibility Study Assistance Program.
Export Promotion Assistance Program.
Creation of Scientific Jobs in Industries.
Business Investment Assistance Program.
Business Financing Program.
Research and Innovation Activities Program.
Export Assistance Program.
Energy Technologies Development Program.
Transportation Research and Development Assistance
Program.
We received no comments on these programs from the interested
parties; therefore, we have not changed our findings from the
Preliminary Results.
[[Page 13859]]
Analysis of Comments
Comment 1: Countervailability of the Exemption From Payment of Water
Bills
Respondents argue that the NHCI's contract with its supplier of
water, La Societe du Parc Industriel et Portuaire de Becancour
(``Industrial Park''), was inextricably linked with the credit it
received from the GOQ to offset its water bills. If the water credit
had not been received, respondents state that a different billing
arrangement would have been made. Therefore, in determining the amount
of the benefit conferred by the credit, the Department should look to
what NHCI would have paid absent the water credit and the contract
compared to what it paid with the credit and the contract. To calculate
what NHCI would have paid absent the credit and the contract,
respondents argue that the closest approximation is the amount NHCI
would have paid under its present contract based on actual water
consumption rather than forecasted consumption.
Petitioner states that under the terms of the contract between NHCI
and the Industrial Park, the amount invoiced is based, in part, on
forecasted consumption and this amount is what NHCI would have paid in
the absence of the water credit. By countervailing the portion of the
water invoice that was offset by the water credit and, hence, not paid
by NHCI, petitioner states that the Department correctly calculated the
countervailable benefit in the Preliminary Results. Even if the
Department were to consider what NHCI would pay in the absence of the
credit and existing contract, petitioner points out that other
Industrial Park customers also are obligated to pay an amount based, in
part, on forecasted consumption although they are allowed to change
their forecasted consumption levels yearly. Hence, forecasted
consumption cannot be ignored as an element of the charge for water.
Petitioner also points out that, in addition to requiring the
Industrial Park to supply the actual amount of water used by NHCI, the
contract also bound the Industrial Park to certain other potential
obligations upon the request of NHCI. According to petitioner, the
contract was structured to compensate the Industrial Park for any costs
it might incur in meeting those other potential obligations.
DOC Response: We disagree with respondents that we are required to
hypothesize what NHCI would have paid for its water in the absence of
the credit and the contract it entered into to measure the benefit
conferred by the credit. The position put forward by NHCI is analogous
to a situation where a company received a low-interest loan from a
government and argues to the Department that because of the low
interest rate, it borrowed more than it otherwise would have.
Therefore, the company would contend, to calculate the benefit
conferred by the low-interest loan, the Department should compare the
actual amount of interest paid on the low-interest loan with the actual
amount of interest the company would have paid on a smaller loan at a
higher benchmark interest rate. In this loan situation, we would not
enter into a hypothetical calculation of what amount the company would
have borrowed absent the low-interest loan. Instead, consistent with
section 771(5)(A)(II)(c) of the Act, we would simply countervail the
difference in the two interest rates without regard to what effect the
interest rate has on the other terms of the loan, i.e., the amount
borrowed.
In this review, the terms of the contract between NHCI and the
Industrial Park unambiguously state that NHCI is required to pay an
amount based, in part, on forecasted consumption. To the extent the
GOQ's provision of the credit relieved NHCI from paying its water
bills, a countervailable benefit existed without regard to whether NHCI
would have received different terms under an alternative arrangement.
Therefore, we determine that the benefit is the full amount of the
credit.
Comment 2: Article 7 Assistance Under the SDI Act
Petitioner states that the label ``interest rebate'' placed on the
Article 7 assistance provided by the SDI does not change the nature of
the assistance and that it remains, in substance, a grant. According to
petitioner, the purpose, amount and disbursement timetable for the
Article 7 assistance was inextricably linked to NHCI's purchase of
specified environmental protection equipment. Petitioner further points
out that the Article 7 assistance was not tied to the cost of NHCI's
plant, the total amount of NHCI borrowing, the interest rate paid by
NHCI on its borrowings, or the total amount of interest incurred by
NHCI. Petitioner argues that the assistance had the impact of
encouraging NHCI to install specified environmental protection
equipment as opposed to encouraging NHCI to borrow money that it
otherwise would not have borrowed. In light of the above, petitioner
concludes that the funding was in the form of a non-recurring grant.
