E5-2296. Pure Magnesium and Alloy Magnesium from Canada: Preliminary Results of Countervailing Duty Administrative Reviews

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce is conducting administrative reviews of the countervailing duty orders on pure magnesium and alloy magnesium from Canada for the period January 1, 2003, through December 31, 2003. We preliminarily find that certain producers/exporters have received countervailable subsidies during the period of review. If the final results remain the same as these preliminary results, we will instruct U.S. Customs and Border Protection to assess countervailing duties as detailed in the “Preliminary Results of Reviews” section of this notice. Interested parties are invited to comment on these preliminary results (see the “Public Comment” section of this notice).

EFFECTIVE DATE:

May 10, 2005.

FOR FURTHER INFORMATION CONTACT:

Andrew McAllister, AD/CVD Operations, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington DC 20230; telephone [phone].

SUPPLEMENTARY INFORMATION:

Case History

On August 31, 1992, the Department of Commerce (“the Department”) published in the Federal Register the countervailing duty orders on pure magnesium and alloy magnesium from Canada (see Final Affirmative Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 39392 (“Magnesium Investigation”)). On August 3, 2004, the Department published a notice of “Opportunity to Request Administrative Review” of these countervailing duty orders (see Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review, 69 FR 46496). We received timely requests for review from Norsk Hydro Canada, Inc. (“NHCI”) and from the petitioner, U.S. Magnesium, LLC for reviews of NHCI and Magnola Metallurgy, Inc. (“Magnola”). On September 1, 2004, we received a request for review from Magnola. On September 7, 2004, we asked Magnola to explain the circumstances which led to its late filing. On September 10, 2004, Magnola responded to the Department's request and explained its circumstances. On September 16, 2004, the Department rejected Magnola's September 1, 2004, request for review, but the review with respect to Magnola continued based on the request of the petitioner. On September 22, 2004, we initiated these reviews covering shipments of subject merchandise from NHCI and Magnola (see Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 69 FR 56745).

On October 6, 2004, we issued countervailing duty questionnaires to NHCI, Magnola, the Government of Québec (“GOQ”), and the Government of Canada (“GOC”). We received questionnaire responses from GOQ on November 8, 2004, from GOC and Magnola on November 12, 2004, and from NHCI on December 22, 2004.

Scope of the Orders

The products covered by these orders 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.

The pure and alloy magnesium subject to the orders is currently classifiable under items 8104.11.0000 and 8104.19.0000, respectively, of the Harmonized Tariff Schedule of the United States (“HTSUS”). Although the HTSUS subheadings are provided for convenience and customs purposes, the written descriptions of the merchandise subject to the orders are dispositive.

Secondary and granular magnesium are not included in the scope of these orders. Our reasons for excluding granular magnesium are summarized in Preliminary Determination of Sales at Less Than Fair Value: Pure and Alloy Magnesium From Canada, 57 FR 6094 (February 20, 1992).

Period of Review

The period of review (“POR”) for which we are measuring subsidies is January 1, 2003, through December 31, 2003.

Subsidies Valuation Information

Discount rate: As noted below, the Department preliminarily finds that NHCI and Magnola benefitted from countervailable subsidies during the POR. In accordance with 19 CFR 351.524(d)(3), it is the Department's preference to use a company's long-term, fixed-rate cost of borrowing in the same year a grant was approved as the discount rate. However, where a company does not have any debt that can be used as an appropriate basis for a discount rate, the Department's next preference is to use the average cost of long-term fixed-rate loans in the country in question. In the investigation and previous reviews, the Department determined that NHCI received and benefitted from countervailable subsidies from the Article 7 grant from the Québec Industrial Development Corporation (“Article 7 grant”). See Magnesium Investigation. In line with the Department's practice, we used NHCI's cost of long-term, fixed-rate debt in the year in which the Article 7 grant was approved as the discount rate for purposes of calculating the benefit pertaining to the POR.

In the Final Results of Pure Magnesium from Canada: Notice of Final Results of Countervailing Duty New Shipper Review (“New Shipper Review”), 68 FR 22359 (April 28, 2003), we found that Magnola benefitted from grants under the Emploi-Québec Manpower Training Measure Program (“MTM Program”). Magnola did not have any long-term fixed-rate debt during the years the grants were approved. Therefore, consistent with our treatment of these grants in previous administrative reviews, we continue to use long-term commercial bond rates for purposes of calculating the benefit attributable to the POR.

