E5-2147. Certain Softwood Lumber Products From Canada: Preliminary Results of Countervailing Duty New Shipper Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce (the Department) is conducting a new shipper review of Seed Timber Co. Ltd. (Seed Timber) under the countervailing duty order on certain softwood lumber products from Canada for the period January 1, 2003, through December 31, 2003. If the final results remain the same as the preliminary results of this new shipper review, we will instruct U.S. Customs and Border Protection (CBP) to assess countervailing duties as detailed in the “Preliminary Results of New Shipper Review” section of this notice. Interested parties are invited to comment on the preliminary results of this new shipper review. (See the “Public Comment” section of this notice.)

EFFECTIVE DATE:

May 3, 2005.

FOR FURTHER INFORMATION CONTACT:

Kristen Johnson, AD/CVD Operations, Office 3, Import Administration, U.S. Department of Commerce, Room 4014, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone [phone].

SUPPLEMENTARY INFORMATION:

Background

On May 22, 2002, the Department published in the Federal Register the countervailing duty order on certain softwood lumber products from Canada. See Notice of Amended Final Affirmative Countervailing Duty Determination and Countervailing Duty Order: Certain Softwood Products From Canada, 67 FR 36070 (May 22, 2002). On May 28, 2004, we received a request from Seed Timber, a respondent company, for a new shipper review covering Seed Timber's shipments of subject merchandise. On June 30, 2004, we initiated a new shipper review for Seed Timber covering the review period January 1, 2003, through December 31, 2003 (POR). See Certain Softwood Lumber Products From Canada: Notice of Initiation of Antidumping Duty New Shipper Review for the Period May 1, 2003, Through April 30, 2004, and Notice of Initiation of Countervailing Duty New Shipper Review for the Period January 1, 2003, Through December 31, 2003, 69 FR 41229 (July 8, 2004).^[1]

On August 10, 2004, we issued a questionnaire to Seed Timber. On September 30, 2004, Seed Timber submitted its questionnaire response. On October 26, 2004, we extended the period for the completion of the preliminary results pursuant to section 751(a)(2)(B)(iv) of the Tariff Act of 1930, as amended (the Act). See Certain Softwood Lumber Products From Canada: Extension of Time Limit for the Preliminary Results of Countervailing Duty New Shipper Review, 69 FR 63366 (November 1, 2004). On March 18, 2005, and March 24, 2005, we issued supplemental questionnaires and received Seed Timber's questionnaire responses on April 7, 2005.

In accordance with 19 CFR 351.214(a), this new shipper review covers only the exporter or producer for which a review was specifically requested. Accordingly, this new shipper review only covers subject merchandise exported and produced by Seed Timber.

Scope of Order

The products covered by this order are softwood lumber, flooring and siding (softwood lumber products). Softwood lumber products include all products classified under subheadings 4407.1000, 4409.1010, 4409.1090, and 4409.1020, respectively, of the Harmonized Tariff Schedule of the United States (HTSUS), and any softwood lumber, flooring and siding described below. These softwood lumber products include:

(1) Coniferous wood, sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or finger-jointed, of a thickness exceeding six millimeters;

(2) Coniferous wood siding (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed;

(3) Other coniferous wood (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces (other than wood moldings and wood dowel rods) whether or not planed, sanded or finger-jointed; and

(4) Coniferous wood flooring (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed.

Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise subject to this order is dispositive.

As specifically stated in the Issues and Decision Memorandum accompanying the Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber Products from Canada, 67 FR 15539 (April 2, 2002) (see comment 53, item D, page 116, and comment 57, item B-7, page 126), available at http://www.ia.ita.doc.gov/​frn,, drilled and notched lumber and angle cut lumber are covered by the scope of this order.

The following softwood lumber products are excluded from the scope of this order provided they meet the specified requirements detailed below:

(1) Stringers (pallet components used for runners): If they have at least two notches on the side, positioned at equal distance from the center, to properly accommodate forklift blades, properly classified under HTSUS 4421.90.98.40.

(2) Box-spring frame kits: If they contain the following wooden pieces—two side rails, two end (or top) rails and varying numbers of slats. The side rails and the end rails should be radius-cut at both ends. The kits should be individually packaged, they should contain the exact number of wooden components needed to make a particular box spring frame, with no further processing required. None of the components exceeds 1″ in actual thickness or 83″ in length.

