[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13863-13866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7359]
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DEPARTMENT OF COMMERCE
[C-122-815]
Pure Magnesium and Alloy Magnesium From Canada; Preliminary
Results of Countervailing Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative reviews.
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SUMMARY: The Department of Commerce (the Department) is conducting
administrative reviews of the countervailing duty orders on pure and
alloy magnesium from Canada for the period January 1, 1993 through
December 31, 1993. We have completed these reviews and preliminarily
determine the net subsidy to be 7.13 percent ad valorem for subject
merchandise for Norsk Hydro Canada, Inc. (NHCI) and all other
producers/exporters from Canada except exports from Timminco Limited,
which company has been excluded from these orders. If the final results
of these reviews remain the same as these preliminary results, the
Department will instruct the U.S. Customs Service to assess
countervailing duties as indicated above.
EFFECTIVE DATE: March 24, 1997.
FOR FURTHER INFORMATION CONTACT: Sally Hastings or Cynthia Thirumalai,
AD/CVD Enforcement, Group 1, Office 1, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW., Washington, DC 20230; telephone:
(202) 482-3464 or 482-4087, respectively.
Background
On August 31, 1992, the Department published in the Federal
Register (57 FR 39392) the countervailing duty orders on pure and alloy
magnesium from Canada. The Department published a notice of
``Opportunity to Request an Administrative Review'' (59 FR 39543) of
the countervailing duty orders on August 3, 1994. We received timely
requests for review from petitioner, Magnesium Corporation of America
(Magcorp) and respondent, NHCI. The Department initiated the
administrative reviews, for the period January 1, 1993 through December
31, 1993, on September 16, 1994 (59 FR 47609).
The Department issued a questionnaire to the Government of Canada
(GOC) on September 7, 1994. On October 24, 1994, we received
questionnaire responses from NHCI, the GOC and the Government of Quebec
(GOQ). The Department issued supplemental questionnaires to the GOQ on
October 11, 1996 and NHCI on November 5, 1996. We received supplemental
responses from the GOQ on October 28, 1996 and NHCI on November 18,
1996.
On October 18, 1994, petitioner requested that the Department re-
examine whether the amended electric power contract between NHCI and
Hydro Quebec is countervailable. On April 28, 1995, the Department
declined to reinvestigate the amended electric power contract.
Applicable Statute and Regulations
The Department is conducting these administrative reviews in
accordance with section 751(a) of the Tariff Act of 1930, as amended
(the Act). Unless otherwise indicated, all citations to the statute and
to the Department's regulations are in reference to the provisions as
they existed on December 31, 1994. However, references to the
Department's Countervailing Duties; Notice of Proposed Rulemaking and
Request for Public Comments, 54 FR 23366 (May 31, 1989) (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 (January 3, 1995).
Scope of the Reviews
The products covered by these orders are 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. 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 descriptions of the scopes of these proceedings are
dispositive.
[[Page 13864]]
Period of Review
The period of review (POR) is January 1, 1993 through December 31,
1993. The reviews cover one producer/exporter of subject merchandise,
NHCI, and the following programs: Exemption from Payment of Water
Bills, Article 7 Grants from the Quebec Industrial Development
Corporation (SDI), St. Lawrence River Environmental 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, Financial Assistance Program for
Research, Formation and for the Improvement of the Recycling Industry,
and Transportation Research and Development Assistance Program.
Analysis of Programs
I. Programs Conferring Subsidies
A. Exemption From Payment of Water Bills
Pursuant to a December 15, 1988 agreement between NHCI and La
Societe du Parc Industriel et Portuaire de Becancour (Industrial Park),
NHCI is exempt from payment of its water bills. Except for the taxes
associated with its bills, NHCI does not pay the invoiced amounts of
its water bills.
In the Final Affirmative Countervailing Duty Determinations: Pure
Magnesium and Alloy Magnesium from Canada (Magnesium from Canada), 57
FR 30946, 30948 (July 13, 1992), the Department determined that the
exemption received by NHCI was limited to a specific enterprise or
industry, or group of enterprises or industries, because no other
company receives such an exemption. In this review, neither the GOQ nor
NHCI provided new information which would warrant reconsideration of
this determination.
We preliminarily determine the countervailable benefit to be the
amount NHCI would have paid absent the exemption. To calculate the
benefit under this program, we divided the amount NHCI would have paid
for water during the POR by NHCI's total POR sales of Canadian-
manufactured products. On this basis, we preliminarily determine that
the net subsidy provided by this program is 0.97 percent ad valorem.
B. Article 7 Grants From the Quebec Industrial Development Corporation
The Quebec Industrial Development Corporation (SDI) administers
development programs on behalf of the GOQ. SDI provides assistance
under Article 7 of the SDI Act in the form of loans, loan guarantees,
grants, assumptions of costs associated with loans, and equity
investments. This assistance involves projects capable of having a
major impact upon the economy of Quebec. Article 7 assistance greater
than 2.5 million dollars must be approved by the Council of Ministers,
and assistance over 5 million dollars becomes a separate budget item
under Article 7. Assistance provided in such amounts must be of
``special economic importance and value to the province.'' (See
Magnesium from Canada, 57 FR 30946, 30949 (July 13, 1992).)