Petitioner emphasizes that the Department should not allow respondents
to engage in ``subsidy engineering'' by turning a large non-recurring
capital grant into some other type of benefit.
Respondents argue that the Department improperly applied its grant
methodology to the Article 7 assistance provided to NHCI. According to
respondents, because NHCI knew it would receive interest rebates from
SDI prior to taking out loans, the Department should calculate the
benefit using its loan methodology and reduce the interest rate charged
by the amount of the interest rebated. Respondents state that this
would be consistent with the Department's methodology, citing a number
of cases (e.g., Final Affirmative Countervailing Duty Determination;
Certain Steel Products From the United Kingdom (UK Steel), 58 FR 37393,
37397 (July 9, 1993)).
Respondents further contend that the Preliminary Results were based
on significant errors of fact regarding the interest rebates received
by NHCI. First, respondents argue that the relationship between the
interest rebates and the underlying loans was not indirect. Second, the
interest rebates received by NHCI reduced NHCI's costs of borrowing for
the construction of its plant, not its costs of purchasing
environmental equipment.
With respect to the first point, respondents argue that the
Department was incorrect in its assertion that the Article 7 assistance
was more closely linked to the acquisition of certain assets than the
accumulation of interest costs. Moreover, respondents maintain that the
SDI assistance was not intended solely for the purchase of
environmental protection equipment, but was also intended to facilitate
the construction of NHCI's facility in Quebec. The fact that the
Article 7 assistance was intended to achieve more than one objective
does not distinguish the Article 7 assistance from other interest
rebate programs which the Department has treated under its loan
methodology, according to respondents.
With respect to the second point, respondents argue that since the
Department wrongly assumed that Article 7 assistance was provided
solely for the purchase of environmental equipment, the Department was
able to conclude that the interest rebates exceeded the interest that
would be in connection with the purchase of the environmental
equipment. Hence, the Department concluded that the Article 7
assistance should not be treated as an interest rebate. However,
because the Article 7 assistance was intended to reduce the cost of
financing for the project as a whole, the assistance was not excessive
in the sense described by the Department.
[[Page 13860]]
DOC Position: The issue presented by this case is whether the
Article 7 assistance received by NHCI should be treated as an interest
rebate or as a grant. If it is treated as an interest rebate, then
under the methodology adopted by the Department in the 1993 steel
cases, the benefit of the Article 7 assistance would be countervailed
according to our loan methodology (Final Affirmative Countervailing
Duty Determinations: Certain Steel Products From Belgium, (Belgium
Steel) 58 FR 37273, 37276, July 9, 1993). However, if treated as a
grant, the benefits would be allocated over a period corresponding to
the life of the company's assets.
In their brief, respondents argue that the interest rebate
methodology reflects the fact that companies face a choice between debt
and equity financing. If a company knows that the government is willing
to rebate interest charges before the company takes out a loan, the
government is encouraging the company to borrow rather than sell
equity. Hence, respondents conclude, the benefit should be measured
with reference to the duration of the borrowing for which the rebate is
provided.
We disagree that the Department's interest rebate methodology was
intended to reflect the choice between equity and loan financing. In
the 1993 steel cases, (See, e.g., Belgium Steel), we examined a
particular type of subsidy, interest rebates, and determined which of
our valuation methodologies was most appropriate. The possible choices
were between the grant and loan methodologies. Where the company had
knowledge prior to taking the loan out that it would receive an
interest rebate, we decided that the loan methodology was most
appropriate because there is virtually no difference between the
government offering a loan at 5 percent interest (which would be
countervailed according to the loan methodology) and offering to rebate
half of the interest paid on a 10 percent loan from a commercial bank
each time the company makes an interest payment. Hence, we were seeking
the closest methodological fit for different types of interest rebates.
However, the interest rebate methodology described in the 1993
steel cases was never intended to dictate that the Department should
apply the loan methodology in every situation. The appropriate
methodology depends on the nature of the subsidy. For example, assume
that the government told a company that it would make all interest
payments on all construction loans the company took out during the next
year up to $6 million. This type of ``interest rebate'' operates
essentially like a $6 million grant restricted to a specific purpose.
