[Federal Register Volume 66, Number 83 (Monday, April 30, 2001)]
[Notices]
[Pages 21332-21335]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-10687]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-839]


Notice of Initiation of Countervailing Duty Investigation: 
Certain Softwood Lumber Products from Canada

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

EFFECTIVE DATE: April 30, 2001.

FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds at (202) 
482-6071 or James Terpstra at (202) 482-3965, Office of AD/CVD 
Enforcement VI, Group II, Import Administration, International Trade 
Administration, U.S. Department of Commerce, Room 1870, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.

Initiation of Investigation

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions effective January 1, 1995, the effective 
date of the amendments made to the Tariff Act of 1930 (the Act) by the 
Uruguay Round Agreements Act (URAA). In addition, unless otherwise 
indicated, all citations to the Department of Commerce (the Department) 
regulations are references to the provisions codified at 19 CFR part 
351 (2001).

The Petition

    On April 2, 2001, the Department received a petition filed in 
proper form by the Coalition for Fair Lumber Imports Executive 
Committee,\1\ the United Brotherhood of Carpenters and Joiners, and the 
Paper, Allied-Industrial, Chemical and Energy Workers International 
Union (collectively, the petitioners). On April 20, 2001, the petition 
was amended to include the following four companies individually as 
petitioners: Moose River Lumber Co., Shearer Lumber Products, Shuqualak 
Lumber Co. and Tolleson Lumber Co., Inc. The Department received 
information supplementing the petition during the twenty-day initiation 
period. In accordance with section 702(b) of the Act, petitioners 
allege that Canadian producers of softwood lumber products received 
countervailable subsidies within the meaning of section 701 of the Act, 
and that such imports are materially injuring an industry in the United 
States.
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    \1\ The Coalition for Fair Lumber Imports Executive Committee is 
comprised of Hood Industries, International Paper Company, Moose 
River Lumber Company, New South Incorporated, Plum Creek Timber 
Company, Polatch Corporation, Seneca Sawmill Company, Shearer Lumber 
Products, Shuqualak Lumber Company, Sierra Pacific Industries, Swift 
Lumber Incorporated, Temple-Inland Forest Products, and Tolleson 
Lumber Company, Incorporated.
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    The Department finds that the petitioners have standing to file 
this petition on behalf of the domestic industry because they are 
interested parties as defined in sections 771(9)(C), (D) and (E) of the 
Act and have demonstrated sufficient industry support with respect to 
the countervailing duty investigation that they are requesting the 
Department to initiate. See Determination of Industry Support for 
the Petition, below.

Scope of Investigation

    The products covered by this investigation are softwood lumber, 
flooring and siding (softwood lumber products). Softwood lumber 
products include all products classified under headings 4407.1000, 
4409.1010, 4409.1090, and 4409.1020, respectively, of the Harmonized 
Tariff Schedule of the United States (HTSUS), and any softwood lumber, 
flooring and siding described below. These softwood lumber products 
include:
    (1) Coniferous wood, sawn or chipped lengthwise, sliced or peeled, 
whether or not planed, sanded or finger-jointed, of a thickness 
exceeding six millimeters;
    (2) Coniferous wood siding (including strips and friezes for 
parquet flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces, whether or not planed, sanded or 
finger-jointed;
    (3) Other coniferous wood (including strips and friezes for parquet 
flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces (other than wood mouldings and wood 
dowel rods) whether or not planed, sanded or finger-jointed; and
    (4) Coniferous wood flooring (including strips and friezes for 
parquet flooring, not assembled) continuously shaped (tongued, grooved, 
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like) 
along any of its edges or faces, whether or not planed, sanded or 
finger-jointed.
    Although the HTSUS subheadings are provided for convenience and 
U.S. Customs purposes, the written description of the merchandise under 
investigation is dispositive.
    During our review of the petition, we discussed the scope with the 
petitioners to ensure that it accurately reflects the products for 
which the domestic industry is seeking relief. Moreover, as discussed 
in the preamble to the Department's regulations (62 FR 27323), we are 
setting aside a period for parties to raise issues regarding product 
coverage. The Department encourages all interested parties to submit 
such comments within twenty days after the date of publication of this 
notice in the Federal Register. Comments should be addressed to 
Import Administration's Central Records Unit at Room 1870, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. The period for scope comments is intended to 
provide the Department with ample opportunity to consider all comments 
and consult with parties prior to the issuance of the preliminary 
determination.

