[Federal Register Volume 62, Number 74 (Thursday, April 17, 1997)]
[Notices]
[Pages 18749-18755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9962]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-815]
Pure and Alloy Magnesium From Canada; Final Results of the Third
(1994) 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 October 7, 1996, 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, 1994 through
December 31, 1994 (see Pure Magnesium and Alloy Magnesium From Canada;
Preliminary Results of Countervailing Duty Administrative Reviews
(Preliminary Results), 61 FR 52435. We have completed these reviews and
determine the net subsidy to be 4.48 percent ad valorem for Norsk Hydro
Canada, Inc. (NHCI) and all other producers/exporters except Timminco
Limited, which has been excluded from these orders. We will instruct
the U.S.
[[Page 18750]]
Customs Service to assess countervailing duties as indicated above.
EFFECTIVE DATE: April 17, 1997.
FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Steven Harris,
Office 1, Group 1, AD/CVD Enforcement, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, DC 20230; tel. (202)
482-4087 and (202) 482-2239, respectively.
SUPPLEMENTARY INFORMATION:
Background
Pursuant to 19 CFR 355.22(a), these reviews cover only those
producers or exporters of the subject merchandise for which reviews
were specifically requested. Accordingly, these reviews cover only
NHCI, a producer of the subject merchandise which exported pure and
alloy magnesium to the United States during the review period.
On October 7, 1996, the Department published in the Federal
Register the Preliminary Results of its administrative reviews of the
countervailing duty orders on pure and alloy magnesium from Canada (61
FR 52435). We invited interested parties to comment on the Preliminary
Results. On November 6 and 13, 1997, case briefs and rebuttals were
submitted by NHCI, the Government of Quebec (GOQ), and the Magnesium
Corporation of America (petitioner). At the request of respondents, the
Department held a public hearing on December 4, 1996.
These reviews cover the period January 1, 1994 through December 31,
1994. 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, and Transportation
Research and Development Assistance Program.
Applicable Statute
Unless otherwise indicated, all citations to the statute are in
reference to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). The Department is conducting these administrative reviews in
accordance with section 751(a) of the Act.
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 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 description
of the scope of this proceeding is dispositive.
Secondary and granular magnesium are not included in the scopes of
these orders. Our reasons for excluding granular magnesium are
summarized in the Preliminary Determination of Sales at Less Than Fair
Value: Pure and Alloy Magnesium from Canada (57 FR 6094, February 20,
1992).
Analysis of Programs
Based upon our analysis of our 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 submitted by the interested parties, summarized below, has
not led us to change our findings from the Preliminary Results. On this
basis, the net subsidy rate for this program is as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI....................................................... 0.65
------------------------------------------------------------------------
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 from the Preliminary Results. On this
basis, the net subsidy for this program is as follows:
------------------------------------------------------------------------
Rate
Manufacturer/exporter (percent)
------------------------------------------------------------------------
NHCI....................................................... 3.83
------------------------------------------------------------------------
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 Development
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.
Business Financing Program.
Research and Innovation Activities Program.
Export Assistance Program.
Energy Technologies Development Program.
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: Countervailability of the Exemption from Payment of Water
Bills
Respondents argue that NHCI's contract with its supplier of water,
La Societe du Parc Industriel et Portuaire de Becancour (``Industrial
Park''), was inextricably linked with the credit it received from the
GOQ to offset its water bills. If the water credit had not been
received, respondents state that a different billing arrangement would
[[Page 18751]]
have been made. Therefore, in determining the amount of the benefit
conferred by the credit, the Department should look to what NHCI would
have paid absent the water credit and the contract compared to what it
paid with the credit and the contract. To calculate what NHCI would
have paid absent the credit and the contract, respondents argue that
the closest approximation is the amount NHCI would have paid under its
present contract based on actual water consumption rather than
forecasted consumption.
Petitioner states that in these reviews and previous ones the
Department has thoroughly analyzed the relevant issues with respect to
NHCI's contract with the Industrial Park and has correctly calculated
the countervailable benefit in the Preliminary Results.
DOC Response
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. The position put forward by NHCI is analogous to a
situation where a company received a low-interest loan from a
government and argues to the Department that because of the low
interest rate, it borrowed more 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
in the two interest rates without regard to what 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 without regard to whether NHCI
would have received different terms under an alternative arrangement.
