[Federal Register Volume 68, Number 18 (Tuesday, January 28, 2003)]
[Notices]
[Pages 4175-4178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1898]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-815]


Alloy Magnesium from Canada: Preliminary Results of 
Countervailing Duty New Shipper Review

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

ACTION: Notice of Preliminary Results of Countervailing Duty New 
Shipper Review.

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SUMMARY: In response to a request from Magnola Metallurgy, Inc., the 
Department of Commerce is conducting a new shipper review of the 
countervailing duty order on alloy magnesium from Canada for the period 
January 1, 2001 through December 31, 2001. In these preliminary 
results, we find that Magnola Metallurgy, Inc. received countervailable 
subsidies during the period of review. The ad valorem rate is shown in 
the ``Preliminary Results of Review'' section of this notice. If these 
preliminary results are adopted in our final results, we will instruct 
the Customs Service to assess countervailing duties.
    Interested parties are invited to comment on these preliminary 
results (see the Public Comment section of this notice).

EFFECTIVE DATE: January 28, 2003.

FOR FURTHER INFORMATION CONTACT: Melanie Brown, Office 1, Group 1, 
Import Administration, International Trade Administration, U.S. 
Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington DC 20230; telephone (202) 482-4987.

SUPPLEMENTARY INFORMATION:

Background

    On August 31, 1992, the Department of Commerce (``Department'') 
published in the Federal Register the countervailing duty orders on 
pure magnesium and alloy magnesium from Canada. See Final Affirmative 
Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium 
from Canada, 57 FR 39392 (July 13, 1992) (``Investigation Final''). On 
February 28, 2002, the Department received a timely request for a new 
shipper review from Magnola Metallurgy, Inc. (``Magnola'') pursuant to 
19 CFR 351.214(d). On March 27, 2002, the Department initiated the new 
shipper review for the period January 1, 2001 through December 31, 
2001. See Pure and Alloy Magnesium From Canada: Notice of Initiation of 
New Shipper Countervailing Review, 67 FR 15794 (April 3, 2002). On May 
8, 2002, U.S. Magnesium,\1\ (``the petitioner'') submitted allegations 
of countervailable subsidies received by Magnola. Magnola commented on 
these allegations on May 15, 2002.
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    \1\ The original petition was filed by Magnesium Corporation of 
America, (``Magcorp''). On July 31, 2002, the petitioner informed 
the Department that Magcorp had been sold to U.S Magnesium.
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    On July 10, 2002, the Department issued its initial countervailing 
questionnaires to Magnola, the Government of Qu[eacute]bec (``GOQ''), 
and the Government of Canada (``GOC''). We received questionnaire 
responses form the GOQ and the GOC on August 15, 2002, and from Magnola 
on August 16, 2002. Subsequent to the receipt of the initial 
questionnaire responses, we issued supplemental questionnaires, 
received comments from the petitioners, and received supplemental 
questionnaire responses from the GOQ, the GOC, and Magnola.
    On September 13, 2002, the Department found that because of the 
complexity of the issues involved in this case it was not practicable 
to complete the review in the time allotted. Therefore, we published an 
extension of the time limit for the completion of the preliminary 
results of this review to no later than January 21, 2003, in accordance 
with section 751(a)(2)(B) of the Act and 19 CFR 351.214(h)(2). We also 
rescinded the review with respect to pure magnesium because Magnola's 
request for the new shipper review was for Magnola's sales of alloy 
magnesium from Canada only. See Alloy Magnesium from Canada: Extension 
of Time Limit for the Preliminary Results of the Countervailing Duty 
New Shipper Review and Pure Magnesium from Canada; Rescission of 
Countervailing Duty New Shipper Review, 67 FR 50819 (September 13, 
2002).

New Subsidy Allegation

    On August 9, 2002, the petitioner submitted a new subsidy 
allegation and documentation supporting the allegation. On August 19 
and September 3, 2002, Magnola submitted comments objecting to the 
consideration of new subsidies. We considered the information on the 
record and initiated an investigation on one additional program 
allegedly operated by the GOQ: Emploi-Qu[eacute]bec Manpower Training 
Mandate (``MTM''). For more information, see the memorandum to Richard 
Moreland, Deputy Assistant Secretary entitled, ``New Subsidy

[[Page 4176]]

Allegation - Canadian Magnesium New Shipper Review,'' dated September 
6, 2002, which is on file in the Commerce Department's Central Records 
Unit in Room B-099 of the main Commerce Department Building (``CRU'').

