[Federal Register Volume 61, Number 54 (Tuesday, March 19, 1996)]
[Notices]
[Pages 11186-11189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6571]



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DEPARTMENT OF COMMERCE
[C-122-815]


Preliminary Results of First Countervailing Duty Administrative 
Reviews: Pure Magnesium and Alloy Magnesium From Canada

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

EFFECTIVE DATE: March 19, 1996.

FOR FURTHER INFORMATION CONTACT: David Boyland or Sue Strumbel, Office 
of Countervailing Investigations, Import Administration, International 
Trade Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone: (202) 
482-4198 or (202) 482-1442, respectively.

Case History

    On August 3, 1993, the Department published in the Federal Register 
a notice of ``Opportunity to Request an Administrative Review'' (58 FR 
41239) of the countervailing duty orders on pure and alloy magnesium 
from Canada (57 FR 39392 (August 31, 1992)). On August 3 and 24, 1993, 
Norsk Hydro Canada Inc. (NHCI) and the Magnesium Corporation of America 
(Magcorp) requested that the Department conduct administrative reviews 
of the countervailing duty orders. We initiated the reviews for the 
period December 6, 1991 through December 31, 1992, on September 30, 
1993 (58 FR 51053). (See also Period of Review section below). The 
Department is conducting this review in accordance with section 751 of 
the Tariff Act of 1930, as amended (the Act).
    On December 17, 1993, the Department issued questionnaires to NHCI, 
the Government of Canada (GOC), and the Government of Quebec (GOQ). The 
Department received questionnaire responses from NHCI, GOC, and GOQ on 
February 22, 1994.
    On January 31, 1994, Magcorp alleged that NHCI was receiving 
subsidized electricity. On February 18, 1994, Magcorp was notified by 
the Department that its allegation could not be considered because it 
was filed 120 days after the initiation of this review (see 19 CFR 
353.31(c)(1)).

Applicable Statute

    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 references 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, (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

[[Page 11187]]
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 Review

    The products covered by these reviews 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 is dispositive.

Period of Review

    For purposes of calculating the net subsidy, the period of review 
(POR) is January 1, 1992 through December 31, 1992. The subject 
merchandise covered by this review, however, includes all entries made 
on or after December 6, 1991 and on or before December 31, 1992. (See 
April 28, 1994 memorandum to Susan H. Kuhbach, Director, Office of 
Countervailing Investigations, for a further explanation.) NHCI 
accounted for all exports of subject merchandise during the period of 
review.

