[Federal Register Volume 71, Number 112 (Monday, June 12, 2006)]
[Notices]
[Pages 33932-33961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5221]



[[Page 33931]]

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Part V





Department of Commerce





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International Trade Administration



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Notice of Preliminary Results and Extension of Final Result of 
Countervailing Duty Administrative Review: Certain Softwood Lumber 
Products From Canada; Notice

  Federal Register / Vol. 71, No. 112 / Monday, June 12, 2006 / 
Notices  

[[Page 33932]]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-839]


Notice of Preliminary Results and Extension of Final Result of 
Countervailing Duty Administrative Review: Certain Softwood Lumber 
Products From Canada

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

SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on certain 
softwood lumber products from Canada for the period April 1, 2004, 
through March 31, 2005. If the final results remain the same as these 
preliminary results of administrative review, we will instruct U.S. 
Customs and Border Protection (CBP) to assess countervailing duties as 
detailed in the ``Preliminary Results of Review'' section of this 
notice. Interested parties are invited to comment on these preliminary 
results. (See ``Public Comment'' section of this notice.)

DATES: Effective Date: June 12, 2006.

FOR FURTHER INFORMATION CONTACT: Stephanie Moore at (202) 482-3692, or 
Robert Copyak at (202) 482-2209, AD/CVD Operations, Office 3, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, Room 4012, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230.

SUPPLEMENTARY INFORMATION:

Background

    On May 22, 2002, the Department published in the Federal Register 
(67 FR 36070) the amended final affirmative countervailing duty (CVD) 
determination and CVD order on certain softwood lumber products from 
Canada (67 FR 37775, May 30, 2002). On May 2, 2005, the Department 
published a notice of opportunity to request an administrative review 
of this CVD order. See Antidumping or Countervailing Duty Order, 
Finding, or Suspended Investigation; Opportunity to Request 
Administrative Review, 70 FR 22631 (May 2, 2005).\1\ The Department 
received requests that it conduct an aggregate review from, among 
others, the Coalition for Fair Lumber Imports Executive Committee 
(petitioners) and the Government of Canada (GOC), as well as requests 
for review covering an estimated 256 individual companies.\2\ On June 
30, 2005, we initiated the review covering the period April 1, 2004, 
through March 31, 2005. See 70 FR 37749.
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    \1\ In the notice of opportunity to request an administrative 
review of this CVD order, we inadvertently listed an incorrect 
period of review. We corrected this error in a subsequent notice of 
opportunity to request an administrative review. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request Administrative Review, 70 FR 31422 (June 1, 
2005).
    \2\ Of these 256 company-specific requests, 145 were for zero/de 
minimis rate reviews under 19 CFR 351.213(k)(1).
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    On July 8, 2005, we determined to conduct this administrative 
review on an aggregate basis, consistent with section 777A(e)(2)(B) of 
the Tariff Act of 1930, as amended (the Act). See the memorandum to 
Joseph A. Spetrini, Acting Assistant Secretary for Import 
Administration, from Barbara E. Tillman, Acting Deputy Assistant 
Secretary for Import Administration, entitled, ``Methodology for 
Conducting the Review,'' dated July 8, 2005, which is a public document 
on file in the Central Records Unit (CRU) in room B-099 of the main 
Commerce building. The Department further determined that it was not 
practicable to conduct any form of company-specific review. Id.
    On July 11, 2005, we issued our initial questionnaire to the GOC as 
well as to the Provincial Governments of Alberta (GOA), British 
Columbia (GOBC), Manitoba (GOM), New Brunswick (GONB), Newfoundland 
(GON), Nova Scotia (GONS), Ontario (GOO), Prince Edward Island (GOPEI), 
Quebec (GOQ), and Saskatchewan (GOS).
    On August 31, 2005, we extended the period for completion of these 
preliminary results until May 31, 2006, pursuant to section 
751(a)(3)(A) of the Act. See Notice of Extension of Time Limit for 
Final Results of Countervailing Duty Administrative Review: Certain 
Softwood Lumber from Canada, 70 FR 51751 (August 31, 2005).
    On October 3, 2005, the GOC, GOA, GOBC, GOM, GONB, GON, GONS, GOO, 
GOPEI, GOQ, and GOS submitted their initial questionnaire responses. 
From January through May 2006, we issued a series of supplemental 
questionnaires to the Federal and Provincial Governments of Canada.
    Pursuant to 19 CFR 351.301, the deadline for interested parties to 
submit factual information is 140 days after the last day of the 
anniversary month. However, both petitioners and the Canadian parties 
requested that the Department extend this due date. After a series of 
extensions, we established that the deadline for interested parties to 
submit factual information would be December 6, 2005, and that the due 
date for submitting rebuttal and/or clarifying information would be 
extended to December 22, 2005. Both petitioners and the Canadian 
parties submitted factual information by the established deadlines.