Scope of the Review

    The products covered by this review are shipments of alloy 
magnesium from Canada. 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. The alloy magnesium subject to review is currently 
classifiable under item 8104.19.0000 of the Harmonized Tariff Schedule 
of the United States (``HTSUS''). Although the HTSUS subheading is 
provided for convenience and customs purposes, the written description 
of the merchandise subject to the order is dispositive.
    Secondary and granular magnesium are not included in the scope of 
this order. Our reasons for excluding granular magnesium are summarized 
in Preliminary Determination of Sales at Less Than Fair Value: Pure and 
Alloy Magnesium From Canada, 57 FR 6094 (February 20, 1992).

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the average useful life 
(``AUL'') of the renewable physical assets used to produce the subject 
merchandise. Section 351.524(d)(2) of the regulations creates a 
rebuttable presumption that the AUL will be taken from the U.S. 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System (``the IRS Tables''). For magnesium, the IRS Tables prescribe an 
AUL of 14 years.
    In order to rebut the presumption in favor of the IRS Tables, the 
challenging party must show that the IRS Tables do not reasonably 
reflect the company-specific AUL or the country-wide AUL for the 
industry in question, and that the difference between the company-
specific or country-wide AUL and the IRS tables is significant. (See 19 
CFR 351.524(d)(2)(i).) For this difference tobe considered significant, 
it must be one year or greater. (See 19 CFR 351.524(d)(2)(ii).)
    Late in these proceedings, Magnola claimed a 28-year company-
specific AUL. The company was unable to provide historical or actual 
depreciation costs because it was still in its start-up phase and not 
yet operating at commercial levels. Instead, Magnola provided an AUL 
calculation based on a prediction of future depreciation expenses and 
asset values (based on pre-production costs) over a 40-year horizon. 
Therefore, we preliminarily find that Magnola has not satisfied the 
requirements of section 351.524(d)(2)(iii) of our regulations and has 
not demonstrated that its proposed company-specific AUL reflects actual 
depreciation expenses and asset values for magnesium. We therefore have 
allocated Magnola's non-recurring benefits over 14 years as prescribed 
in the IRS Tables.
    For non-recurring subsidies, we applied the ``0.5 percent expense 
test'' described in section 351.524(b)(2) of our regulations. In this 
test, we compare the amount of subsidies approved under a given program 
in a particular year to sales (total or export, as appropriate) in that 
year. If the amount of subsidies is less that 0.5 percent of sales, the 
benefits are expensed in their entirety in the year of receipt rather 
than allocated over the AUL period.

Discount Rates

    In accordance with section 351.524(d)(3) of the regulations, it is 
the Department's preference to use a company's long-term fixed-rate 
cost of borrowing in the same year a grant was approved as the discount 
rate. However, where a company does not have a loan that could be used 
as a discount rate, the Department's next preference is to use the 
average cost of long-term fixed-rate loans in the country in question.
    Magnola did not have long-term, fixed-rate, Canadian dollar loans 
or other debt obligations during 1998 or 2000, the years in which the 
MTM grants were approved. Therefore, we used the Canadian average rate 
of return on long-term commercial bonds as discount rates for the years 
1998 and 2000.

Analysis of Programs

I. Program Preliminarily Found to Confer Countervailable

[sbull] Subsidies Emploi-Qu[eacute]bec Manpower Training Mandate 
(``MTM'')
    Emploi-Qu[eacute]bec (``E-Q'') is a labor-focused government unit 
created under the laws of Qu[eacute]bec that administers the manpower 
and employment policies on behalf of Qu[eacute]bec's Ministry of 
Employment and Solidarity (Minist[egrave]re de L'Emploi et de la 
Solidarit[eacute] sociale). The goal of the E-Q is to improve and 
develop the labor market in the region of Qu[eacute]bec. To accomplish 
this goal, in 1998 the MTM program was established to provide financial 
support, in the form of grants, to companies with approved training 
programs. Up to 50 percent of a company's training expenses, normally 
over a period of 24-months, are reimbursed under the MTM program with 
funding from the Labor Market Development Fund (Fonds de 
d[eacute]veloppement du march[eacute] du travail) (``LMDF''), a central 
fund established by the Government of Qu[eacute]bec to finance the 
labor objectives of the E-Q. With the exception of government-
affiliated agencies, companies in all industries are eligible for these 
benefits.
    Under the MTM program, there are two funding levels under which 
companies may receive reimbursement of labor training expenses: small-
scale economic projects and major economic projects. Projects at both 
funding levels must satisfy the E-Q's five policy objectives of job 
preparation, job integration, job management, job stabilization, and 
job creation, before becoming eligible for reimbursement. Once the five 
objectives are met, companies are eligible to receive reimbursement of 
50 percent of their labor training expenses. Small-scale project 
recipients are eligible to receive a maximum reimbursement of $100,000.
    The $100,000 reimbursement limit does not apply to major economic 
projects. However, major economic projects are required to: 1) create 
either 50 jobs or 100 jobs in 24 months, depending on whether the 
company is a new company or a company that has been in operation; 2) 
have the approval of the Ministry's Commission des partenaires du 
marche du travail (``CPMT''); and 3) agree to close monitoring by the 
E-Q. The LMDF sets aside $40 million annually to finance major economic 
projects and while all industries are eligible to receive funding, 
priority is given to manufacturing sectors where exporting is a 
priority and to projects from the service, commerce and accommodation 
sectors, if they have the potential to attract an international 
clientele or foreign business to Qu[eacute]bec.
    In 1998, Magnola submitted a human resource development plan to the 
E-Q that described its new magnesium plant, the new technology it would 
be using and the training programs that Magnola needed to develop a 
sufficiently skilled workforce. Magnola met the criteria for 
eligibility as a major economic project. In 1998 and 2000, the E-Q 
approved grants to reimburse 50 percent of Magnola's training expenses.
    Because there are two funding levels in the MTM program, we are 
conducting an analysis to determine if the two levels are integrally 
linked and should be treated as one program. According to Sec.  
351.502(c) of the Department's