Analysis of Programs

Programs Previously Determined to Confer Subsidies

1. Exemption From Payment of Water Bills
    Pursuant to a December 15, 1988 agreement between NHCI and Le 
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 
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. Additionally, in Magnesium from Canada the Department 
determined the countervailable benefit to be the money NHCI would have 
paid absent the exemption. During the course of this review, NHCI 
argued that, even though their water bills were based, in part, on 
forecasted water consumption, the countervailable benefit should be 
confined solely to the unpaid POR water bills as they relate to actual 
water consumption.
    For reasons which cannot be disclosed in this notice due to the 
business proprietary status assigned to certain information, the 
Department preliminarily determines, as it did in Magnesium from 
Canada, that the countervailable benefit of this program is the sum of 
the POR water bills--which are partially based on forecasted 
consumption--that NHCI would have paid absent the exemption it 
received. (See also June 28, 1995 memorandum to Paul L. Joffe, Deputy 
Assistant Secretary for Import Administration.)
    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 1.31 percent 
ad valorem.
2. Article 7 Grants From the Quebec Industrial Development Corporation
    The Societe de Developpement Industriel du Quebec (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 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 this 
review, neither the GOQ nor NHCI provided new information which would 
warrant reconsideration of this determination.
    In Magnesium from Canada, the Department found that the grant 
provided under Article 7 was nonrecurring because it represented a one-
time provision of funds. Before a Binational panel the Department also 
argued that Article 7 was a nonrecurring grant because it was 
authorized in a single act and completely disbursed within a relatively 
short period of time. The Binational review panel upheld the 
Department's decision that the grant was nonrecurring.
    Principles enunciated in the General Issues Appendix to the Certain 
Steel investigations support the Department's finding that Article 7 
assistance represents a nonrecurring grant. (See General Issues 
Appendix (GIA), 58 FR 37226 (July 9, 1993)). The GIA modified the test 
used to make the determination as to whether a grant is recurring or 
nonrecurring. Under the current test, a grant is generally considered 
nonrecurring if: (1) the benefit provided is exceptional, (2) the 
recipient cannot expect to receive benefits under the program on an 
ongoing basis from review period to review period, or (3) the provision 
of funds by the government must be approved every year.
    The Article 7 grant received by NHCI was exceptional in the sense 
that it was a one-time grant authorized by a single act of the GOQ. 
Additionally, NHCI cannot expect to receive Article 7 grants on an 
ongoing basis from review period to review period. Finally, in order 
for NHCI to receive additional Article 7 benefits in the future, 
additional government approval would be required. Therefore, applying 
the current recurring/nonrecurring test, the Article 7 grant received 
by NHCI should be considered nonrecurring.
    The GIA also lists benefits which the Department generally 
considers nonrecurring. This list includes ``grants for the purchase of 
fixed assets.'' As noted above, NHCI's Article 7 grant was for the 
purchase of fixed assets (i.e., environmental protection equipment). 
Therefore, based on the reasons discussed above, we preliminarily 
determine that the Article 7 grant received by NHCI was nonrecurring.
    We calculated the benefit from the grant received by NHCI using the

[[Page 11188]]
company's cost of long-term, fixed-rate debt as a discount rate and our 
declining balance methodology as described in section 355.49(b) of the 
Department's Proposed Regulations. We used 14 years as our allocation 
period, which is the average useful life of the assets in the magnesium 
industry. We divided that portion of the benefit allocated to the 
period of investigation by NHCI's total sales of Canadian manufactured 
products and preliminarily calculated a net subsidy of 8.55 percent ad 
valorem for NHCI.
    Because the Article 7 grant was disbursed in the form of interest 
rebates respondent argues that the Department should employ the 
interest rebate methodology articulated in the Certain Steel 
investigations (see e.g., Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Italy, 58 FR 37327 (July 9, 
1993)). In Certain Steel and subsequent investigations, the 
Department's practice has been to analyze the benefit from an interest 
rebate in either of two ways. If the borrower knows that an interest 
rebate will be provided prior to taking on the debt, the Department 
employs its loan methodology and reduces the interest rate charged by 
the amount of interest rebated. If the borrower does not know of the 
interest rebate prior to taking on the debt, the Department treats the 
interest rebate as a grant.
    In this administrative review, respondent has provided additional 
information showing that the majority of Article 7 assistance took the 
form of interest rebates on loans taken out after the Article 7 
assistance was awarded. Respondent asserts that, since it knew it would 
be receiving Article 7 assistance prior to taking out these loans, the 
Department should employ its loan methodology and reduce the interest 
paid by the amount of the Article 7 assistance received. Moreover, 
according to respondent, because these loans were not outstanding 
during the POR and the Department confines the allocation period of a 
subsidized loan to the life of the loan, the majority of benefits from 
Article 7 assistance are no longer countervailable (see section 
353.49(c)(1) of the Proposed Regulations).
    In addressing respondent's argument, we note that there are 
significant differences between the Article 7 assistance provided to 
NHCI and the interest rebate programs that the Department has 
encountered in the past and for which the above-referenced Certain 
Steel methodology provides guidance.
    We first note the attenuated relationship between the Article 7 
assistance and the group of loans subsequently taken out by NHCI. This 
is in contrast with the direct and tangible relationship that the 
Department typically observes when examining interest rebate programs 
and the underlying loans whose interest is being rebated (see e.g. 
Final Affirmative Countervailing Duty Determination; Certain Steel 
Products from the United Kingdom (58 FR 37393, 37397 (July 9, 1993)).
    The agreement NHCI signed with the GOQ primarily conditions the 
disbursement of funds upon the achievement by NHCI of pre-established 
targets related to the purchase of specific fixed assets. The 
requirement to accumulate interest costs prior to the disbursement of 
the grant was clearly secondary and far less specific. The disbursement 
of the grant was not tied to the amount borrowed, the number of loans 
taken out, the interest rate charged on those loans or the specific 
dates on which interest payments were made. Once NHCI was able to 
demonstrate that certain costs had been incurred in purchasing specific 
fixed assets, it was only required to show that an equivalent amount of 
interest expense had been paid to receive the next disbursement. No 
evidence was provided to show a link between the loans and the Article 
7 assistance.
    Secondly, the interest rebate programs in Certain Steel and 
subsequent cases for which the Department employed its loan 
methodology, operated to lower the financing cost of purchasing 
particular fixed assets. The subsidy recipients in these programs 
obtained financing to make an investment and a portion of the interest 
incurred in financing the investment was rebated by the government. In 
contrast, the Article 7 assistance received by NHCI actually lowered 
the cost of the fixed assets themselves, not simply the cost of 
financing the purchase of those assets.
    The Article 7 assistance received by NHCI effectively reimbursed a 
large percentage of the price of certain fixed assets. As noted above, 
the Article 7 payments were primarily conditioned upon NHCI meeting 
pre-established targets related to the purchase and installation of 
fixed assets. While the payments could not be more than the amount of 
interest incurred, the overall cap on the payments received was not 
limited to the interest on loans taken out to finance the acquisition 
of the fixed assets in question. Instead, the cap included all interest 
on loans taken out by NHCI. As a result, the Article 7 payments covered 
more than the cost of financing the purchase of fixed assets, they 
covered the cost of the equipment itself.
    For the reasons outlined above, in this preliminary determination, 
we disagree with respondent's contention that the Department should 
treat Article 7 assistance as a series of interest rebates rather than 
a nonrecurring grant. (See also June 28, 1995 memorandum to Paul L. 
Joffe, Deputy Assistant Secretary for Import Administration.)