Whether the purpose is to pay interest expenses or buy a piece of
equipment does not change the nature of the subsidy. In contrast, the
interest rebate methodology is appropriate for the type of interest
rebate programs investigated in the 1993 steel cases, i.e., partial
interest rebates paid over a period of years on particular long-term
loans.
As we did in the 1993 steel cases, the Department in these reviews
is seeking the most appropriate methodology for the Article 7
assistance. We erred in our Preliminary Results of First Countervailing
Duty Administrative Reviews: Pure Magnesium and Alloy Magnesium from
Canada, 61 FR 11186 (March 19, 1996), in stating that the primary
purpose of the Article 7 assistance was to underwrite the purchase of
environmental equipment. However, it cannot be disputed that the
environmental equipment played a crucial role in the agreement between
SDI and NHCI. Most importantly, the aggregate amount of assistance to
be provided was determined by reference to the cost of environmental
equipment to be purchased. In this respect, the Article 7 assistance is
like a grant for capital equipment.
Further, the assistance provided by SDI is distinguishable from the
interest rebates addressed in the 1993 steel cases in that the interest
payments in the steel cases rebated a portion of the interest paid on
particular long-term loans. Here, although the disbursement of Article
7 assistance was contingent, inter alia, on NHCI making interest
payments, the disbursements were not tied to the amount borrowed, the
number of loans taken out or the interest rates charged on those loans.
Instead, the disbursements were tied to NHCI meeting specific
investment targets and generally to NHCI having incurred interest costs
on borrowing related to the construction of its facility.
Therefore, while we recognize that NHCI had to borrow and pay
interest in order to receive individual disbursements of Article 7
assistance, we do not agree that this fact is dispositive of whether
the interest rebate methodology used in the 1993 steel cases is
appropriate. We believe this program more closely resembles the
scenario described above where the government agrees to pay all
interest incurred on construction loans taken out by a company over the
next year up to a specified amount. Because, in this case, the amount
of assistance is calculated by reference to capital equipment purchases
(something extraneous to the interest on the loan) and the
reimbursements do not relate to particular loans, we determine that the
Article 7 assistance should be treated as a grant.
The Department has in past cases classified subsidies according to
their characteristics. For example, in the General Issues Appendix
(GIA) attached to the Final Affirmative Countervailing Duty
Determination: Certain Steel Products from Austria 58 FR 37217, 37254
(July 9, 1993), we developed a hierarchy for determining whether so-
called ``hybrid instruments'' should be countervailed according to our
loan, grant or equity methodologies. In short, we were asking whether
the details of particular government ``contributions'' made them more
like a loan, a grant or an equity infusion. Similarly, when a company
receives a grant, we look to the nature of the grant to determine
whether the grant should be treated as recurring or non-recurring. In
these reviews, we have undertaken the same type of analysis, i.e.,
determining an appropriate calculation methodology based on the nature
of the subsidy in question. As with hybrid instruments and recurring/
non-recurring grants, it is appropriate to determine which methodology
is most appropriate based on the specific facts of the Article 7
assistance. Although the Article 7 assistance exhibits characteristics
of both an interest rebate and a grant, based on an overview of the
contract under which the assistance was provided, we determine that the
weight of the evidence in this case supports our treatment of the
Article 7 assistance as a grant.
Comment 3: Re-Examination of Specificity of Article 7 Assistance
In the event the Department continues to treat Article 7 assistance
as a non-recurring grant, respondents state that the Department is
obliged to make a finding that the Article 7 assistance conferred a
subsidy to NHCI during the POR. The Department may not, as it has here,
rely on a factual finding of disproportionality during a different time
period and different amounts of assistance. Respondents state that a
finding of de facto specificity requires a case-by-case analysis,
citing PPG Industries, Inc. v. United States, Geneva Steel v. United
States, and Certain Steel Products from Brazil to support their
reasoning. Respondents also cite the sixth administrative review of
Live Swine from Canada; Final Results of Countervailing Duty
Administrative Review (Live Swine) (59 FR 12243 (March 16, 1994)) as an
example where the Department reexamined the
[[Page 13861]]
countervailability of benefits found to be de facto specific in prior
reviews.