[[Page 4177]]

regulations, the Secretary may find two or more programs integrally 
linked if: 1) the subsidy programs have the same purpose, 2) the 
subsidy programs bestow the same type of benefit, 3) the subsidy 
programs confer similar levels of benefits on similarly situated firms, 
and 4) the subsidy programs were linked at inception.
    In the instant review we find that both the small-scale economic 
projects and the major economic projects were established under the MTM 
program to improve the labor conditions in Qu[eacute]bec and hence, 
have the same purpose. Second, the benefit bestowed at both funding 
levels is the same because at both funding levels recipients are 
reimbursed for 50 percent of training expenses in the form of grants. 
Moreover, at both funding levels, the projects confer similar levels of 
benefits on similarly situated firms because firms with similar levels 
of training expenses are treated equally. Finally, with respect to the 
fourth criteria, the two funding levels were linked at the inception of 
the MTM program. Based on the above, we find that the two funding 
levels of the MTM program meet the integral linkage requirements. 
Consequently, for purposes of this review, we find that the MTM program 
for small-scale economic projects and major economic projects are 
integrally linked and consider them to be a single program.
    We find that the MTM grants Magnola received in 1998 and 2000 
constitute countervailable subsidies within the meaning of section 
771(5) of the Act. We find a financial contribution under section 
771(5)(D)(i) because the grants are a direct transfer of funds from the 
GOQ that confer a financial benefit to Magnola in the amount of the 
grants. In order to determine whether the MTM program is de facto 
specific, we conducted a ``disproportionate benefit'' analysis on an 
industry-specific and on a company-specific basis according to section 
771(5A)(D)(iii)(III) of the Act. We reviewed the information available 
on the industry of recipients in the MTM program and compared the 
benefit amount received by the metals industry to the amounts received 
by all other recipient industries. We found that from 1998 through 
2001, the metals industry received a disproportionately large amount of 
MTM benefits compared to other industries.
    We then conducted a company-specific analysis by comparing the 
benefits received by Magnola to those received by other major economic 
project recipients, the only recipients for which we had company-
specific data. We found that from 1998 through 2001, Magnola received a 
disproportionately large amount of benefits compared to other major 
economic project recipients. While the company-specific analysis was 
based on major economic project recipients only, we note that based on 
the amount of funding received by small-scale project recipients, the 
inclusion of small scale projects would not have had a significant 
impact on our analysis. Taken together, these facts support a finding 
under section 771(5A)(D)(iii)(III) of the Act, that the MTM program 
assistance received by Magnola was disproportionate on an industry-
specific and company-specific basis.
    Concerning whether this program is an export subsidy, section 
771(5A) of the Act states that an export subsidy ``is a subsidy that 
is, in law or in fact, contingent upon export performance, alone or as 
one of two or more conditions.'' In this review, the petitioner alleged 
the MTM program is export specific, citing to language in the MTM 
regulations that state that funding for projects ``from the 
manufacturing sector, where production is mainly destined to export is 
given priority....''
    We reviewed this information with respect to section 771(5A)(B) of 
the Act and found that the MTM regulations do not meet the requirements 
of an export subsidy because MTM assistance was not contingent upon 
exportation. In this instance, we find that the term ``export'' used in 
the MTM regulations refers to exports outside the province of 
Qu[eacute]bec and not to exports outside Canada. Moreover, there is no 
evidence on the record to support the finding that eligibility for MTM 
assistance was contingent upon exportation, whether provincially or 
outside Canada. The fact that a subsidy is awarded to a company that 
exports does not, by itself, make the subsidy an export subsidy within 
the meaning of the Act. See Preliminary Negative Countervailing Duty 
Determination: Certain Laminated Hardwood Trailer Flooring from Canada, 
61 FR 59079 (November 20, 1996). Therefore, we preliminarily find that 
the MTM program is neither de facto nor de jureexport specific.
    In accordance with 19 CFR 351.524(c)(1) and (2), we have treated 
these grants as non-recurring subsidies because separate, project 
specific government approval was required to receive benefits, and 
funding for all projects under the MTM program was generally limited to 
24 months. To calculate the benefit, we performed the expense test, as 
explained in the AUL section above, and found that the benefits 
approved in each year were more than 0.5 percent of Magnola's total 
sales. Therefore, we allocated the benefits over time. We used the 
grant methodology described in section 351.524(d) of the regulations to 
calculate the amount of benefit allocable to the POR. We then divided 
the benefit in the POR by Magnola's sales in the POR.
    On this basis, we preliminarily find the net subsidy rate from the 
MTM program to be 7.00 percent ad valorem for Magnola.