Therefore, we determine that the 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, because NHCI knew it would receive interest rebates from
SDI prior to taking out loans, the Department should calculate the
benefit using its loan methodology and reduce the interest rate charged
by the amount of the interest rebated. Respondents state that this
would be consistent with the Department's methodology, citing a number
of cases (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, respondents argue that the relationship between the
interest rebates and the underlying loans was not indirect. Second, 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.
With respect to the first 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.
With respect to the second 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 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.
Petitioner agrees with the Department's treatment of the Article 7
benefits received by NHCI and emphasizes that in these reviews and in
prior reviews the Department has addressed the germane issues regarding
the Article 7 benefits.
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 an interest rebate, then under the
methodology adopted by the Department in the 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 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, (See, e.g., Belgium Steel), we examined a
particular type of subsidy, interest rebates, and determined which of
our valuation methodologies was most appropriate. The possible choices
were between the grant and loan methodologies. Where the company had
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
[[Page 18752]]
cases was never intended to dictate that the Department should apply
the loan methodology in every situation in which a government makes
contributions toward a company's interest obligations. The appropriate
methodology depends on the nature of the subsidy. For example, assume
that the government told 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.
As we did in the 1993 steel cases, the Department in these reviews
is seeking the most appropriate methodology for the Article 7
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 37063, 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: Reexamination 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 given the Department's responsibility to
make a finding of specificity and countervailability based on the
information relevant to the POR, the Department should consider any new
assistance provided by SDI since the end of the original period of
investigation. To this end, the GOQ provided information on the Article
7 assistance extended up to, and including, the POR in a submission
dated April 4, 1996. The GOQ also provided information on assistance
provided under Article 9 of the SDI Act in that same submission.
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.
Petitioner concurs with the Department's decisions on this issue in
these reviews and in prior segments of the proceedings.
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 Order, 59 FR 58814, November 15, 1994). In these
reviews, no new facts or evidence have
[[Page 18753]]
been presented which would lead us to question that determination. We
address respondents' arguments in favor of making a POR-specific
determination and the relevance of the information submitted for
consideration below.
POR-Specific Determinations Re: De Facto Specificity
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.) 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, 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
investigation or review of different products (e.g., an investigation
of carbon black from Mexico as opposed to an investigation of 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.
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.
Relevance Of Submitted Information
As stated in the preceding section, the proper time period for a
specificity determination is the time of bestowal. Therefore,
information submitted by the GOQ on assistance provided subsequent to
the time of bestowal of the assistance granted to NHCI under Article 7
of the SDI Act is not relevant to the specificity determination. The
remaining information presented by the GOQ on the Article 7 assistance
granted prior to and including the time of bestowal of NHCI's Article 7
benefits is nearly identical to that utilized by the Department in its
original specificity determination. Differences between the updated
information on Article 7 provided by the GOQ and information used in
the original specificity determination are sufficiently small so as not
to compromise the original specificity determination.
As for the GOQ's argument that assistance under Article 9 should
also be included in the specificity analysis, we note that the GOQ
neither alleged that Articles 7 and 9 are integrally linked nor
provided information which would allow us to make a determination on
integral linkage. Information on the record in these proceedings with
respect to Article 9 consists only of the following statement by the
GOQ in its original response to the questionnaire:
Article 7 replaced Article 9 of the SDI Act in 1986. Article 9
operated almost identically to Article 7. Article 9 assistance, like
Article 7, required authorization by the Gouvernement du Quebec.
In order for the Department to treat two programs as one for purposes
of its specificity analysis, it must be demonstrated that the two
programs are integrally linked. When examining the issue of integral
linkage, it has been the Department's practice to examine, among other
things, the administration of the programs, evidence of a government
policy to treat industries equally, the purposes of the programs as
stated in their enabling legislation and the manner of funding the
program (see Final Negative Countervailing Duty Determination and Final
Negative Critical Circumstances Determination: Certain Laminated
Hardwood Trailer Flooring From Canada 62 FR 5201, 5210 (February 4,
1997)). As can be seen from the foregoing, the GOQ has failed to
provide any evidence supporting its implicit claim that Articles 7 and
9 should be treated as one program. Since Articles 7 and 9 are separate
programs, information submitted on Article 9 assistance does not call
into question the original specificity determination regarding Article
7.