(3) Radius-cut box-spring-frame components, not exceeding 1″ in actual thickness or 83″ in length, ready for assembly without further processing. The radius cuts must be present on both ends of the boards and must be substantial cuts so as to completely round one corner.

(4) Fence pickets requiring no further processing and properly classified under HTSUS 4421.90.70, 1” or less in actual thickness, up to 8″ wide, 6′ or less in length, and have finials or decorative cuttings that clearly identify them as fence pickets. In the case of dog-eared fence pickets, the corners of the boards should be cut off so as to remove pieces of wood in the shape of isosceles right angle triangles with sides measuring 3/4 inch or more.

(5) U.S.-origin lumber shipped to Canada for minor processing and imported into the United States, is excluded from the scope of this order if the following conditions are met: (1) The processing occurring in Canada is limited to kiln-drying, planing to create smooth-to-size board, and sanding, and (2) if the importer establishes to the satisfaction of U.S. Customs and Border Protection (CBP) that the lumber is of U.S. origin.

(6) Softwood lumber products contained in single family home packages or kits,^[2] regardless of tariff classification, are excluded from the scope of this order if the importer certifies to items 6 A, B, C, D, and requirement 6 E is met:

A. The imported home package or kit constitutes a full package of the number of wooden pieces specified in the plan, design or blueprint necessary to produce a home of at least 700 square feet produced to a specified plan, design or blueprint;

B. The package or kit must contain all necessary internal and external doors and windows, nails, screws, glue, sub floor, sheathing, beams, posts, connectors, and if included in the purchase contract, decking, trim, drywall and roof shingles specified in the plan, design or blueprint.

C. Prior to importation, the package or kit must be sold to a retailer of complete home packages or kits pursuant to a valid purchase contract referencing the particular home design plan or blueprint, and signed by a customer not affiliated with the importer;

D. Softwood lumber products entered as part of a single family home package or kit, whether in a single entry or multiple entries on multiple days, will be used solely for the construction of the single family home specified by the home design matching the entry.

E. For each entry, the following documentation must be retained by the importer and made available to CBP upon request:

i. A copy of the appropriate home design, plan, or blueprint matching the entry;

ii. A purchase contract from a retailer of home kits or packages signed by a customer not affiliated with the importer;

iii. A listing of inventory of all parts of the package or kit being entered that conforms to the home design package being entered;

iv. In the case of multiple shipments on the same contract, all items listed in E(iii) which are included in the present shipment shall be identified as well.

Lumber products that CBP may classify as stringers, radius cut box-spring-frame components, and fence pickets, not conforming to the above requirements, as well as truss components, pallet components, and door and window frame parts, are covered under the scope of this order and may be classified under HTSUS subheadings 4418.90.45.90, 4421.90.70.40, and 4421.90.97.40.

Finally, as clarified throughout the course of the investigation, the following products, previously identified as Group A, remain outside the scope of this order. They are:

1. Trusses and truss kits, properly classified under HTSUS 4418.90;

2. I-joist beams;

3. Assembled box spring frames;

4. Pallets and pallet kits, properly classified under HTSUS 4415.20;

5. Garage doors;

6. Edge-glued wood, properly classified under HTSUS 4421.90.98.40;

7. Properly classified complete door frames;

8. Properly classified complete window frames;

9. Properly classified furniture.

In addition, this scope language was further clarified to specify that all softwood lumber products entered from Canada claiming non-subject status based on U.S. country of origin will be treated as non-subject U.S.-origin merchandise under the countervailing duty order, provided that these softwood lumber products meet the following condition: upon entry, the importer, exporter, Canadian processor and/or original U.S. producer establish to CBP's satisfaction that the softwood lumber entered and documented as U.S.-origin softwood lumber was first produced in the United States as a lumber product satisfying the physical parameters of the softwood lumber scope.^[3] The presumption of non-subject status can, however, be rebutted by evidence demonstrating that the merchandise was substantially transformed in Canada.