[[Page 21333]]

Consultations

    Pursuant to section 702(b)(4)(A)(ii) of the Act, the Department 
invited representatives of the Government of Canada (GOC) for 
consultations with respect to the countervailing duty investigation. 
The Department held consultations with representatives of the GOC on 
April 18, 2001. See the April 19, 2001, memorandum to the file 
regarding these consultations (public documents on file in the Central 
Records Unit (CRU) of the Department of Commerce, Room B-099). In 
addition, on April 19 and 20, 2001, the Government of Canada submitted 
additional written comments pursuant to the consultations.

Determination of Industry Support for the Petition

    Section 771(4)(A) of the Act defines the ``industry'' as the 
producers of a domestic like product. Thus, when determining the degree 
of industry support, the statute directs the Department to look to 
producers and workers who produce the domestic like product. The 
International Trade Commission (ITC), which is responsible for 
determining whether ``the domestic industry'' has been injured, must 
also determine what constitutes a domestic like product in order to 
define the industry. While both the Department and the ITC must apply 
the same statutory definition regarding the domestic like product 
(section 771(10) of the Act), they do so for different purposes and 
pursuant to separate and distinct authority. In addition, the 
Department's determination is subject to limitations of time and 
information. Although this may result in different definitions of the 
like product, such differences do not render the decision of either 
agency contrary to the law.\2\
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    \2\ See Algoma Steel Corp. Ltd., v. United States, 688 
F. Supp. 639, 642-44 (CIT 1988); High Information Content Flat 
Panel Displays and Display Glass from Japan: Final Determination; 
Rescission of Investigation and Partial Dismissal of Petition, 
56 FR 32376, 32380-81 (July 16, 1991).
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    Section 771(10) of the Act defines the domestic like product as ``a 
product which is like, or in the absence of like, most similar in 
characteristics and uses with, the article subject to an investigation 
under this subtitle.'' Thus, the reference point from which the 
domestic like product analysis begins is ``the article subject to an 
investigation,'' i.e., the class or kind of merchandise to be 
investigated, which normally will be the scope as defined in the 
petition.
    The petition covers softwood lumber as defined in the Scope of 
Investigation section, above, a single class or kind of 
merchandise. The petitioners define the domestic like product as the 
class or kind of merchandise covered by the scope of the investigation. 
The Department has no basis on the record to find the petitioners' 
definition of the domestic like product to be inaccurate.
    The Department, therefore, has adopted the domestic like product 
definition set forth in the petition.
    Section 702(b)(1) of the Act requires that a petition be filed on 
behalf of the domestic industry. Section 702(c)(4)(A) of the Act 
provides that a petition meets this requirement 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. Finally, section 702(c)(4)(D) of the Act 
provides that if the petition does not establish support of domestic 
producers or workers accounting for more than 50 percent of the total 
production of the domestic like product, the administering agency 
shall: (i) Poll the industry or rely on other information in order to 
determine if there is support for the petition as required by 
subparagraph (A), or (ii) determine industry support using a 
statistically valid sampling method.
    In this case, the Department has determined that the petition (and 
subsequent amendments) contain adequate evidence of industry support; 
therefore, polling is unnecessary. See Attachment I to 
Initiation of Countervailing Duty Investigation: Certain Softwood 
Lumber Products from Canada (April 23, 2001) (Initiation 
Checklist), a public document on file in the CRU. To estimate total 
domestic production of softwood lumber products, the petitioners relied 
on year 2000 production figures published by the American Forest and 
Paper Association (AF&PA). The petitioners also made an upward 
adjustment to this figure to account, conservatively, for flooring and 
siding that may or may not otherwise be included in the AF&PA total 
production figure, but which is included in the definition of domestic 
like product. In a letter dated April 20, 2001, the Government of 
Canada attempted to show that this upward adjustment to the year 2000 
total production figure was inadequate, and argued that numerous other 
product categories should also be added to the total production figure. 
We analyzed the claim made by the Government of Canada and have 
concluded that it would result in significant double-counting. Further, 
we have found no other evidence through independent research that would 
indicate that the petitioners' figure for total U.S. production is in 
any way understated. We therefore conclude that 67 percent of the U.S. 
softwood lumber-producing industry supports the petition. Because the 
petition has support from more than 50 percent of the entire domestic 
industry, we are not required to consider any expression of opposition 
in our determination to initiate this investigation. Accordingly, the 
Department determines that this petition is filed on behalf of the 
domestic industry within the meaning of section 702(b)(1) of the Act.

Injury Test

    Because Canada is a ``Subsidies Agreement Country'' within the 
meaning of section 701(b) of the Act, section 701(a)(2) 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.