Programs Preliminarily Found Not to be Used

    We preliminarily find that NHCI did not apply for or receive 
benefits under the following programs during the period of review: 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, the 
Development Assistance Program, the Industrial Feasibility Study 
Assistance Program, the Export Promotion Assistance Program, the 
Creation of Scientific Jobs in Industries, the Business Investment 
Assistance Program, the Business Financing Program, the Research and 
Innovation Activities Program, Export Technologies Development Program, 
the Financial Assistance Program for Research Formation and for the 
Improvement of the Recycling Industry, the Transportation Research and 
Development Assistance Program.

Preliminary Results of Review

    We preliminarily determine the net subsidy for the period January 
1, 1992 through December 31, 1992, to be 9.87 percent. If the final 
results of this review remain the same as these preliminary results, 
the Department intends to instruct the Customs Service to assess 
countervailing duties at 9.87 percent of the F.O.B. invoice price on 
all shipments of the subject merchandise, except Timminco Limited 
(which was excluded from the order during the original investigation), 
exported on or after December 6, 1992 and on or before December 31, 
1992. The Department also intends to instruct the Customs Service to 
collect a cash deposit of 9.87 percent on 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 this 
administrative review.
    Parties to the proceeding may request disclosure of the calculation 
methodology and interested parties may request a hearing not later than 
10 days

[[Page 11189]]
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 
this proceeding 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 
Sec. 355.38(e).
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order up 
until 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 are due under 19 CFR 355.38(c).
    The Department will publish the final results of this 
administrative review, including the results of its analysis of issues 
raised in any case or rebuttal briefs.
    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, 1996.
Paul L. Joffe,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 96-6571 Filed 3-18-96; 8:45 am]
BILLING CODE 3510-DS-P