II. Programs under which no benefit was received during the POR

[sbull] Federal Funding for a Feasibility Study under the Canada-Quebec 
Subsidiary Agreement on Industrial Development
    The Department examined this program in the original investigations 
of pure and alloy magnesium and found that the GOC-provided assistance 
conferred a countervailable benefit. (See Investigation Final). Magnola 
received repayable contributions in 1996 and 1997, which were repaid to 
the GOC in 1998, with interest. Therefore, since Magnola repaid the 
benefits received prior to the POR, and no new funds were received 
during the POR, we find there is no benefit from this program during 
the POR.

III. Programs Preliminarily Found To Be Not Used

    We examined the following programs and preliminarily find that 
Magnola did not apply for or receive benefits under these programs 
during the POR:
[sbull] St. Lawrence River Environment Technology Development Program
[sbull] Program for Export Market Development
[sbull] The Export Development Corporation
[sbull] Canada-Qu[eacute]bec Subsidiary Agreement on the Economic 
Development of the Regions of Qu[eacute]bec
[sbull] Opportunities to Stimulate Technology Programs
[sbull] Development Assistance Program
[sbull] Industrial Feasibility Study Assistance Program
[sbull] Export Promotion Assistance Program
[sbull] Creation of Scientific Jobs in Industries
[sbull] Business Investment Assistance Program
[sbull] Business Financing Program
[sbull] Research and Innovation Activities Program
[sbull] Export Assistance Program
[sbull] Energy Technologies Development Program
[sbull] Financial Assistance Program for Research Formation and for the 
Improvement of the Recycling Industry
[sbull] Transportation Research and Development Assistance Program

[[Page 4178]]

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated a subsidy 
rate for Magnola, the sole producer/exporter subject to this new 
shipper review. For the period January 1, 2001, through December 31, 
2001, we preliminarily find the net subsidy rate for Magnola to be 7.00 
percent ad valorem. We will disclose our calculations to the interested 
parties pursuant to section 351.224(b) of the regulations.
    Upon completion of this new shipper review, the Department will 
determine, and the Customs Service shall assess, countervailing duties 
on all appropriate entries. In accordance with 19 CFR 351.212(b)(2), we 
have calculated a company-specific assessment rate for merchandise 
subject to this review. The Department will issue appropriate 
assessment instructions directly to the Customs Service within 15 days 
of publication of the final results of review. If these preliminary 
results are adopted in the final results of review, we will direct the 
Customs Service to assess the resulting assessment rates against the 
entered customs values for the subject merchandise on each of the 
company's entries during the review period. The Department also intends 
to instruct Customs to collect cash deposits of estimated 
countervailing duties at the rate of 7.00 percent on the f.o.b. value 
of all shipments of the subject merchandise from Magnola entered, or 
withdrawn from warehouse, for consumption on or after the date of 
publication of the final results of this new shipper review.

Public Comment

    Interested parties may request a hearing within 30 days of the date 
of publication of this notice. Any hearing, if requested, will be held 
two days after the scheduled date for submission of rebuttal briefs 
(see below). Interested parties may submit written arguments in case 
briefs within 30 days of the date of publication of this notice. 
Rebuttal briefs, limited to issues raised in case briefs, may be filed 
no later than five days after the date of filing the case briefs. 
Parties who submit briefs in these proceedings should provide a summary 
of the arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited. Copies of case briefs and rebuttal briefs 
must be served on interested parties in accordance with 19 CFR 
351.303(f).
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 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, under 19 CFR 351.309(c)(1)(ii), are due.
    The Department will publish a notice of the final results of this 
new shipper review within 90 days of the publication of these 
preliminary results.
    This new shipper review and notice is in accordance with sections 
751(a)(2)(B)(iv)and 777(i) of the Act.

    Dated: January 21, 2003.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 03-1898 Filed 1-27-03; 8:45 am]
BILLING CODE 3510-DS-S