Allegations of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files, on 
behalf of an industry, a petition 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.
    We are initiating an investigation of the following programs 
alleged in the petition to have provided countervailable subsidies to 
producers and exporters of the subject merchandise in Canada (a full 
description of each program is provided in the Initiation 
Checklist):

A. Federal and Provincial Timber Management Systems

    This includes stumpage provided for less than adequate remuneration 
in the Provinces of British Columbia, Quebec, Ontario, Alberta, 
Manitoba, Saskatchewan, and the Yukon Territory and Northwest 
Territories. With respect to the Provinces of British Columbia, Quebec, 
Ontario, and Alberta, if we determine that cross-border is not an 
appropriate benchmark, we will also examine log export restrictions 
under the criteria of 771(5)(B). See Initiation Checklist.

[[Page 21334]]

B. Programs Administered by the Government of Canada

1. Non-Repayable Grants and Conditionally Repayable Contributions from 
the Department of Western Economic Diversification
2. Canadian Forest Service: Industry, Trade and Economics Program
3. Federal Economic Development Initiative in Northern Ontario

C. Programs Administered by the Province of British Columbia

1. Grants, Loans and Loan Guarantees Provided from Forest Renewal B.C.
2. Job Protection Act
3. Subsidies to Skeena Cellulose Inc.

D. Programs Administered by the Province of Quebec

1. Societe de Recuperation, d'Exploitation et Developpement Forestiers 
du Quebec (REXFOR)
2. Assistance under Article 7 of the Societe de Developpement 
Industriel du Quebec (SDI)
3. Export Assistance under SDI
4. Export Assistance from Investissement Quebec
5. Redemption by Tembec, Inc. of Preferred Stock Held by SDI
6. Private Forest Development Program
7. Funds to Create Jobs in Forest Industry under Budget of Quebec

E. Programs Administered by the Province of Ontario

1. Development Corporations of the Government of Ontario: Export 
Support Loan Program
2. Sales Tax Exemption for Seedlings

F. Program Administered by the Province of Alberta

1. Loan Guarantees to Attract New Mills
    We are not initiating an investigation of the following programs 
alleged in the petition to have provided countervailable subsidies to 
producers and exporters of the subject merchandise in Canada (a full 
description of each program and the reason for not initiating an 
investigation of the program is provided in the Initiation 
Checklist):

A. Programs Administered by the Government of Canada

1. Loan Gurantees, Loan Insurance and Credit Insurance from the 
Department of Western Economic Diversification
2. Northern Ontario Business Development Loan Fund for Small to Medium 
Sized Businesses
3. Logging Tax Deduction

B. Programs Administered by the Province of British Columbia

1. B.C. Rail Volume Incentive Program for Lumber
2. Forest Science Program
3. Identified Wildlife Management Strategy and Landscape Unit Planning
4. B.C. Council of Forest Industries Marketing Plan
5. Toleration of Timber Theft
6. Excessive Contract Payments to Producers from Forest Renewal B.C.

C. Programs Administered by the Province of Quebec

1. Small-Wood Subsidy
2. Timber Under-Scaling
3. Financing Assistance from Investissement Quebec
4. Preferential Loans to Tembec, Inc.
5. APEX Program
6. Refinancing of Domtar Inc: New Share Subscription by Crown 
Corporations
7. Refinancing of Domtar Inc: Conversion of SDI Loan into Preferred 
Shares