Extension of Final Results

    Extension of Time Limit for Final Results of Review Section 
751(a)(3)(A) of the Tariff Act of 1930, as amended (the Act), requires 
the Department to issue final results within 120 days after the date on 
which the preliminary determination is published. However, if it is not 
practicable to complete the final results of review within this time 
period, section 751(a)(3)(A) of the Act allows the Department to extend 
that 120-day period to 180 days. We determine that completion of the 
final results of the instant review within the 120-day period is not 
practicable as there are a large number of programs to be considered 
and analyzed by the Department. In order to complete our analysis, the 
Department required additional and/or clarifying information after the 
publication of the preliminary results, and now needs time to review 
the responses to these requests as well. Given the complexity of these 
issues, and in accordance with section 751(a)(3)(A) of the Act, we are 
extending the time period for issuing the preliminary results of 
reviews by 60 days to 180 days. Thus, the final results of review are 
due on or about December 4, 2006, which is the next business day after 
180 days from the publication date of the preliminary results.

Period of Review

    The period of review (POR) for which we are measuring subsidies is 
April 1, 2004, through March 31, 2005.

Scope of the Review

    The products covered by this order are softwood lumber, flooring 
and siding (softwood lumber products). Softwood lumber products include 
all products classified under sub-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

[[Page 33933]]

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 moldings 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 
subject to this order is dispositive.
    As specifically stated in the Issues and Decision Memorandum 
accompanying the Notice of Final Determination of Sales at Less Than 
Fair Value: Certain Softwood Lumber Products from Canada, 67 FR 15539 
(April 2, 2002) (see comment 53, item D, page 116, and comment 57, item 
B-7, page 126), available at http://www.ia.ita.doc.gov, drilled and 
notched lumber and angle cut lumber are covered by the scope of this 
order.
    The following softwood lumber products are excluded from the scope 
of this order provided they meet the specified requirements detailed 
below:
    (1) Stringers (pallet components used for runners): if they have at 
least two notches on the side, positioned at equal distance from the 
center, to properly accommodate forklift blades, properly classified 
under HTSUS 4421.90.98.40.
    (2) Box-spring frame kits: if they contain the following wooden 
pieces--two side rails, two end (or top) rails and varying numbers of 
slats. The side rails and the end rails should be radius-cut at both 
ends. The kits should be individually packaged, they should contain the 
exact number of wooden components needed to make a particular box 
spring frame, with no further processing required. None of the 
components exceeds 1'' in actual thickness or 83'' in length.
    (3) Radius-cut box-spring-frame components, not exceeding 1'' in 
actual thickness or 83'' in length, ready for assembly without further 
processing. The radius cuts must be present on both ends of the boards 
and must be substantial cuts so as to completely round one corner.
    (4) Fence pickets requiring no further processing and properly 
classified under HTSUS 4421.90.70, 1'' or less in actual thickness, up 
to 8'' wide, 6' or less in length, and have finials or decorative 
cuttings that clearly identify them as fence pickets. In the case of 
dog-eared fence pickets, the corners of the boards should be cut off so 
as to remove pieces of wood in the shape of isosceles right angle 
triangles with sides measuring \3/4\ inch or more.
    (5) U.S. origin lumber shipped to Canada for minor processing and 
imported into the United States, is excluded from the scope of this 
order if the following conditions are met: (1) The processing occurring 
in Canada is limited to kiln-drying, planing to create smooth-to-size 
board, and sanding, and (2) if the importer establishes to the 
satisfaction of CBP that the lumber is of U.S. origin.
    (6) Softwood lumber products contained in single family home 
packages or kits,\3\ regardless of tariff classification, are excluded 
from the scope of this order if the importer certifies to items 6 A, B, 
C, D, and requirement 6 E is met:
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    \3\ To ensure administrability, we clarified the language of 
exclusion number 6 to require an importer certification and to 
permit single or multiple entries on multiple days as well as 
instructing importers to retain and make available for inspection 
specific documentation in support of each entry.
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    A. The imported home package or kit constitutes a full package of 
the number of wooden pieces specified in the plan, design or blueprint 
necessary to produce a home of at least 700 square feet produced to a 
specified plan, design or blueprint;
    B. The package or kit must contain all necessary internal and 
external doors and windows, nails, screws, glue, sub floor, sheathing, 
beams, posts, connectors, and if included in the purchase contract, 
decking, trim, drywall and roof shingles specified in the plan, design 
or blueprint.
    C. Prior to importation, the package or kit must be sold to a 
retailer of complete home packages or kits pursuant to a valid purchase 
contract referencing the particular home design plan or blueprint, and 
signed by a customer not affiliated with the importer;
    D. Softwood lumber products entered as part of a single family home 
package or kit, whether in a single entry or multiple entries on 
multiple days, will be used solely for the construction of the single 
family home specified by the home design matching the entry.
    E. For each entry, the following documentation must be retained by 
the importer and made available to CBP upon request:
    i. A copy of the appropriate home design, plan, or blueprint 
matching the entry;
    ii. A purchase contract from a retailer of home kits or packages 
signed by a customer not affiliated with the importer;
    iii. A listing of inventory of all parts of the package or kit 
being entered that conforms to the home design package being entered;
    iv. In the case of multiple shipments on the same contract, all 
items listed in E(iii) which are included in the present shipment shall 
be identified as well.
    Lumber products that CBP may classify as stringers, radius cut box-
spring-frame components, and fence pickets, not conforming to the above 
requirements, as well as truss components, pallet components, and door 
and window frame parts, are covered under the scope of this order and 
may be classified under HTSUS subheadings 4418.90.45.90, 4421.90.70.40, 
and 4421.90.97.40.
    Finally, as clarified throughout the course of the investigation, 
the following products, previously identified as Group A, remain 
outside the scope of this order. They are:
    1. Trusses and truss kits, properly classified under HTSUS 4418.90;
    2. I-joist beams;
    3. Assembled box spring frames;
    4. Pallets and pallet kits, properly classified under HTSUS 
4415.20;
    5. Garage doors;
    6. Edge-glued wood, properly classified under HTSUS item 
4421.90.98.40;
    7. Properly classified complete door frames;
    8. Properly classified complete window frames;
    9. Properly classified furniture.
    In addition, this scope language has been further clarified to now 
specify that all softwood lumber products entered from Canada claiming 
non-subject status based on U.S. country of origin will be treated as 
non-subject U.S.-origin merchandise under the CVD order, provided that 
these softwood lumber products meet the following condition: Upon 
entry, the importer, exporter, Canadian processor and/or original U.S. 
producer establish to CBP's satisfaction that the softwood lumber 
entered and documented as U.S.-origin softwood lumber was first 
produced in the United States as a lumber product satisfying the 
physical parameters of the

