[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)]
[Notices]
[Pages 48607-48611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24565]
[[Page 48607]]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-815]
Pure and Alloy Magnesium From Canada; Final Results of the Second
(1993) 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 24, 1997, the Department of Commerce (the Department)
published in the Federal Register its preliminary results of
administrative reviews of the countervailing duty orders on pure and
alloy magnesium from Canada for the period January 1, 1993 through
December 31, 1993 (see Pure Magnesium and Alloy Magnesium From Canada;
Preliminary Results of Countervailing Duty Administrative Reviews
(Preliminary Results), 62 FR 13863). We have completed these reviews
and determine the net subsidy to be 7.34 percent ad valorem for Norsk
Hydro Canada, Inc. (NHIC) 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: September 16, 1997.
FOR FURTHER INFORMATION CONTACT:
Cynthia Thirumalai or Sally Hastings. 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) 482-4087 or (202) 482-3464,
respectively.
SUPPLEMENTARY INFORMATION:
Background
On March 24, 1997, the Department published in the Federal Register
(62 FR 13863) the preliminary results of its administrative reviews of
the countervailing duty orders on pure and alloy magnesium from Canada
(62 FR 13863). 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 23, 1997, case briefs were submitted by NHCI, a
producer of subject merchandise which export pure and alloy magnesium
to the United States during the review period, and the Government of
Quebec (GOQ). At the request of respondents, the Department held a
public hearing on May 13, 1997.
These reviews cover the period January 1, 1993 through December 31,
1993. The reviews involve one company (NHCI) 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, Financial Assistance
Program For Research Formation and for the Improvement of the Recycling
Industry, and Transportation Research and Development Assistance
Program.
Applicable Statute
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.
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 classifiable under subheadings
8104.11.000 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.
Analysis of Programs
Based upon the analysis of the questionnaire responses and written
comments from the interested parties, we determine the following:
I. Programs Conferring Subsidies
A. 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 of the interested parties, summarized below, has not led
us to change our findings with respect to the countervailability of
this program. The net subsidy rate for this program is as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI....................................................... 1.00
------------------------------------------------------------------------
B. 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 with respect to the
countervailability of this program. The net subsidy for this program is
as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI....................................................... 6.34
------------------------------------------------------------------------
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 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
[[Page 48608]]
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
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.
Analysis of Comments
Comment 1: Countervailable Benefit Received From the Exemption From
Payment of Water Bills
While agreeing that NHCI's contract with its supplier of water, La
Societe du Parc Industriel et Portuaire de Becancour (``Industrial
Park''), was linked with the credit it received from the GOQ to offset
its water bills and reflected a forecasted annual rate of consumption,
respondents argue that the GOQ's recalculation of NHCI's water bills
reflecting actual consumption is a more accurate measure of the
countervailable benefit than is the water bill credit received by NHCI
during the review period. Respondents state that a different billing
arrangement would have been made if a water credit had not been
received. In summary, respondents argue that the Department should look
to what NHCI would have paid absent the water credit and the contract
compared to what NHCI paid with the credit and the contract to
determine the amount of the benefit conferred by the credit.
DOC Position: 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. Simply put, the GOQ gave NHCI a credit based
on and because of the contract and NHCI's forecasted usage. The water
contract and the credit are inextricably linked. Again, we compare
NHCI's argument to a situation in which a company that received a low-
interest loan from a government argues to the Department that because
of the low interest rate, it borrowed a greater amount of money 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 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 between the two interest rates
regardless of the effect the interest rate has on the other terms of
the loan, i.e., the amount borrowed.
In these reviews, 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 regardless of any hypothetical
alternative arrangements. Therefore, as stated in the Preliminary
Results we determine that the countervailable benefit is the full
amount of the credit.
Comment 2: Article 7 Assistance under the SDI Act: Respondents
argue that the Department improperly applied its grant methodology to
the Article 7 assistance provided to NHCI. According to respondents,
the Department should calculate the benefit using its loan methodology
and reduce the interest rate charged by the amount of the interest
rebated because NHCI knew it would receive interest rebates from SDI
prior to taking out loans. Respondents state that this would be
consistent with the Department's methodology, and cite a number of
cases in support thereof (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, 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. Second, respondents argue that the
relationship between the interest rebates and the underlying loans was
not indirect.
With respect to the first point, respondents argue that since the
Department wrongly assumed that the 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 expended 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.
With respect to the second 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.
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 a interest rebate, then under
the methodology adopted by the Department in 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 of 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, we examined a particular type of subsidy,
interest rebates, and determined which of our valuation methodologies
was most appropriate (See, e.g., Belgium Steel). The possible choices
were between the grant and loan methodologies. Where the company had
[[Page 48609]]
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 in which a government
makes contributions towards a company's interest obligations. The
appropriate methodology depends on the nature of the subsidy. For
example, assume that the government sold 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.