D. Programs Administered by the Province of Alberta

1. Industrial Electricity Rebate Program
2. Infrastructure Grants to Attract New Mills

Critical Circumstances

    In their submission, the petitioners claim that, following the 
March 31, 2001, expiration of the U.S.-Canada Softwood Lumber Agreement 
(SLA), there is a reasonable basis to believe or suspect that critical 
circumstances will exist with regard to imports of softwood lumber from 
Canada.
    Section 703(e)(1) of the Act states that the Department will find 
that critical circumstances exist, at any time after the date of 
initiation, when there is a reasonable basis to believe or suspect that 
under paragraph (A) the alleged countervailable subsidies are 
inconsistent with the Subsidies Agreement and that under paragraph (B) 
there have been massive imports of the subject merchandise over a 
relatively short period of time. Section 351.206(h) of our regulations 
defines ``massive imports'' as imports that have increased by at least 
by 15 percent over the imports during an immediately preceding period 
of comparable duration. Section 351.206(i) of the regulations states 
that ``relatively short period'' will normally be defined as the period 
beginning on the date the proceeding begins and ending at least three 
months later.
    In the petition, petitioners allege various export subsidy 
programs. We have initiated investigations on the following alleged 
export subsidy programs: (1) Export Assistance from the SDI, (2) Export 
Assistance from Investissement Quebec, and (3) the Development 
Corporations of the Government of Ontario Export Support Loan Program. 
Petitioners have alleged that these programs are inconsistent with the 
Subsidies Agreement.
    The petitioners request that the Department immediately begin 
reviewing import data of the subject merchandise and that the 
Department request the U.S. Customs Service to compile information on 
an expedited basis regarding entries of subject merchandise. We note 
that section 702(e) of the Act states that when there is a reasonable 
basis to believe or suspect that the alleged countervailable subsidies 
are inconsistent with the Subsidies Agreement, the Department may 
request the Commissioner of Customs to compile information on an 
expedited basis regarding entries of the subject merchandise.
    Taking into consideration the foregoing, we will analyze this 
matter further and continue to monitor imports of softwood lumber from 
Canada. If at any time, the criteria for a finding of critical 
circumstances are established, we will issue a critical circumstances 
finding at the earliest possible date. See Policy Bulletin 98/4, 
63 FR 55364, (October 15, 1998) (determination of critical 
circumstances may be made any time after initiation).

Allegations and Evidence of Material Injury and Causation

    The petitioners allege that the U.S. industry producing the 
domestic like product is being materially injured, or is threatened 
with material injury, by reason of the subsidization of individual and 
cumulated imports of the subject merchandise. Petitioners contend that 
the industry's injured condition is evident in the declining trends in 
net operating profits, net sales volumes, profit-to-sales ratios, and 
capacity utilization. The allegations of injury and causation are 
supported by relevant evidence including U.S. Customs import data, lost 
sales, and pricing information. We have assessed the allegations and 
supporting evidence regarding material injury and causation, and have 
determined that these allegations are properly supported by accurate 
and adequate evidence and meet the statutory requirements for 
initiation. See Attachment II of the Initiation Checklist.

Initiation of Countervailing Duty Investigation

    The Department has examined the countervailing duty petition on 
certain softwood lumber products from Canada, and found that it 
complies with the requirements of section 702(b) of the Act. Therefore, 
in accordance with

[[Page 21335]]

section 702(b) of the Act, we are initiating a countervailing duty 
investigation to determine whether manufacturers, producers, or 
exporters of certain softwood lumber products from Canada receive 
countervailable subsidies.

Exclusion Requests

    Due to the extraordinarily large number of Canadian producers, the 
Department anticipates that it will conduct this countervailing duty 
investigation on an aggregate basis consistent with section 
777A(e)(2)(B) of the Act. If so, the Department expects that it will 
receive numerous requests for exclusions during the course of this 
investigation. In light of petitioners' allegation that 75 percent of 
timber harvest in the Maritime Provinces are from private lands, we 
anticipate a particularly large percentage of exclusion requests from 
the Maritimes. The circumstances that warranted a general exclusion for 
the Maritimes in the past are not present in this case. Therefore, the 
Department anticipates creating a system that will allow us to 
expeditiously process and rule on these exclusion requests without 
compromising the integrity of the CVD law, while, at the same time, 
ensuring fairness and transparency in the treatment of the exclusion 
requests. We will seek the cooperation of the Government of Canada and 
the provincial governments in Canada in implementing any such system, 
which could involve, for example, province and/or company 
certifications. Comments on this issue should be submitted to the 
Department within 15 days of the publication of this notice in the 
Federal Register. Comments should be addressed to Import 
Administration's Central Records Unit at Room 1870, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230.

Distribution of Copies of the Petitions

    In accordance with section 702(b)(3)(A) of the Act, a copy of the 
public version of the petition has been provided to the representatives 
of the GOC.

ITC Notification

    We have notified the ITC of our initiation, as required by section 
702(d) of the Act.

Preliminary Determination by the ITC

    The ITC will determine, no later than May 17, 2001, whether there 
is a reasonable indication that imports of certain softwood lumber 
products from Canada are causing material injury, or threatening to 
cause material injury, to a U.S. industry. A negative ITC determination 
will result in the investigation being terminated; otherwise, the 
investigation will proceed according to statutory and regulatory time 
limits.
    This notice is published pursuant to section 777(i) of the Act. 
Effective January 20, 2001, Bernard T. Carreau is fulfilling the duties 
of the Assistant Secretary for Import Administration.

    Dated: April 23, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary, Import Administration.
[FR Doc. 01-10687 Filed 4-27-01; 8:45 am]
BILLING CODE 3510-DS-P