[[Page 33934]]

softwood lumber scope.\4\ The presumption of non-subject status can, 
however, be rebutted by evidence demonstrating that the merchandise was 
substantially transformed in Canada.
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    \4\ See the scope clarification message ( 3034202), 
dated February 3, 2003, to CBP, regarding treatment of U.S.-origin 
lumber on file in the CRU.
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    On March 3, 2006, the Department issued a scope ruling that any 
product entering under HTSUS 4409.10.05 which is continually shaped 
along its end and/or side edges which otherwise conforms to the written 
definition of the scope is within the scope of the order.\5\
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    \5\ See Memorandum from Constance Handley, Program Manager to 
Stephen J. Claeys, Deputy Assistant Secretary regarding Scope 
Request by the Petitioner Regarding Entries Made Under HTSUS 
4409.10.05, dated March 3, 2006.
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Subsidies Valuation Information

Allocation Period

    In the underlying investigation and pursuant to 19 CFR 
351.524(d)(2), the Department allocated, where applicable, all of the 
non-recurring subsidies provided to the producers/exporters of subject 
merchandise over a 10-year average useful life (AUL) of renewable 
physical assets for the industry concerned, as listed in the Internal 
Revenue Service's (IRS) 1977 Class Life Asset Depreciation Range 
System, as updated by the Department of the Treasury. See Notice of 
Preliminary Affirmative Countervailing Duty Determination, Preliminary 
Affirmative Critical Circumstances Determination, and Alignment of 
Final Countervailing Duty Determination With Final Antidumping 
Determination: Certain Softwood Lumber Products From Canada, 66 FR 
43186 (August 30, 2001) (Preliminary Determination); see also Notice of 
Final Affirmative Countervailing Duty Determination and Final Negative 
Critical Circumstances Determination: Certain Softwood Lumber Products 
From Canada, 67 FR 15545 (April 2, 2002) (Final Determination). No 
interested party challenged the 10-year AUL derived from the IRS 
tables. Thus, in this review, we have allocated, where applicable, all 
of the non-recurring subsidies provided to the producers/exporters of 
subject merchandise over a 10-year AUL.