Allocation period: In the investigations and previous administrative reviews of these cases, the Department used as the allocation period for non-recurring subsidies the average useful life (“AUL”) of renewable physical assets in the magnesium industry as recorded in the Internal Revenue Service's 1977 Class Life Asset Depreciation Range System (“the IRS tables”), i.e., 14 years. Pursuant to section 351.524(d)(2) of the Department's regulations, we use the AUL in the IRS tables as the allocation period unless a party can show that the IRS tables do not reasonably reflect either the company-specific or country-wide AUL for the industry. During this review, none of the parties contested using the AUL reported for the magnesium industry in the IRS tables. Therefore, we continue to allocate non-recurring benefits over 14 years.

For non-recurring subsidies, we applied the “0.5 percent expense test” described in section 351.524(b)(2) of the Department's regulations. In this test, we compare the amount of subsidies approved under a given program in a particular year to sales (total or export, as appropriate) in that year. If the amount of the subsidies is less than 0.5 percent of sales, the benefits are expensed in their entirety, in the year of receipt, rather than allocated over the AUL period.

Analysis of Programs

I. Programs Preliminarily Determined to Confer Countervailable Subsidies

A. Article 7 Grant from the Québec Industrial Development Corporation (“SDI”)

SDI (Société de Développement Industriel du Québec) 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 is provided for projects that are capable of having a major impact upon the economy of Québec. 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 Investigation, 57 FR at 30948.)

In 1988, NHCI was awarded a grant under Article 7 to cover a large percentage of the cost of certain environmental protection equipment. In the Magnesium Investigation, the Department determined the Article 7 grant confers a countervailable subsidy within the meaning of section 771(5) of the Tariff Act of 1930, as amended (“the Act”). The grant is a direct transfer of funds from the GOQ bestowing a benefit in the amount of the grant. We previously determined that NHCI received a disproportionately large share of assistance under this program, and, on this basis, we determined that the Article 7 grant was limited to a specific enterprise or industry, or group of enterprises or industries, within the meaning of section 771(5A)(D)(iv) of the Act. In these reviews, neither the GOQ nor NHCI has provided new information which would warrant reconsideration of this determination.

In the Magnesium Investigation, the Department determined that the Article 7 assistance received by NHCI constituted a non-recurring grant because it represented a one-time provision of funds. In the current reviews, no new information has been placed on the record that would cause us to depart from this treatment. To calculate the benefit, we performed the expense test, as explained in the “Allocation period” section above, and found that the benefits approved were more than 0.5 percent of NHCI's total sales. Therefore, we allocated the benefits over time. We used the grant methodology as described in section 351.524(d) of the Department's regulations to calculate the amount of benefit allocable to the POR. We then divided the benefit attributable to the POR by NHCI's total sales of Canadian-manufactured products in the POR. On this basis, we preliminarily determine the countervailable subsidy from the Article 7 grant to be 1.21 percent ad valorem for NHCI.

B. Emploi-Québec Manpower Training Program

The MTM Program is a labor-focused program designed to improve and develop the labor market in the region of Québec. It is implemented by the Emploi-Québec (“E-Q”), a labor unit within Québec's Ministry of Employment and Solidarity (Ministére de L'Emploi et de la Solidarité sociale), and funded by the GOQ. The Program provides grants to companies in Québec that have training programs approved by the E-Q. Up to 50 percent of a company's training expenses, normally over a period of 24 months, are reimbursed under the MTM program if the training programs satisfy the E-Q's five policy objectives of job preparation, job integration, job management, job stabilization, and job creation.

Once the five objectives are met, companies with small-scale projects are eligible to receive reimbursement of 50 percent of their labor training expenses, up to a maximum reimbursement of $100,000. Major economic projects are required to: (1) create either 50 jobs or 100 jobs in 24 months, depending on whether the company is a new company or a company that has been in operation; (2) have the approval of the Ministry's Commission des partenaires du marche du travail; and (3) agree to close monitoring by the E-Q. The $100,000 reimbursement limit does not apply to major economic projects. (See New Shipper Review and accompanying Issues and Decision Memorandum at “Analysis of Programs.”)

In 1998 and 2000, the E-Q approved grants to reimburse 50 percent of Magnola's training expenses. Magnola received the MTM grants in 1999, 2000 and 2001. In the New Shipper Review, the Department found that the MTM program assistance received by Magnola, constituted countervailable benefits within the meaning of section 771(5) of the Act. The assistance is a direct transfer of funds from the GOQ bestowing a benefit in the amount of the grants. We also found Magnola received a disproportionately large share of assistance under the MTM program and, on this basis, we found the grants to be limited to a specific enterprise or industry, or group of enterprises or industries, within the meaning of section 771(5A)(D)(iv) of the Act. In accordance with 19 CFR 351.524(c)(1) and (2), we treated the grants as non-recurring.