Based on all of the arguments above, 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: Appropriate Denominator
Respondents state that in the Preliminary Results the Department
deviated from its standard practice in determining the denominator for
companies with multinational production facilities that fail to rebut
the presumption that subsidies are domestically tied. In particular,
respondents argue that it is the Department's policy to tie such
subsidies to domestic operations, by allocating benefits to sales by
the domestic company regardless of country of manufacture, as opposed
to tying to domestic production, as was done in the Preliminary
Results. Respondents additionally state that the Department both failed
to explain its basis for presuming that the subsidies were tied to
Canadian production and to respond to NHCI's arguments in favor of
allocating the subsidies over sales by NHCI of subject merchandise
regardless of country of manufacture. In so doing,
[[Page 18754]]
respondents claim the Department denied NHCI due process by preventing
it from rebutting the presumption and from responding to the rationale
the Department used to support its decision to tie the subsidies to
domestic production. In support of their assertion that the subsidies
NHCI received are tied to its domestic operations, respondents state
that any funds received benefited all employment-related activities in
Canada (e.g., sales of all products) and that these activities are
related to both domestic and foreign production. Respondents elaborate
further that the denominator policy used by the Department in this case
is a deviation from the fungibility of money principle.
Respondents also cite British Steel plc v. United States (British
Steel) (479 F. Supp. 1254, 1371) in which the Court reversed and
remanded the Department's determinations because it found that the
Department should have given plaintiffs due notice of its decision to
apply the rebuttable presumption that the subsidies at issue were tied
to domestic production in order to allow plaintiffs the opportunity to
rebut the Department's presumption.
Petitioner agrees with the Department's decisions and analyses of
this issue in these reviews and in prior segments of these proceedings.
DOC Response:
Respondents cite British Steel in an attempt to imply that the
Department must inform parties early during the course of each
proceeding of its intent to use the rebuttable presumption that
subsidies to companies with foreign manufacturing operations are tied
to domestic production. However, the facts involved in British Steel
are readily distinguishable. Therefore, the holding in that case does
not apply to the present situation.
In British Steel, the Court was examining the Department's policy
of using the rebuttable presumption articulated in the GIA. In
particular, the Court took issue with the introduction of the new
policy in the final-determination stage of the investigation, because
the timing prevented parties from both commenting on the methodology
and from presenting evidence rebutting the presumption. It is important
to note that the Department's remand determination, as affirmed by the
Court, upheld the appropriateness of using the rebuttable presumption.
The Department has continued to use the rebuttal presumption and this
policy has become accepted Department practice. Unlike British Steel,
we are not dealing with the introduction of a new policy late into the
course of a proceeding in this case. Therefore, the Department was not
required to forewarn respondents of the use of the rebuttable
presumption.
We also note that the use of a denominator based only on
domestically produced merchandise did not come as a surprise to
respondents. To begin, in the original investigations of these cases
(which pre-dated the rebuttable presumption) the Department used a
denominator based only on sales of domestically produced merchandise
(Final Affirmative Countervailing Duty Determinations: Pure Magnesium
and Alloy Magnesium From Canada, 57 FR 30946 (July 13, 1992)). Since
the investigations in these cases, there has been a changed
circumstances review (57 FR 54047 (November 16, 1992)) and a Binational
Panel proceeding. In all of the proceedings, the denominators have
included only domestically produced merchandise and in no case have
respondents objected to those denominators. In addition, the
questionnaire for these reviews requested information on sales
denominators based on domestically produced merchandise. NHCI provided
the requested sales denominator information along with denominators
based on total sales by NHCI and arguments why those based on total
sales should be used. Moreover, sales of domestically produced
merchandise were used as the denominator in the Preliminary Results. As
can be seen from the foregoing, respondents were aware as to the
possible use of a denominator based on domestically produced
merchandise and did indeed have an opportunity to attempt to rebut the
presumption.