Recurring and Non-Recurring Benefits

    The Department has previously determined that the sale of Crown 
timber by Canadian provinces confers countervailable benefits on the 
production and exportation of the subject merchandise under 
771(5)(E)(iv) of the Act because the stumpage fees at which the timber 
is sold are for less than adequate remuneration. See, e.g., ``Recurring 
and Non-Recurring Benefits'' section of the March 21, 2002, Issues and 
Decision Memorandum that accompanied the Final Determination (Final 
Determination Decision Memorandum); see also ``Recurring and Non-
Recurring Benefits'' section of the December 5, 2005, Issues and 
Decision Memorandum (Final Results of 2nd Review Decision Memorandum) 
that accompanied the Notice of Final Results of Countervailing Duty 
Administrative Review: Certain Softwood Lumber Products from Canada, 70 
FR 73448, (December 12, 2005) (Final Results of 2nd Review). For the 
reasons described in the program sections, below, the Department 
continues to find that Canadian provinces sell Crown timber for less 
than adequate remuneration to softwood lumber producers in Canada. 
Pursuant to 19 CFR 351.524(c)(1), subsidies conferred by the government 
provision of a good or service normally involve recurring benefits. 
Therefore, consistent with our regulations and past practice, benefits 
conferred by the provinces' administered Crown stumpage programs have, 
for purposes of these preliminary results, been expensed in the year of 
receipt.
    In this review the Department is also examining non-stumpage 
programs that involve the provision of grants to producers and 
exporters of subject merchandise. Under 19 CFR 351.524, benefits from 
grants can either be classified as providing recurring or non-recurring 
benefits. Recurring benefits are expensed in the year of receipt, while 
grants providing non-recurring benefits are allocated over time 
corresponding to the AUL of the industry under review. However, under 
19 CFR 351.524(b)(2), grants which provide non-recurring benefits will 
also be expensed in the year of receipt if the amount of the grant 
under the program is less than 0.5 percent of the relevant sales during 
the year in which the grant was approved (referred to as the 0.5 
percent test).

Benchmarks for Loans and Discount Rate

    In selecting benchmark interest rates for use in calculating the 
benefits conferred by the various loan programs under review, the 
Department's normal practice is to compare the amount paid by the 
borrower on the government-provided loans with the amount the firm 
would pay on a comparable commercial loan actually obtained on the 
market. See section 771(5)(E)(ii) of the Act; 19 CFR 351.505(a)(1) and 
(3)(i). However, because we are conducting this review on an aggregate 
basis and we are not examining individual companies, for those programs 
requiring a Canadian dollar-denominated, long-term benchmark interest 
rate, we used for these preliminary results the national average 
interest rates on commercial long-term Canadian dollar-denominated 
loans as reported by the GOC.
    The information submitted by the GOC was for fixed-rate long-term 
debt. For long-term debt, the GOC provided quarterly rates using data 
from Statistics Canada's (STATCAN) Quarterly Survey of Financial 
Statistics for Enterprises. We used the information from this survey as 
the basis for our long-term loan benchmark.
    Some of the reviewed programs provided long-term loans to the 
softwood lumber industry with variable interest rates instead of fixed 
interest rates. Because we were unable to gather information on 
variable interest rates charged on commercial loans in Canada, we have 
used as our benchmark for those variable loans the rate applicable to 
long-term fixed interest rate loans for the POR as reported by the GOC.
    As stated above, the Department is examining non-stumpage programs 
that confer non-recurring benefits. For those non-stumpage programs 
that require the allocation of the benefit over time, we have employed 
the allocation methodology described under 19 CFR 351.524(d). As our 
discount rate, we have used the rate applicable to long-term fixed 
interest rate loans for the POR, as reported by the GOC.

Aggregate Subsidy Rate Calculation

    As noted above, this administrative review is being conducted on an 
aggregate basis. We have used the same methodology to calculate the 
country-wide rate for the programs subject to this review that we used 
in the Final Determination, the Notice of Final Results of 
Countervailing Duty Administrative Review and Rescission of Certain 
Company-Specific Reviews: Certain Softwood Lumber Products from Canada, 
69 FR 75917 (December 20, 2004) (Final Results of 1st Review), and the 
Final Results of 2nd Review.

Provincial Crown Stumpage Programs

    For stumpage programs administered by the Canadian provinces 
subject to this review, we first calculated a provincial subsidy rate 
by dividing the aggregate benefit conferred under each specific 
provincial stumpage program by the total stumpage denominator 
calculated for that province. For further information regarding the 
stumpage denominator, see ``Numerator and Denominator Used for 
Calculating the

[[Page 33935]]

Stumpage Programs' Net Subsidy Rates'' section, below. As required by 
section 777A(e)(2)(B) of the Act, we next calculated a single country-
wide subsidy rate. To calculate the country-wide subsidy rate conferred 
on the subject merchandise from all stumpage programs, we weight-
averaged the subsidy rate from each provincial stumpage program by the 
respective provinces' relative shares of total exports to the United 
States during the POR. As in Final Determination and subsequent 
reviews, these weighted-averages of the subject merchandise do not 
include exports from the Maritime Provinces or sales of companies 
excluded from the CVD order.\6\ We then summed these weighted-average 
subsidy rates to determine the country-wide rate for all provincial 
Crown stumpage programs.
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    \6\ The Maritime provinces are Nova Scotia, New Brunswick, 
Newfoundland, and Prince Edward Island.
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Other Programs

