[Federal Register Volume 61, Number 66 (Thursday, April 4, 1996)]
[Notices]
[Pages 15041-15044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8218]



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DEPARTMENT OF COMMERCE
[C-122-825]


Notice of Initiation of Countervailing Duty Investigation: 
Certain Laminated Hardwood Flooring from Canada

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

EFFECTIVE DATE: April 4, 1996.

FOR FURTHER INFORMATION CONTACT: Sue Strumbel or David Boyland, Office 
of Countervailing Duty Investigations, U.S. Department of Commerce, 
Room 3099, 14th Street and Constitution Avenue, N.W., Washington, DC 
20230; telephone

[[Page 15042]]
(202) 482-1442, (202) 482-4198, respectively.

Initiation of Investigation

The Applicable Statute

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act effective January 1, 1995 (the Act).

The Petition

    On March 7, 1996, the Department of Commerce (the Department) 
received a petition filed from the Ad Hoc Committee on Laminated 
Hardwood Trailer Flooring Imports (the petitioners). The Ad Hoc 
Committee is made up of five U.S. producers of laminated hardwood 
flooring (LHF): Anderson-Tully, Havco Wood Products, Inc., Industrial 
Hardwood Products Inc. (IHP), Lewisohn Sales Company Inc., and Cloud 
Corporation/Cloud Oak Corporation. On March 15, March 22, and March 26, 
1996, petitioners amended the petition by providing additional 
information, as well as revising the manner in which certain 
information in the petition was presented to the Department.
    In accordance with section 701(a) of the Act, petitioners allege 
that manufacturers, producers, or exporters of the subject merchandise 
in Canada receive countervailable subsidies.
    The petitioners have standing to file the petition because they are 
interested parties, as defined under section 771(9)(C) of the Act.
    On March 21 and 22, 1996, the Department held consultations with 
representatives of the Government of Canada (GOC) and the Government of 
Quebec (GOQ) pursuant to 702(b)(4)(ii) (see March 26, 1996 memos to the 
file regarding these consultations). On March 26, 1996, the GOC and the 
GOQ submitted certain information with respect to certain programs 
alleged in the petition.

Determination of Industry Support for the Petition

    Section 702(c)(4)(A) of the Act requires the Department to 
determine, prior to the initiation of an investigation, that a minimum 
percentage of the domestic industry supports a countervailing duty 
petition. A petition meets these minimum requirements if the domestic 
producers or workers who support the petition account for (1) at least 
25 percent of the total production of the domestic like product; and 
(2) more than 50 percent of the production of the domestic like product 
produced by that portion of the industry expressing support for, or 
opposition to, the petition.
    The Department has been notified that two domestic producers of LHF 
oppose the petition. A review of the production data provided in the 
petition and other information readily available to the Department 
indicates that the petitioner accounts for more than 50 percent of the 
total production of the domestic like products thus meeting the 
standard of 702(c)(4)(A) and requiring no further action by the 
Department pursuant to 702(c)(4)(D). Accordingly, the Department 
determines that this petition is supported by the domestic industry.

Injury Test

    Because Canada is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, Title VII of the Act applies to 
this investigation. Accordingly, the ITC must determine whether imports 
of the subject merchandise from Canada materially injure, or threaten 
material injury to, a U.S. industry.

Scope of the Investigation

    The scope of this investigation consists of certain laminated 
hardwood flooring which is made of oak, maple or other hardwood lumber. 
Laminated hardwood flooring is customized for specific dimensions, but 
generally ranges in size from 8'  x  48''  x  1'' to 8'  x  6''  x  
57''  x  1\1/2\'' for trailer flooring, and to 8'  x  16''  x  1(\1/
8\)'' to 8'  x  26'  x  1(\1/2\)'' for trailer flooring and van and 
truck bodies, respectively. The merchandise under investigation is 
currently classified, in addition to various other hardwood products, 
under subheading 4421.90.98.40 and 9905.44.50.15 of the Harmonized 
Tariff Schedule of the United States (HTSUS). Although the HTSUS 
subheadings are provided for convenience and Customs purposes, our 
written description of the scope of this proceeding is dispositive.

Allegation of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to petitioners 
supporting the allegations.

Initiation of Countervailing Duty Investigations

    The Department has examined the petition on LHF from Canada and 
found that it complies with the requirements of section 702(b) of the 
Act. Therefore, in accordance with section 702(b) of the Act, we are 
initiating a countervailing duty investigation to determine whether 
manufacturers, producers, or exporters of LHF from Canada receive 
subsidies.
    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers of the 
subject merchandise in Canada:
    1. Capital Gains Exemptions
    2. Investment Tax Credits (ITCs)
    3. Export Development Corporation (EDC)
    4. Performance Security Services through EDC
    5. Program for Export Market Development (PEMD)
    6. Venture Loans Through the Business Development Bank of Canada 
(BDBC)
    7. Working Capital for Growth from BDBC
    8. Programs Provided by the Industrial Development Corporation 
(SDI) 1

    \1\ The Department is not including in the investigation other 
SDI programs.