Respondents maintain that given the Department's responsibility to
make a finding of specificity and countervailability based on the
information relevant to the POR, the Department should consider any new
assistance provided by SDI since the end of the original period of
investigation. Respondents then present a methodology they believe
should be employed whereby the Department would compare the portion of
NHCI's original grant allocated to the POR, based on the Department's
standard allocation methodology, and the portions of benefits allocated
to the POR for all assistance bestowed to all other enterprises
receiving SDI assistance to determine whether NHCI received a
disproportionate share of benefits. Respondents state that the
Department had a responsibility to gather the information necessary to
make the specificity determination they have described. Since the
Department has not gathered the information required for their proposed
methodology, respondents conclude that a determination of de facto
specificity during the POR is not possible.
Petitioner counters that since the Article 7 assistance was in the
form of a non-recurring grant, the Department properly looked at the
time period when the government granted the assistance to make the
specificity finding. According to petitioner, the provision of the
assistance was, and always will be, specific regardless of how the GOQ
administers the program in future years--even if it were to abolish the
program. In other words, petitioner states that no future action by the
GOQ could retroactively make the subsidy non-specific. Simply because
the Department's grant calculation methodology assigns an amortized
portion of the assistance to this review period, it does not mean that
the GOQ is granting a new subsidy worthy of a new specificity analysis.
Indeed, states petitioner, if a new subsidy were being analyzed, the
Department's specificity analysis would not take into account portions
of old subsidies amortized into the period being examined.
DOC Position: It is the Department's policy not to revisit
specificity determinations absent the presentation of new facts or
evidence (see, e.g., Carbon Steel Wire Rod From Saudi Arabia; Final
Results of Countervailing Duty Administrative Review and Revocation of
Countervailing Duty Order, 59 FR 58814, November 15, 1994). In this
review, no new facts or evidence have been presented which would lead
us to question that determination. We address respondents' arguments in
favor of making a POR-specific determination below.
Respondents refer to the various reviews of the countervailing duty
order on live swine from Canada as demonstrating that the Department
has, as a matter of course, revisited its de facto specificity
determinations from one segment of a proceeding to another. While
distinct de facto specificity determinations were made with respect to
the Tripartite program in the fourth, fifth and sixth reviews, these
were not done as a matter of course. The Department reexamined
specificity in these reviews of live swine only as a result of an
adverse decision by the Binational Panel. Because the Binational Panel
overturned the Department's finding of specificity regarding the
Tripartite program in the fourth review of live swine for lack of
evidence (and eventually rejected its analysis regarding specificity in
the fifth review but upheld its decision), the Department continued to
collect information in the sixth review, which was running concurrently
with the Binational proceedings. In explaining its actions in the sixth
review, the Department recognized that it does not routinely revisit
specificity determinations, as respondents would have us believe, in
stating the following:
Although our practice is not to reexamine a specificity
determination (affirmative or negative) made in the investigation or
in a review absent new facts or evidence of changed circumstances,
the record in the prior reviews did not contain all of the
information we consider necessary to define the agricultural
universe in Canada.
(See Live Swine.) As can be seen from the foregoing, the facts
surrounding the live swine reviews do not correspond to the situation
presented here. In particular, the issue of specificity had not been
conclusively settled in the live swine reviews and was in the process
of litigation, and different information was available; unlike this
case in which a definitive specificity determination had already been
established.
As for respondents' arguments that de facto specificity
determinations should be done on a case-by-case basis, we agree.
However, we disagree with respondents as to what ``case-by-case''
means. In each of the citations respondents refer to, ``case'' referred
not to a separate segment of the same proceeding (e.g., the first
review of an order distinct from the second review), but to a separate
investigation or review of different products (e.g., an investigation
of carbon black from Mexico as opposed to an investigation of steel
products from Brazil) . It is this latter definition of ``case'' we
find to be the proper basis for examination of de facto specificity
determinations. Since a separate de facto specificity determination was
made in the investigations of pure and alloy magnesium, we find that
the analysis was properly conducted.
In proposing that the Department base a POR-specific de facto
specificity finding on the portions of non-recurring grants allocated
to the POR, the respondents appear to be confusing the initial
specificity determination based on the action of the granting authority
at the time of bestowal with the allocation of the benefit over time.