    We also examined a number of non-stumpage programs administered by 
the Canadian Federal Government and certain Provincial Governments in 
Canada. To calculate the country-wide rate for these programs, we used 
the same methodology employed in the first and second administrative 
reviews. For Federal programs that were found to be specific because 
they were limited to certain regions, we calculated the countervailable 
subsidy rate by dividing the benefit by the relevant denominator (i.e., 
total production of softwood lumber in the region or total exports of 
softwood lumber to the United States from that region), and then 
multiplying that result by the relative share of total softwood exports 
to the United States from that region. For Federal programs that were 
not regionally specific, we divided the benefit by the relevant 
country-wide sales (i.e., total sales of softwood lumber, total sales 
of the wood products manufacturing industry (which includes softwood 
lumber), or total sales of the wood products manufacturing and paper 
industries).
    For provincial programs, we calculated the countervailable subsidy 
rate by dividing the benefit by the relevant sales amount for that 
province (i.e., total exports of softwood lumber from that province to 
the United States, total sales of softwood lumber in that province, or 
total sales of the wood products manufacturing and paper industries in 
that province). That result was then multiplied by the relative share 
of total softwood exports to the United States from that province.
    Where the countervailable subsidy rate for a program was less than 
0.005 percent, the program was not included in calculating the country-
wide CVD rate.

Numerator and Denominator Used for Calculating the Stumpage Programs' 
Net Subsidy Rates \7\
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    \7\ The denominators used for non-stumpage programs are 
discussed below in the individual program write-ups.
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1. Aggregate Numerator and Denominator

    As noted above, the Department is determining the stumpage 
subsidies to the production of softwood lumber in Canada on an 
aggregate basis. The methodology employed to calculate the ad valorem 
subsidy rate requires the use of a compatible numerator and 
denominator. In the second administrative review, the Department 
explained that in the numerator of the net subsidy rate calculation, 
the Department included only the benefit from those softwood Crown logs 
that entered and were processed by sawmills during the POR (i.e., logs 
used in the lumber production process). See ``Aggregate Numerator and 
Denominator'' section and Comment 9 of the Final Results of 2nd Review 
Decision Memorandum. Accordingly, the denominator used for the final 
calculation included only those products that result from the softwood 
lumber manufacturing process. Id. For purposes of these preliminary 
results, we continue to calculate the numerator and denominator using 
the approach adopted in the final results of the second review.\8\
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    \8\ In the case of Alberta and British Columbia, it was 
necessary to derive the volume of softwood Crown logs that entered 
and were processed by sawmills during the POR (i.e., logs used in 
the lumber production process). Our methodology for deriving those 
volumes is described in the ``Calculation of Provincial Benefits'' 
section of these preliminary results.
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    Consistent with the Department's previously established 
methodology, we included the following in the denominator: Softwood 
lumber, including softwood lumber that undergoes some further 
processing (so-called ``remanufactured'' lumber), softwood co-products 
(e.g., wood chips and sawdust) that resulted from softwood lumber 
production at sawmills, and residual products produced by sawmills that 
were the result of the softwood lumber manufacturing process, 
specifically, softwood fuelwood and untreated softwood ties.
    We would have included in the denominator those softwood co-
products produced by lumber remanufacturers that resulted from the 
softwood lumber manufacturing process. However, the GOC failed to 
separate softwood co-products that resulted from the softwood lumber 
manufacturing process of lumber remanufacturers from those resulting 
from the myriad of other production processes performed by producers in 
the remanufacturing category that have nothing to do with the 
production of subject merchandise. Lacking the information necessary to 
determine the value of softwood co-products that resulted from the 
softwood lumber manufacturing process of lumber remanufacturers during 
the softwood lumber manufacturing process, we have preliminarily 
determined not to include any softwood co-product values from the non-
sawmill category. See, e.g., Comment 16 of the December 13, 2004, 
Issues and Decision Memorandum that accompanied the Final Results of 
1st Review (Final Results of 1st Review Decision Memorandum). See also 
Comment 9 of the Final Results of 2nd Review Decision Memorandum.

2. Adjustments to Account for Companies Excluded From the CVD Order

    In the investigation, we deducted from the denominator sales by 
companies that were excluded from the CVD order. The Department has 
since also concluded expedited reviews for a number of companies, 
pursuant to which a number of additional companies have been excluded 
from the CVD order. See Final Results of Countervailing Duty Expedited 
Reviews: Certain Softwood Lumber Products from Canada: Notice of Final 
Results of Countervailing Duty Expedited Reviews, 68 FR 24436, (May 7, 
2003); see also Notice of Final Results of Countervailing Duty 
Expedited Reviews of the Order on Certain Softwood Lumber from Canada, 
69 FR 10982 (March 9, 2004).
    In the second review, the GOC, GOO, and GOQ indicated that the 
excluded companies in their respective provinces did not harvest Crown 
timber during the POR. The GOC stated the same with respect to the 
excluded companies in the Yukon Territories. The GOC, GOO, and GOQ 
further claimed they did not have any information regarding the volume 
of lumber and/or Crown logs purchased by the excluded companies during 
the POR. The respective governments were also unable to provide POR 
sales data of the excluded companies. See, e.g., ``Adjustments to 
Account for Companies Excluded from the CVD Order'' section of the 
Final Results of 2nd Review Decision