Article 7 Assistance
Export Assistance Program
Business Investment Assistance Program
Business Financing Program
Research and Innovation Activities Program
    9. Export Promotion Assistance Program (APEX)
    10. St. Lawrence River Environmental Technology Development Program
    11. Industrial Research Assistance Program (IRAP)
    12. Canada-Quebec Subsidiary Agreement on the Economic Development 
of Quebec
    13. Private Forest Development Program (PFDP)
    14. Quebec Stumpage Program
    The Department has reviewed information submitted by the GOQ which 
has raised a question whether Leclerc is a tenure holder; i.e., whether 
it received benefits under this program. Therefore, the Department has 
included this program in its investigation to investigate use of this 
program.
    Petitioners have argued that Nilus Leclerc Inc. (Leclerc) ``became 
partners with the government * * * with the sole objective of taking 
over the U.S. [LHF] market'' and that all programs provided to Leclerc 
should be considered specific because they were given pursuant to ``an 
overall endeavor that gave Leclerc special treatment.'' However, 
petitioners were unable to provide any evidence that the GOC or

[[Page 15043]]
the GOQ have provided any ``special treatment'' to Leclerc. 
Accordingly, the Department did not consider petitioners' ``special 
specificity'' argument when determining whether a program should be 
included in the investigation.
    We are not including in our investigation the following programs 
alleged to be benefiting producers of the subject merchandise in 
Canada:

National Programs

1. Canadian Forest Services Research Subsidies
    The Canadian Forest Service (CFS) maintains a series of programs 
that support basic research and development in forestry.
    Petitioners have provided no information to support the allegation 
that LHF producers would conduct research under these programs. 
Therefore, we are not including this program in our investigation.
2. Cooperative Industrial and Market Development Partnership (CIMDP)
    The CIMDP provides information concerning export enhancement, 
export market penetration, and productivity enhancement to members of 
the British Columbia (BC) Wood Specialties Group, an association of BC 
companies involved in secondary wood manufacturing.
    Petitioners have provided no information to support the allegation 
that any producer of subject merchandise is eligible to receive 
benefits under this program. The Canadian producers of LHF identified 
in the petition are located in Quebec and Ontario. Because the Canadian 
producers of LHF identified by the petitioners are not located in BC, 
and no BC producer of LHF has been identified, we are not including 
this program in our investigation.
3. Term Loans Through BDBC
    Small and medium-sized businesses are eligible to receive BDBC term 
loans for the purchase of land, buildings, equipment, major plant 
overhauls, working capital, refinancing, and changes of ownership. 
Because the amortization of BDBC term loans is apparently flexible, 
petitioners have argued that the program provides a benefit.
    Because petitioners have provided no basis to believe that this 
program is specific pursuant to section 771(5)(A), either as a domestic 
or export subsidy, we are not including this program in our 
investigation.
4. Venture Capital Division of BDBC
    Under this program BDBC provides small and medium-sized companies 
with equity financing in the form of straight equity, options, 
warrants, or convertible or other forms of debentures.
    Because petitioners have provided no basis to believe that this 
program is specific pursuant to section 771(5)(A), either as a domestic 
or export subsidy, we are not including this program in our 
investigation.