In 1988, NHCI was awarded a grant under Article 7 to cover a large
percentage of the cost of certain environmental protection equipment.
In Magnesium from Canada, we determined that NHCI received a
disproportionately large share of assistance under Article 7. On this
basis, we determined that the Article 7 grant was limited to a specific
enterprise or industry, or group of enterprises or industries. In these
reviews, neither the GOQ nor NHCI provided new information which would
warrant reconsideration of this determination.
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 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 the
Article 7 assistance was contingent, inter alia, on NHCI making
interest
[[Page 13865]]
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.
For the reasons set forth in Magnesium from Canada, we
preliminarily determine that the grant provided under Article 7 was
non-recurring because it represented a one-time provision of funds.
(See 57 FR 30946, 30949 (July 13, 1992)).
We calculated the benefit from the grant received by NHCI using the
company's cost of long-term, fixed-rate debt as the discount rate and
our declining balance methodology, consistent with Sec. 355.49 of the
Proposed Regulations. We divided that portion of the benefit allocated
to the POR by NHCI's total sales of Canadian-manufactured products.
(See the Allocation Methodology section below regarding the selection
of the allocation period.) We preliminarily determine the net subsidy
to be 6.16 percent ad valorem for NHCI.
II. Programs Preliminarily Found Not To Be Used
We examined the following programs and preliminarily find that NHCI
did not apply for or receive benefits under the following programs
during the POR: St. Lawrence River Environmental 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, Financial Assistance Program for Research
Formation and for the Improvement of the Recycling Industry, and
Transportation Research and Development Assistance Program.
Allocation Methodology
In the past, the Department has relied upon information from the
U.S. Internal Revenue Service on the industry-specific average useful
life of assets in determining the allocation period for non-recurring
grant benefits. (See GIA at 37226.) However, in British Steel plc. v.
United States, 879 F. Supp. 1254 (CIT 1995) (British Steel), the U.S.
Court of International Trade (the Court) ruled against this allocation
methodology. In accordance with the Court's remand order, the
Department calculated a company-specific allocation period for non-
recurring subsidies based on the average useful life (AUL) of non-
renewable physical assets. This remand determination was affirmed by
the Court on June 4, 1996 (British Steel, 929 F. Supp. 426, 439 (CIT
1996)).
The Department has decided to acquiesce to the Court's decision
and, as such, we intend in all future cases to determine the allocation
period for non-recurring subsidies using company-specific AUL data
where reasonable and practicable. Specifically, the Department has
preliminarily determined that it is reasonable and practicable to
allocate all new non-recurring subsidies (i.e., subsidies that have not
yet been assigned an allocation period) based on a company-specific
AUL. However, if a subsidy has already been countervailed based on an
allocation period established in an earlier segment of the proceeding,
it does not appear reasonable or practicable to reallocate that subsidy
over a different period of time. In other words, since the
countervailing duty rate in earlier segments of the proceeding was
calculated based on a certain allocation period and resulting benefit
stream, redefining the allocation period in later segments of the
proceeding would entail taking the original grant amount and creating
an entirely new benefit stream for that grant. Such a practice may lead
to an increase or decrease in the amount countervailed and, thus, would
result in the possibility of over-countervailing or under-
countervailing the actual benefit. The Department has preliminarily
determined that a more reasonable and accurate approach is to continue
using the allocation period first assigned to the subsidy. We invite
the parties to comment on the selection of this methodology and provide
any other reasonable and practicable approaches for complying with the
Court's ruling.
In the current reviews, there are no new non-recurring grant
subsidies. The non-recurring grant under review was provided prior to
the POR; the allocation period for the grant was established during
prior segments of these proceedings. Therefore, for purposes of these
preliminary results, the Department is using the original allocation
period assigned to the grant.
Preliminary Results of Review
We preliminarily determine the net subsidy for the period January
1, 1993 through December 31, 1993, to be 7.13 percent ad valorem.
If the final results of these reviews remain the same as these
preliminary results, the Department intends to instruct the U.S.
Customs Service to assess countervailing duties of 7.13
[[Page 13866]]
percent of the f.o.b. invoice price on all shipments of subject
merchandise from Canada, except from Timminco Limited (which was
excluded from the order in the original investigation).
The Department also intends to instruct the U.S. Customs Service to
collect a cash deposit of estimated countervailing duties of 7.13
percent of the f.o.b. invoice price on all shipments of the subject
merchandise from Canada, except from 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.
Parties to these proceedings may request disclosure of the
calculation methodology and interested parties may request a hearing
not later than 10 days after the date of publication of this notice.
Interested parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Parties who
submit argument in these proceedings are requested to submit with the
argument (1) a statement of the issue, and (2) a brief summary of the
argument. Any hearing, if requested, will be held seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 355.38 (e).
Representatives of parties to the proceedings may request
disclosure of proprietary information under administrative protective
order no later than 10 days after the representative's client or
employer becomes a party to the proceedings, but in no event later than
the date the case briefs, under 19 CFR 355.38(c), are due. The
Department will publish the final results of these administrative
reviews, including the results of its analysis of issues raised in any
case or rebuttal briefs or at a hearing.
These administrative reviews 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. 97-7359 Filed 3-21-97; 8:45 am]
BILLING CODE 3510-DS-P