[[Page 33936]]

Memorandum. Thus, pursuant to our prior practice, in the second review, 
we deducted the sales of all companies excluded from the countervailing 
duty order from the relevant sales denominators used to calculate the 
country-wide subsidy rates. Further, consistent with our approach in 
the first review, because we lacked POR sales data, we indexed the 
excluded companies' sales data to the POR using province-specific 
lumber price indices obtained from STATCAN. We then subtracted the 
indexed sales data of the excluded companies from the corresponding 
provincial denominators. Id. In addition, because Canadian parties 
stated that the excluded companies did not acquire Crown timber during 
the POR and because they did not provide any other additional benefit 
data from the companies, in the second review we did not adjust the 
aggregate numerator data from the relevant provinces. Id.
    In keeping with our prior findings, we have continued the approach 
adopted in the second review. Thus, we have indexed the sales of the 
excluded companies to the POR using province-specific lumber price 
indices obtained from STATCAN. We then subtracted the sales of the 
excluded companies from the corresponding provincial denominators. As 
in the prior review, we have not made any adjustments to the aggregate 
numerator data from the relevant provinces.

3. Pass-Through

    In the second administrative review, the Canadian parties claimed 
that a portion of the Crown timber processed by sawmills was purchased 
by the mills in arm's-length transactions with independent harvesters. 
The Canadian parties further claimed that such transactions must not be 
included in the subsidy calculation unless the Department determines 
that the benefit to the independent harvester passed through to the 
lumber producers. The GOO, GOBC, British Columbia Lumber Trade Council 
(BCLTC), GOM, GOS, and GOA based their claims on aggregate data which 
they argued indicate that subsidy benefits on specified volumes of 
Crown timber did not pass through to the purchasing sawmills. In the 
second administrative review, the Ontario Lumber Manufacturing 
Association and the Ontario Forest Industries Association (OLMA/OFIA) 
separately submitted company-specific data for several companies in 
Ontario and Manitoba. The information provided by the OLMA/OFIA 
included transaction-specific data, statements and certification of 
non-affiliation, and additional supporting documentation.
    In the second administrative review, we employed a two-part test to 
evaluate the Canadian parties' pass-through claims. First, we examined 
whether the claims involved log transactions between mills and 
independent harvesters that were conducted at arm's length between 
unrelated parties. See Comment 5 of Final Results of 2nd Review 
Decision Memorandum. We further specified that the identity of the 
party that pays the stumpage fee is crucial in determining whether the 
second part of the analysis is warranted. Id. at Comment 4. The 
identity of the party paying the stumpage is important because, in 
instances in which the sawmill pays the stumpage fee to the Crown, the 
subsidy benefits accrue directly to the sawmill just as if it were 
drawing from its own tenure and contracting out for harvesting and 
hauling services. Id.
    In the second administrative review, we further explained that the 
second part of the pass-through test examines whether the sawmill 
received a competitive benefit from the purchase of the subsidized 
logs. Id. at Comment 5. The competitive benefit analysis is guided by 
the provisions of the Department's regulations on upstream subsidies. 
See 19 CFR 351.523. Under this analysis, a competitive benefit exists 
when the price for the input is lower than the price for a benchmark 
input price. To conduct the competitive benefit test, we require 
specific information on each transaction for which parties request a 
pass-through analysis, which necessitates that they provide more than 
just aggregate data and more than self-selected sample data. This 
approach follows from the very nature of the competitive benefit test, 
an analysis in which the price of subsidized logs sold in individual 
transactions are compared to a market-determined benchmark price. 
Specifically, we require the volume and the unit price, by species, for 
each of the log sales for which Canadian parties sought a pass-through 
analysis--so that we can compare these sales to our benchmark price. 
Furthermore, to ensure that the competitive benefit test is accurate 
and meaningful, we require specific data (e.g., species, size, grade, 
quality, discount, delivery terms, and payment terms) on the logs sold 
in the transactions under analysis. These data are necessary in order 
to further ensure that we conduct our competitive benefit test on an 
``apples-to-apples'' basis relative to our benchmark prices. Id.
    In the second administrative review, we determined that, based on 
the criteria described above, the GOO, GOBC, BCLTC, GOM, GOS, and GOA 
each failed to substantiate their respective ``aggregate'' claims. See 
``Pass-Through'' section and Comments 3 through 5 of the Final Results 
of 2nd Review Decision Memorandum. However, based on our analysis of 
the company-specific data submitted by the OLMA/OFIA, we determined 
that a reduction in the Ontario subsidy benefits was warranted. See 
``Pass-Through'' section and Comments 6 through 7 of the Final Results 
of 2nd Review Decision Memorandum.
    In anticipation of a similar claim in this administrative review, 
we explained in the initial questionnaire that if the Canadian 
provinces wished to claim that any portion of the reported volume of 
Crown harvest was sold in arm's-length transactions and that subsidies 
provided for that portion of the Crown harvest did not pass through to 
the purchasing sawmill, they must provide such information as (1) a 
breakdown, by species, of the total volume and value that purportedly 
did not pass through, excluding sales of logs for which sawmills paid 
the stumpage fees directly to the Crown and (2) documentation regarding 
the corporate affiliation of each of the parties involved in their 
pass-through claim, including the identities of affiliated parties of 
the purchasing sawmills, the harvesters, and the tenure holders of the 
tenures from which the logs were harvested. See, e.g., pages III-18 and 
III-19 of the Department's July 11, 2005, initial questionnaire. In 
response to the Department's original questionnaire, the Canadian 
parties provided various sets of information for analysis.
    In their October 3, 2005, initial questionnaire response, the GOA 
and the GOBC/BCLTC each provided an aggregate pass-through claim (with 
accompanying information) of the amount of Crown timber in the 
respective provinces that was obtained by sawmills through arm's-length 
transactions.\9\ The GOBC/BCLTC provided company-specific data based on 
a survey conducted by PriceWaterhouseCoopers (PWC) that contained the 
total volume and value of logs purchased by 42 sawmills