Respondents also argue that the Department must explain the basis
of its presumption. However, the idea behind the use of a rebuttable
presumption is that the fact presumed--in this case that subsidies
bestowed on companies with foreign manufacturing operations are tied to
domestic production--becomes the default position and does not have to
be explained in each case. As the Department stated in the GIA, ``Thus,
under the Department's refined ``tied'' analysis, the Department will
begin by presuming that a subsidy provided by the government of the
country under investigation is tied to domestic production'' (GIA at
37231). It follows that the Department will find that subsidies are
tied to domestic production in the absence of evidence to the contrary.
As for respondents' complaint that the Department failed to address
its arguments that the subsidies received by NHCI benefited all of the
company's operations, not just its manufacturing activities, we note
that in the GIA it states, ``A party may rebut this presumption by
presenting evidence tending to show that the subsidy was not tied to
domestic production . . .'' The phrase, ``tending to show'' means that
the party attempting to rebut the presumption must provide enough
evidence to convince a reasonable fact-finder of the non-existence of
the presumed fact--that subsidies are tied to the recipient firm's
domestic production (Results of Redetermination Pursuant to Court
Remand on General Issue of Sales Denominator: British Steel plc v.
United States, Consol. Ct. No. 93-09-00550-CVD, Slip Op. 95-17 and
Order (CIT Feb. 9, 1995) at 17). The mere absence of evidence limiting
the government's intended scope of the benefit to domestic production
is not sufficient. In this case, respondents' arguments have not risen
to the level of evidence that would convince us that the GOQ intended
that the subsidies it bestowed on NHCI were to benefit more than just
domestic production. Therefore, respondents have failed to rebut the
presumption that the subsidies received by NHCI were tied to domestic
production.
The Department's methodology for determining what to include in the
denominator when a company has foreign manufacturing operations is
explained in the GIA: ``If we determine that the subsidy is tied to
domestic production, we will allocate the benefit of the subsidy fully
to sales of domestically produced merchandise'' [emphasis added] (GIA
at 37231). This quotation makes it clear that sales of foreign-produced
merchandise by a respondent company would not be included in the
denominator. Even if we were to consider tying the subsidies at issue
to domestic operations, using respondents' suggestion of a sales
denominator based on total NHCI sales would be improper since such a
figure would include sales of foreign-produced merchandise by NHCI and,
therefore, value-added from operations in other countries. Based on the
foregoing arguments, we have continued to allocate subsidies received
by NHCI to the company's merchandise produced in Canada.
Final Results of Review
In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an
individual subsidy rate for each producer/exporter subject to these
administrative reviews. For the period January 1, 1994 through December
31, 1994, we determine the net subsidy for
[[Page 18755]]
NHCI to be 4.48 percent ad valorem. This rate adjusts the rate of 4.01
percent found in the Preliminary Results to a f.o.b. basis (see the GIA
at 37237). We will instruct the U.S. Customs Service to assess
countervailing duties as indicated above. The Department will also
instruct Customs to collect cash deposits of estimated countervailing
duties in the percentages detailed above of the f.o.b. invoice price on
all shipments of subject merchandise from reviewed companies, except
from Timminco Limited (which was excluded from the order in the
original investigations), entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of
these reviews.
Because the URAA 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, 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 Sec. 777A(e)(2)(B) of the Act. The requested review
will normally cover only those companies specifically named. See 19 CFR
355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a
review was not requested, duties must be assessed at the cash deposit
rate, and cash deposits must continue to be collected at the rate
previously ordered. As such 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)). Therefore, the
cash deposit rates for all companies except those covered by these
reviews will be unchanged by the results of these reviews.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company, except from Timminco Limited
(which was excluded from the order in the original investigations).
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by these orders are those established in the
most recently completed administrative proceeding, conducted pursuant
to the statutory provisions that were in effect prior to the URAA
amendments. See Pure and Alloy Magnesium from Canada: Final Results of
the First (1992) Countervailing Duty Administrative Reviews (62 FR
13857 (March 24, 1997)). These rates shall apply to all non-reviewed
companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1994 through December
1994, 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 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)).
Dated: April 7, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration (Acting).
[FR Doc. 97-9962 Filed 4-16-97; 8:45 am]
BILLING CODE 3510-DS-P