Company History

Seed Timber, located in the province of British Columbia, was incorporated in July 2001, and commenced active operations in September 2001. Seed Timber purchases logs from various suppliers and then rents either a sawmill or remanufacturing facility to custom cut the logs into softwood lumber products, which the company sells directly to customers in Canada and the United States. During the review period (i.e., calendar year 2003) Seed Timber purchased Western Red Cedar (WRC) Crown-origin logs from a number of suppliers. Until December 1, 2003, Seed Timber was affiliated with and cross-owned by Storey Creek Trading Ltd. (Storey Creek), a log broker, also located in British Columbia. Storey Creek reported that it does not and has never produced or exported the subject merchandise.

Analysis of Programs

I. Program Preliminarily Determined To Be Countervailable

In the Final Results of Countervailing Duty Administrative Review and Rescission of Certain Company-Specific Reviews: Certain Softwood Lumber Products From Canada, 69 FR 75917 (December 20, 2004)) (Lumber IV First Review Final), we found the Government of British Columbia's (GOBC) stumpage program to be countervailable. Specifically, we found that the GOBC's stumpage program constitutes a financial contribution in the form of a provision of a good within the meaning of section 771(5)(D)(iii) of the Act; is specific under section 771(5A)(D)(iii)(I) of the Act because the provincial stumpage subsidy program is used by a limited number of enterprises; and conferred benefits through the provision of a good for less than adequate remuneration under section 771(5)(E)(iv) of the Act. In addition, we determined that the stumpage and log markets are closely intertwined and therefore Crown stumpage prices affect both stumpage and log prices. See Issues and Decision Memorandum: Final Results of Administrative Review of Certain Softwood Lumber Products from Canada (Lumber IV First Review Final Memorandum) (December 13, 2004) at 14. No new information has been provided in this review to warrant reconsideration of our earlier findings.

During the review period, Seed Timber purchased Crown-origin WRC logs. Because of the Department's prior findings that Crown logs are subsidized, we have reason to believe that those purchases may have provided Seed Timber with a “competitive benefit” within the meaning of section 771A(b) of the Act. Therefore, we undertook to evaluate whether a competitive benefit was, in fact, bestowed on Seed Timber.

To determine whether a competitive benefit exists, section 351.523(c)(1) of the CVD Regulations states that the Department will compare the price for the subsidized input product (i.e., logs) to a benchmark input price and outlines five benchmark input price alternatives in order of preference. Based on information available to the Department for these preliminary results, we are using, under tier (v) of the benchmark hierarchy,^[4] U.S. log prices for WRC as the appropriate benchmark input price. See the April 25, 2005, Memorandum to Barbara E. Tillman, Acting Deputy Assistant Secretary, Import Administration, from Melissa G. Skinner, Director, AD/CVD Operations, Office 3, concerning Benchmark Input Price Hierarchy, which is on file in the CRU. The U.S. log prices are from private transactions between log sellers and sawmills for logs harvested from private lands and are thus market-determined prices. Use of a U.S. log price benchmark is also consistent with our approach in the Lumber IV First Review Final Memorandum (see pages 16-18).

Specifically, we have selected U.S. Pacific Northwest log prices for WRC as an appropriate benchmark to evaluate whether a competitive benefit was bestowed on Seed Timber through the purchase of Crown-origin WRC from various B.C. log suppliers. We obtained U.S. log prices for WRC for calendar year 2003, from publicly available materials, which are on the record of this new shipper review. See the April 20, 2005, Memorandum to the File concerning U.S. Log Price Data.^[5]

Based on our analysis, we preliminarily find that Seed Timber received a competitive benefit through its purchase of Crown-origin logs because the price paid for those logs was lower than the benchmark U.S. log price and that the subsidized logs (the only input product for the production of softwood lumber) had a significant effect on Seed Timber's cost of producing subject merchandise. Therefore, in accordance with section 771A of the Act, we preliminarily determine that Seed Timber received countervailable subsidies in 2003.