Quebec Provincial Programs

5. Industrial Feasibility Study Assistance Program
    Under this program the GOQ provides financial assistance to cover 
up to 50 percent of the eligible expenditures for feasibility studies 
of industrial projects to be carried out in Quebec. Petitioners believe 
that Leclerc may have received benefits under this program in order to 
develop its LHF business.
    Because petitioners have provided no basis to believe that this 
program is specific pursuant to section 771(5)(A), either as a domestic 
or export subsidy, we are not including this program in our 
investigation.
6. Development Assistance Program Under SDI
    According to petitioners, SDI provides venture capital for up to 90 
percent of eligible expenditures which is repayable through royalties 
on sales or minority interest in the capital stock of the company.
    Petitioners have not alleged that Leclerc was unequityworthy or 
that any financing provided was preferential. Therefore, we are not 
including this program in our investigation.
7. Quebec Business Investment Companies Act administered by SDI
    The objective of the Business Investment Companies Act is to 
promote better capitalization of Quebec companies and to encourage 
investment by providing tax benefits to shareholders in special 
corporations which invest in Quebec companies. Although it is not 
clear, petitioners may view the benefit under this program to be an 
equity infusion into Leclerc which presumably would not have taken 
place absent the above-referenced tax benefits. Alternatively, 
petitioners may believe that Leclerc's financing costs are reduced 
pursuant to the tax deduction.
    Because petitioners have provided no basis to believe that this 
program is specific pursuant to section 771(5)(A), either as a domestic 
or export subsidy, we are not including this program in our 
investigation.
8. Financial Assistance for Research, Formation, and Improvement of 
Recycling Industry
    Under this program, the Quebec Ministry of Environment provides 
grants to the recycling industry in Quebec.
    Because petitioners have provided insufficient information to 
support the allegation that Leclerc is also part of the Quebec 
recycling industry, and is therefore eligible to participate in this 
program, we are not including this program in our investigation.
9. Preferential Rates under Hydro-Quebec Risk and Profit Sharing
    Under the Risk and Profit Sharing program, the provincially-owned 
power company, Hydro-Quebec, signs long-term contracts with its 
industrial customers for the provision of electricity. A portion of the 
rate to be charged under these contracts is based either on the price 
of the customer's products or the company's profit. Industrial 
customers which meet several criteria (e.g., at least a five megawatt 
power requirement and energy costs which represent 15 percent or more 
of production costs) are eligible to participate in the program.
    Because petitioners have not provided information which is 
sufficient to support the allegation that Leclerc would be eligible for 
this program, we are not including this program in our investigation.

Ontario Provincial Program

Ontario Stumpage
    10. Petitioners have alleged that Leclerc may benefit from Ontario 
stumpage. Because petitioners have not provided either a benchmark 
stumpage rate or the public stumpage rate charged by the Government of 
Ontario, we are not including this program in our investigation.

Creditworthiness

    Petitioners assert that the financial position of Leclerc was such 
that it was uncreditworthy when it allegedly obtained a ``large and 
speculative'' amount of government-sponsored financing. Petitioners 
indicate that they have provided the information which is reasonably 
available to them showing that Leclerc ``did not possess intrinsic 
worth'' to avail itself of such large amounts of capital.
    The Department does not consider the creditworthiness of a firm 
absent a specific allegation by the petitioner which is supported by 
information

[[Page 15044]]
establishing a reasonable basis to believe or suspect that the firm is 
uncreditworthy. While the information provided by petitioners does 
raise certain doubts as to Leclerc's ability to attract such financing, 
the financial information regarding Leclerc is incomplete. Therefore, 
at this time, the Department does not have a reasonable basis to 
believe or suspect that Leclerc is uncreditworthy.

Critical Circumstances

    The petition contains an allegation that there is a reasonable 
basis to believe that critical circumstances exist with respect to 
imports of subject merchandise.
    Section 703(e)(1) of the Act provides that the Department will 
determine that there is a reasonable basis to believe or suspect that 
critical circumstances exist if:
    (A) The alleged countervailable subsidy is inconsistent with the 
Subsidies Agreement, and
    (B) There have been massive imports of the subject merchandise over 
a relatively short period of time.
    The petition contains information that satisfies these criteria. 
First, in accordance with section 771(5)(A)(B) of the Act, petitioners 
have alleged that several programs are export subsidies and, therefore, 
inconsistent with the Subsidies Agreement. With respect to the second 
statutory criterion, whether imports of the subject merchandise have 
been massive over a relatively short period of time, petitioners note 
that there has been significant import growth in recent years.
    Based on the above, we find a reasonable basis to believe or 
suspect that critical circumstances exist and will investigate this 
matter further.

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, copies of 
the public version of the petition have been provided to 
representatives of GOC. We will attempt to provide copies of the public 
version of the petition to all the exporters named in the petition.

ITC Notification

    Pursuant to section 702(d) of the Act, we have notified the ITC of 
these initiations.

Preliminary Determination by the ITC

    The ITC will determine by April 21, 1996, whether there is a 
reasonable indication that an industry in the United States is being 
materially injured, or is threatened with material injury, by reason of 
imports from Canada of LHF. Any ITC determination which is negative 
will result in the investigation being terminated; otherwise, the 
investigation will proceed according to statutory and regulatory time 
limits. If the ITC determines that an industry in the United States is 
being materially injured, or is threatened with material injury, the 
Department will issue its preliminary determination in this 
investigation on May 31, 1996.
    This notice is published pursuant to 702(c)(2) of the Act.

    Dated: March 27, 1996.
Paul L. Joffe,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 96-8218 Filed 4-3-96; 8:45 am]
BILLING CODE 3510-DS-P