In the current reviews, no new information has been provided that would warrant reconsideration of these determinations. To calculate the benefit, we performed the expense test, as explained in the “Allocation period” section above, and found that the benefits approved were more than 0.5 percent of Magnola's total sales. Therefore, we allocated the benefits over time. We used the grant methodology as described in section 351.524(d) of the Department's regulations to calculate the amount of benefit allocable to the POR. We then divided the benefit attributable to the POR by Magnola's total sales in the POR. On this basis, we preliminarily find the net subsidy rate from the MTM program to be 5.40 percent ad valorem for Magnola.

II. Programs Preliminarily Determined To Be Not Used

We examined the following programs and preliminarily determine that neither NHCI nor Magnola applied for or received benefits under these programs during the POR:

• St. Lawrence River Environment Technology Development Program
• Program for Export Market Development
• The Export Development Corporation
• Canada-Québec Subsidiary Agreement on the Economic Development of the Regions of Québec
• 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

III. Program Previously Determined To Be Terminated

• Exemption from Payment of Water Bills

Adjustment of Countervailing Duty Cash Deposit Rate

In its December 3, 2004, submission, NHCI contends that the Department should set the countervailing duty cash deposit rate to zero for pure and alloy magnesium produced by NHCI in Canada and entered on or after January 1, 2005. NHCI asserts that, as of that date, the only subsidy at issue for NHCI will have been fully amortized, and there will be no legal basis or need for collecting cash deposits from NHCI. On December 9, 2004, the GOQ made a submission supporting NHCI's arguments. On December 14, 2004, the petitioner argued that the Department should deny NHCI's request and complete the administrative review before setting future cash deposit rates.

On December 14, 2004, the Department responded to NHCI's request by stating that we do not have the authority to modify deposit rates outside of the administrative review process. Therefore, we are not changing the deposit rate for NHCI effective January 1, 2005.

Preliminary Results of Reviews

In accordance with 19 CFR 351.221(b)(4)(i), we calculated an individual subsidy rate for each producer/exporter subject to these administrative reviews. For the period January 1, 2003, through December 31, 2003, we preliminarily find the net subsidy rates for producers/exporters under review to be those specified in the chart shown below. If the final results of these reviews remain the same as these preliminary results, the Department intends to instruct U.S. Customs and Border Protection (“CBP”) to assess countervailing duties at these net subsidy rates. We will disclose our calculations to the interested parties in accordance with section 351.224(b) of the Department's regulations.

Net Subsidy Rate: Pure Magnesium

Manufacturer/Exporter	Percent
Norsk Hydro Canada, Inc.	1.21 percent
Magnola Metallurgy, Inc.	5.40 percent

Net Subsidy Rate: Alloy Magnesium

Manufacturer/Exporter	Percent
Norsk Hydro Canada, Inc.	1.21 percent
Magnola Metallurgy, Inc.	5.40 percent

Cash Deposit Instructions

The Department also intends to instruct CBP to collect cash deposits of estimated countervailing duties at the rate specified on the f.o.b. value of all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of these administrative reviews.

We will instruct CBP to continue to collect cash deposits for non-reviewed companies (except Timminco Limited, which was excluded from the orders during the investigations) at the most recent company-specific or country-wide rate applicable to the company. Accordingly, the cash deposit rate that will be applied to non-reviewed companies covered by these orders is that established in P ure and Alloy Magnesium From Canada; Final Results of the Second (1993) Countervailing Duty Administrative Reviews, 62 FR 48607 (September 16, 1997) or the company-specific rate published in the most recent final results of an administrative review in which a company participated. These rates shall apply to all non-reviewed companies until a review of a company assigned these rates is requested.

Public Comment

Interested parties may submit written arguments in case briefs within 30 days of the date of publication of this notice. Rebuttal briefs, limited to issues raised in case briefs, may be filed not later than five days after the date of filing the case briefs. Parties who submit briefs in this proceeding should provide a summary of the arguments not to exceed five pages and a table of statutes, regulations, and cases cited. Copies of case briefs and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f).

Interested parties may request a hearing within 30 days after the date of publication of this notice. Any hearing, if requested, will be held two days after the scheduled date for submission of rebuttal briefs. The Department will publish a notice of the final results of these administrative reviews within 120 days from the publication of these preliminary results.

We are issuing and publishing these results in accordance with sections 751(a)(1) and 777(i)(1) of the Act.

Dated: May 3, 2005.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.