In these reviews, as in the 1993 steel cases, the Department is
seeking the most appropriate methodology for the 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 the 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) appended to Final Countervailing Duty Determination: Certain
Steel Products from Austria, 58 FR 37082, at 37226, (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 the Article 7
Assistance: In the event the Department continues to treat the 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 (928 F.2d 1568,
1577 (Fed.Cir. 1991)), Geneva Steel v. United States (914 F.Supp. 563,
598 (CIT 1996)), and Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from Brazil (58 FR 37295, 37303
(July 9, 1993)) 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
countervailability of benefits found to be de facto specific in prior
reviews.
Respondents maintain that the Department is obliged to evaluate the
countervailability of a program previously determined to be de facto
specific, regardless of whether the parties have provided new
information. According to the GOQ, assistance under Article 9 should be
included in the Article 7 specificity analysis because Article 9 was
the predecessor of Article 7 and the provisions of Article 9 functioned
basically the same as those of Article 7.
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 under Articles 7 and 9 to determine whether NHCI received a
disproportionate share of benefits.
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
[[Page 48610]]
Order, 59 FR 58814, November 15, 1994). In these reviews, no new facts
or evidence have been presented which would lead us to question our
previous determination.
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 of the
order on live swine from Canada, 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 (59 FR 12243 (March 16, 1994)).) 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, once again we state that 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 proceeding involving different products (e.g., carbon
black from Mexico as opposed to 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.
Again, we state that 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.
In addition, we find that the GOQ has not provided new information
which would cause us to revisit our original specificity determination.
As a result, the bases of the original specificity determination and
the conclusions of that determination are still valid. We, therefore,
maintain that assistance provided to NHCI under Article 7 of the SDI
Act is specific and, therefore, countervailable.
Comment 4: FOB Adjustment: Respondents argue that the Department
used the correct sales denominator in the Preliminary Results, but in
the alternative has submitted NHCI's F.O.B. (port) value of total sales
during the POR.
DOC Position: We have used NHCI's submission of its F.O.B. (port)
value of total sales in these reviews in determining the ad valorem
subsidy rate. In the Preliminary Results, we used NHCI's total sales
figure as recorded in the company's books. Due to this change, the
rates calculated in these final results differ from those in the
Preliminary Results.
Final Results of Review
For the period January 1, 1993 through December 31, 1993, we
determine the net subsidy for NHCI to be 7.34 percent ad valorem.
The Department will instruct the U.S. Customs Service to assess the
following countervailing duties:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI and all others, except for Timminco Ltd............... 7.34
------------------------------------------------------------------------
Prior to these 1993 results, the final results of the 3rd (1994)
administrative reviews were published (see 12994 Final Results). The
1994 reviews were conducted under the statutory provisions subject to
the URAA amendments. These statutory provisions replaced the general
rule in favor of a country-wide rate with a general rule in favor of
individual rates for investigated and reviewed companies. As a result,
the procedures for establishing countervailing duty rates, including
those for non-reviewed companies, are now essentially the same as those
in antidumping cases, except as provided for in section 777A(e)(2)(B)
of the Act. Therefore, the countervailing duty cash deposit rate
applicable to a company can no longer change, except pursuant to a
request for a review of that company (See Federal-Mogul Corporation and
the Torrington Company v. United States, 822 F. Supp. 782 (CIT 1993)
and Floral Trade Council v. United States, 822 F. Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR 355.22(g)).) Accordingly, the
cash deposit rate that will be applied to companies not reviewed during
the 1994 reviews is that established in the most recently completed
administrative proceeding conducted pursuant to the statutory
provisions that were in effect prior to the URAA amendments, i.e.,
these 1993 administrative reviews. (See Pure and Alloy Magnesium from
Canada: Final Results of the First (1992) Countervailing Duty
Administrative Reviews (62 FR 13857 (March 24, 1997).) Since NHCI was
reviewed in the 1994 reviews, we will instruct Customs to collect cash
deposits for NHCI at the company-specific rate established for it in
the 1994 reviews of 4.48 percent ad valorem; for non-reviewed
companies, the cash deposit will be the rate calculated in these 1993
reviews of 7.34 percent ad valorem, except from Timminco Limited (which
was excluded from the order in the original investigations). In
addition, for the period January 1, 1993 through December 31, 1993, the
assessment rates applicable to all non-reviewed companies covered by
these orders are the cash deposit rates in effect at the time of entry.
This notice serves as a reminder to parties subject to
administrative
[[Page 48611]]
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.
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: August 6, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-24565 Filed 9-15-97; 8:45 am]
BILLING CODE 3510-DS-M