To calculate the countervailable benefit conferred on Seed Timber, we multiplied the calculated price differential between benchmark log price and the price Seed Timber paid for the Crown-origin logs by the volume of the Crown-origin logs purchased. We then expensed the total benefit bestowed on Seed Timber in the year of receipt, i.e., the year in which the logs were purchased and entered a sawmill for processing. As in Lumber IV First Review Final, we did not include in our calculation logs which Seed Timber acquired and resold without any processing (i.e., logs that did not enter a sawmill). Also, consistent with our approach in the expedited reviews, we calculated a subsidy rate which applies only to the softwood lumber produced by Seed Timber by dividing the benefit by the appropriate value of Seed Timber's sales (i.e., scope and non-scope softwood lumber products and softwood lumber by-products, net of resales). See, e.g., Issues and Decision Memorandum: Final Results of Expedited Review of Companies Covered by the May 8, 2003, Notice of Preliminary Results and Partial Rescission of Countervailing Duty Expedited Review (March 9, 2004) at 3. On this basis, we preliminarily determine a net countervailable subsidy of 2.22 percent ad valorem for Seed Timber.

II. Programs Preliminarily Determined To Be Not Used

Seed Timber and its previously affiliated company, Storey Creek, reported that they did not apply for, use, or benefit from the programs listed below; therefore, we preliminarily determine that neither company used these programs.

A. Non-Stumpage Programs of the GOBC

1. Grants, Loans, and Loan Guarantees Provided from Forest Renewal BC

2. Payments Associated with Tenure Reclamation

3. Land-Base Investment Program

4. Forestry Innovation Investment Program

5. Allowances for Harvesting Beetle-Infested Timber

6. Tax Breaks for Timber Harvesters on Private Timber Land

B. Non-Stumpage Programs of the Federal Government of Canada

1. Non-Repayable Grants and Conditionally Repayable Contributions from the Department of Western Economic Diversification

2. Workers Assistance Packages

3. Softwood Marketing Subsidies

4. Litigation Related Payments to Lumber Trade Associations

Preliminary Results of New Shipper Review

In accordance with section 751(a)(2)(B)(i) of the Act, we have determined an individual rate for the exporter or producer of the subject merchandise participating in this new shipper review. We preliminarily determine the total net countervailable subsidy rate to be:

Producer/exporter	Net subsidy rate
Seed Timber Co. Ltd.	2.22 percent ad valorem

If the final results of this new shipper review remain the same as these preliminary results, the Department will instruct CBP within 41 days of publication of the final results of this review, to liquidate shipments of the subject merchandise produced or exported by Seed Timber entered, or withdrawn from warehouse, for consumption from January 1, 2003, through December 31, 2003, at 2.22 percent ad valorem of the f.o.b. invoice price. The Department also intends to instruct CBP to collect cash deposits of estimated countervailing duties at 2.22 percent ad valorem of the f.o.b. invoice price on all shipments of the subject merchandise from Seed Timber entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this new shipper review.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Case briefs must be submitted within 30 days after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case briefs, must be submitted no later than five days after the time limit for filing case briefs. Parties who submit argument in this proceeding are requested to submit with the argument: (1) A statement of the issue, and (2) a brief summary of the argument. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f).

Also, pursuant to 19 CFR 351.310(c), within 30 days of the date of publication of this notice, interested parties may request a public hearing on arguments to be raised in the case and rebuttal briefs. Unless the Secretary specifies otherwise, the hearing, if requested, will be held two days after the date of submission of rebuttal briefs, that is, thirty-seven days after the date of publication of these preliminary results. Representatives of parties to the proceeding 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 proceeding, but in no event later than the date the case briefs, under 19 CFR 351.309(c)(ii), are due.

The Department will issue and publish the final results of this review, which will include the results of its analysis of issues raised in any case or rebuttal brief, or at a hearing, if requested within 90 days of publication of these preliminary results.

This review and notice is issued and published in accordance with sections 751(a) and 777(i)(1) of the Act.

Dated: April 26, 2005.

Barbara E. Tillman,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  Seed Timber's antidumping new shipper review was subsequently rescinded as a result of the company's withdrawal of its request for a review (69 FR 54766, September 10, 2004).

2.  To ensure administrability, we clarified the language of exclusion number 6 to require an importer certification and to permit single or multiple entries on multiple days as well as instructing importers to retain and make available for inspection specific documentation in support of each entry.

3.  See scope clarification message 3034202, dated February 3, 2003, to CBP, concerning treatment of U.S.-origin lumber on file in the Department's Central Records Unit (CFU), room B-099.

4.  Tier (v) permits the use of a surrogate price deemed appropriate by the Secretary. See section 351.523(c)(1)(v) of the Department's Regulations.

5.  This public document is available in the public file in the CRU.