These are two separate processes. The portions of grants allocated to
periods of time using the Department's standard allocation methodology
are irrelevant to an examination of the actual distribution of benefits
by the granting government at the time of bestowal. We agree with
petitioner that the determination of whether a non-recurring subsidy
was specific (or not) at the time of bestowal then becomes attached to
the subsidy.
Based on all of the arguments above, we find that the bases of the
original specificity determination are still valid. Since no new
evidence has been presented which would cause us to revisit the
original specificity determination, we continue to find assistance
under Article 7 of the SDI Act to be specific and, therefore,
countervailable.
Comment 4: Appropriate Denominator
Respondents state that in the Preliminary Results the Department
deviated from its standard practice in determining the denominator for
companies with multinational production facilities that fail to rebut
the presumption that subsidies are domestically tied. In particular,
respondents argue that it is the Department's policy to tie such
subsidies to domestic operations, by allocating benefits to sales by
the domestic company regardless of country of manufacture, as opposed
to tying to domestic production, as was done in the Preliminary
Results. Respondents additionally state that the Department both failed
to explain its basis for presuming that the subsidies were tied to
Canadian production and to respond to NHCI's arguments in favor of
allocating the subsidies over sales by NHCI of subject merchandise
regardless of country of manufacture. In so doing, respondents claim
the Department denied NHCI due process by preventing it from rebutting
the presumption and
[[Page 13862]]
from responding to the rationale the Department used to support its
decision to tie the subsidies to domestic production. In support of
their assertion that the subsidies NHCI received are tied to its
domestic operations, respondents state that any funds received
benefited all employment-related activities in Canada (e.g., sales of
all products) and that these activities are related to both domestic
and foreign production. Respondents elaborate further that the
denominator policy used by the Department in this case is a deviation
from the fungibility of money principle.
Respondents also cite British Steel plc v. United States (British
Steel) (479 F. Supp. 1254, 1371) in which the Court reversed and
remanded the Department's determinations because it found that the
Department should have given plaintiffs due notice of its decision to
apply the rebuttable presumption that the subsidies at issue were tied
to domestic production in order to allow plaintiffs the opportunity to
rebut the Department's presumption.
Petitioner states that there is nothing on the record indicating
that the GOQ intended the funds it provided to NHCI to benefit
production in another country. Therefore, the Department should
continue to allocate the subsidies received over sales of merchandise
produced in Canada.
DOC Response: Respondents cite British Steel in an attempt to imply
that the Department must inform parties early during the course of each
proceeding of its intent to use the rebuttable presumption that
subsidies to companies with foreign manufacturing operations are tied
to domestic production. However, the facts involved in British Steel
are readily distinguishable. Therefore, the holding in that case does
not apply to the present situation.
In British Steel, the Court was examining the Department's policy
of using the rebuttable presumption articulated in the GIA. In
particular, the Court took issue with the introduction of the new
policy in the final-determination stage of the investigation because
the timing prevented parties from both commenting on the methodology
and from presenting evidence rebutting the presumption. It is important
to note that the Department's remand determination, as affirmed by the
Court, upheld the appropriateness of using the rebuttable presumption.
The Department has continued to use the rebuttal presumption and this
policy has become accepted Department practice. Unlike British Steel,
we are not dealing with the introduction of a new policy late into the
course of a proceeding in this case. Therefore, the Department was not
required to forewarn respondents of the use of the rebuttable
presumption.
We also note that the use of a denominator based only on
domestically produced merchandise did not come as a surprise to
respondents. To begin, in the original investigations of these cases
(which pre-dated the rebuttable presumption) the Department used a
denominator based only on sales of domestically produced merchandise
(Final Affirmative Countervailing Duty Determinations: Pure Magnesium
and Alloy Magnesium From Canada, 57 FR 30946 (July 13, 1992)). Since
the investigations in these cases, there has been a changed
circumstances review (57 FR 54047 (November 16, 1992)) and a Binational
Panel proceeding. In all of the proceedings, the denominators have
included only domestically produced merchandise and in no case have
respondents objected to those denominators. In addition, the
questionnaire for these reviews requested information on sales
denominators based on domestically produced merchandise. NHCI provided
the requested sales denominator information along with denominators
based on total sales by NHCI and arguments why those based on total
sales should be used. Moreover, sales of domestically produced
merchandise was used as the denominator in the Preliminary Results. As
can be seen from the foregoing, respondents were aware as to the
possible use of a denominator based on domestically produced
merchandise and did indeed have an opportunity to attempt to rebut the
presumption.