[[Page 33937]]

throughout the B.C. interior. See Exhibits 3 and 4 of the BCLTC's 
December 6, 2005, factual submission for the results of the PWC survey. 
The GOBC/BCLTC submitted revised PWC survey data in Exhibits A and B of 
the GOBC's March 30, 2006, supplemental questionnaire response. The GOO 
and the OLMA/OFIA submitted company-specific/transaction-specific data 
and supporting information for us to analyze with respect to certain 
sawmills in Ontario and Manitoba. See OFIA/OLMA Volume I, Exhibits 
OFIA/OLMA 1 to OFIA/OLMA 11 of the GOO's October 3, 2005, questionnaire 
response. On March 2, 2006, we issued a supplemental questionnaire to 
the GOC and the provincial governments in which we requested that they 
respond to the pass-through appendix included in the Department's July 
11, 2005, initial questionnaire. In their March 30 and April 3, 2006, 
supplemental questionnaire responses, Canadian parties reiterated their 
arguments that the pass-through claims made in their initial 
questionnaire response were sufficient for the Department to find that 
alleged subsidy benefits on certain volumes of Crown-origin logs did 
not pass through to the purchasing sawmill and, thus, any such benefits 
should not be included in the numerators of the provincial benefit 
calculations. On May 2, 2006, we issued a supplemental questionnaire to 
the OLMA/OFIA, in which we requested clarification of the data 
provided. The OLMA/OFIA provided a response on May 12, 2006. See OFIA/
OLMA's Supplemental Questionnaire Response.
---------------------------------------------------------------------------

    \9\ The GOQ, GOM, and GOS did not make any pass-through claims 
in this segment of the proceeding. However, the OLMA/OFIA submitted 
a pass-through claim on behalf of a company with operations in 
Manitoba. See TEM(Manitoba) Volume I, Pass-through questionnaire 
response of the GOO's October 3, 2005 submission and the May 12, 
2006 OFIA/OLMA Supplemental Questionnaire Response. For this 
particular mill, we analyzed its pass-through claim pursuant to the 
pass-through analysis described in this section of the preliminary 
results.
---------------------------------------------------------------------------

    We have reviewed and considered all of the information provided on 
the record of this administrative review. We find that the GOA and 
GOBC/BCLTC each failed to provide the information necessary for us to 
examine whether the claims were with respect to log transactions 
conducted at arm's length, and whether a competitive benefit was 
received by the alleged buyer. Regarding the data submitted by the GOO, 
while the GOO submitted information for each company, it did not 
provide price data on a transaction-specific basis as requested by the 
Department and, thus, we lack the information required for the 
competitive benefit test that is the second part of our pass-through 
analysis. However, for purposes of these preliminary results, we 
determine that, based on our analysis of the company-specific/
transaction-specific data and information provided by the OLMA/OFIA, a 
reduction in the Ontario subsidy benefit is warranted. Our analysis and 
preliminary findings with respect to these claims are detailed, by 
province, below.
a. Alberta
    The GOA claims that the numerator of Alberta's provincial subsidy 
rate calculation should be reduced to account for fair-market, arm's-
length sales of Crown logs between unrelated parties.\10\ The GOA 
asserts that, on the basis of its pass-through claim, at least 1.5 
million m\3\ of softwood logs should be removed from the numerator of 
the provincial subsidy rate calculation. See page XII-1 of the GOA's 
October 3, 2005, questionnaire response. The GOA bases its claim on a 
survey of Timber Damage Assessment (TDA) data that was conducted by a 
private consulting firm hired by the GOA. The survey is an updated 
version of the TDA survey upon which the GOA based its pass-through 
claim in the second administrative review. As explained in the second 
administrative review, the TDA survey lacks the company-specific and 
transaction-specific data we require to perform the two steps of our 
pass-through analysis (i.e., the arm's-length test and the competitive 
benefit test). See Comment 5 of the Final Results of 2nd Review 
Decision Memorandum.
---------------------------------------------------------------------------