Respondents also argue that the Department must explain the basis
of its presumption. However, the idea behind the use of a rebuttable
presumption is that the fact presumed--in this case that subsidies
bestowed on companies with foreign manufacturing operations are tied to
domestic production--becomes the default position and does not have to
be explained in each case. As the Department stated in the GIA, ``Thus,
under the Department's refined ``tied'' analysis, the Department will
begin by presuming that a subsidy provided by the government of the
country under investigation is tied to domestic production'' (GIA at
37231). It follows that the Department will find that subsidies are
tied to domestic production in the absence of evidence to the contrary.
As for respondents' complaint that the Department failed to address
its arguments that the subsidies received by NHCI benefited all of the
company's operations, not just its manufacturing activities, we note
that in the GIA it states, ``A party may rebut this presumption by
presenting evidence tending to show that the subsidy was not tied to
domestic production * * *'' The phrase, ``tending to show'' means that
the party attempting to rebut the presumption must provide enough
evidence to convince a reasonable fact-finder of the non-existence of
the presumed fact--that subsidies are tied to the recipient firm's
domestic production (Results of Redetermination Pursuant to Court
Remand on General Issue of Sales Denominator: British Steel plc v.
United States, Consol. Ct. No. 93-09-00550-CVD, Slip Op. 95-17 and
Order (CIT Feb. 9, 1995) at 17). The mere absence of evidence limiting
the government's intended scope of the benefit to domestic production
is not sufficient. In this case, respondents' arguments have not risen
to the level of evidence that would convince us that the GOQ intended
that the subsidies it bestowed on NHCI were to benefit more than just
domestic production. Therefore, respondents have failed to rebut the
presumption that the subsidies received by NHCI were tied to domestic
production.
The Department's methodology for determining what to include in the
denominator when a company has foreign manufacturing operations is
explained in the GIA: ``If we determine that the subsidy is tied to
domestic production, we will allocate the benefit of the subsidy fully
to sales of domestically produced merchandise'' [emphasis added] (GIA
at 37231). This quotation makes it clear that sales of foreign-produced
merchandise by a respondent company would not be included in the
denominator. Even if we were to consider tying the subsidies at issue
to domestic operations, using respondents' suggestion of a sales
denominator based on total NHCI sales would be improper since such a
figure would include sales of foreign-produced merchandise by NHCI and,
therefore, value-added from operations in other countries. Based on the
foregoing arguments, we have continued to allocate subsidies received
by NHCI to the company's merchandise produced in Canada.
Comment 5: Suspension of Liquidation for the Period April 4, 1992 to
August 31, 1992
Respondents argue that since the Department terminated suspension
of liquidation for entries on or after April 4, 1992 to August 31,
1992,
[[Page 13863]]
countervailing duties cannot be reassessed for that period.
DOC Position: We agree with respondents.
Final Results of Review
For the period December 6, 1991 through December 31, 1992, we
determine the net subsidy to be 9.86 percent ad valorem for Norsk Hydro
Canada Inc. and all other companies except Timminco Limited, which has
been excluded from these orders. This rate corrects the rate of 9.87
found in the Preliminary Results which arose from a rounding error.
The Department will instruct the U.S. Customs Service to assess the
following countervailing duties on entries during the periods December
6, 1991 to April 3, 1992 and September 1, 1992 to December 31, 1992:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Norsk Hydro Canada Inc. and All Other Companies Except
Timminco Limited (which is excluded from these orders).... 9.86
------------------------------------------------------------------------
The Department will also instruct the U.S. Customs Service to
collect a cash deposit of estimated countervailing duties of 9.86
percent of the f.o.b. invoice price on all shipments of the subject
merchandise from Norsk Hydro Canada Inc. and all other companies except
Timminco Limited (which was excluded from the order during the original
investigation), entered, or withdrawn from warehouse, for consumption
on or after the date of publication of the final results of these
reviews.
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: March 12, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-7358 Filed 3-21-97; 8:45 am]
BILLING CODE 3510-DS-P