    \10\ As explained in the ``Calculation of Provincial Benefits'' 
section of these preliminary results, the numerator of the 
provincial subsidy rate calculation is the product of the adjusted 
unit benefit and the total volume of softwood Crown logs that 
entered and were processed by sawmills during the POR.
---------------------------------------------------------------------------

    As explained above, on March 2, 2006, we provided the GOA with an 
opportunity to respond to the pass-through appendix, which was included 
in the Department's July 11, 2005, initial questionnaire. In its 
response, the GOA argued that, while it had stated its willingness in 
the initial questionnaire to provide any additional useful information 
that it could regarding its pass-through claim, ``the Department is now 
asking for a massive expenditure of time, resources, and effort that is 
not feasible, and, in fact is not necessary, in light of reliable 
information already provided.'' See the GOA's March 30, 2006, 
supplemental questionnaire response. It further argued that the 
Department should instead conduct its pass-through analysis using the 
data in the TDA survey. Id.\11\
---------------------------------------------------------------------------

    \11\ The GOA made the same argument concerning the Department's 
request for a response to its pass-through appendix in the second 
administrative review. See, Comment 5 of the Final Results of 2nd 
Review Decision Memorandum.
---------------------------------------------------------------------------

    Based on the GOA's questionnaire responses and in keeping with the 
approach employed in the second administrative review, we preliminarily 
determine that we are unable to rely on the TDA survey as a basis for 
the GOA's pass-through claim because it lacks the information we 
require to perform the two steps of our pass-through analysis. 
Accordingly, we preliminarily determine that the GOA has failed to 
substantiate its pass-through claim and, therefore, we have not reduced 
the numerator of Alberta's provincial subsidy rate calculation, as 
requested by the GOA.
b. British Columbia
    The GOBC claims that the numerator of British Columbia's provincial 
subsidy rate calculation should be reduced to account for fair-market, 
arm's-length sales of Crown logs between unrelated parties. Using 
aggregate data from Interior and Coastal British Columbia, the GOBC 
estimates that at least 15.6 million m\3\ of softwood logs were 
acquired by sawmills in arm's-length transactions and, thus, the volume 
of these logs should be removed from the numerator of the provincial 
subsidy rate calculation. See page BC-XIV-2 of the GOBC's October 3, 
2005, and page 3 of the GOBC's March 30, 2006, supplemental 
questionnaire response. In support of this aggregate claim the GOBC 
provided data from a survey commissioned by the BCLTC and conducted by 
PWC on what were purported to be arm's-length log purchases by B.C. 
sawmills. See Exhibits 3 and 4 of the BCLTC's December 6, 2005, factual 
submission for the results of the PWC survey. The GOBC submitted a 
revised PWC survey in Exhibits A and B of the GOBC's March 30, 2006, 
supplemental questionnaire response. This survey covered 42 sawmills 
and, according to the GOBC, accounted for 78 percent of the logs 
consumed in the B.C. interior. See page 3 of the GOBC's March 30, 2006, 
supplemental questionnaire response. According to the GOBC and BCLTC, 
the survey provides company- and species-specific data concerning the 
volume of Crown-origin logs purchased by sawmills from unaffiliated 
sawmills and log sellers. They further claim the survey separately 
lists the volume of Crown-origin logs acquired from private lands and 
affiliated parties by each of the surveyed sawmills. To the extent the 
Department does not accept their aggregate pass-through claim, the GOBC 
and BCLTC argue that the Department should, at the very least, conduct 
its pass-through analysis using the data from the PWC survey. The GOBC 
and BCLTC contend that the data in the PWC survey demonstrate that a 
substantial portion of the alleged subsidy benefit attributable to the 
Crown-origin logs harvested during the

[[Page 33938]]

POR did not pass through to the purchasing sawmills.
    Regarding the GOBC's aggregate estimation and PWC survey, we note 
that they fail to identify those transactions in which the sawmill pays 
the stumpage fee directly to the Crown as specified in our July 11, 
2005, initial questionnaire. As explained above, we have previously 
determined that the identity of the party paying the stumpage is 
important because, in instances in which the sawmill pays the stumpage 
fee to the Crown, the subsidy benefits accrue directly to the sawmill 
just as if it were drawing from its own tenure and contracting out for 
harvesting and hauling services. See Comment 5 of the Final Results of 
2nd Review Decision Memorandum. In addition, the data in the GOBC's 
aggregate pass-through claim as well as those of the PWC survey fail to 
document, as instructed by the Department in its initial questionnaire, 
the corporate relationships of each of the parties involved in the 
transactions associated with the GOBC's pass-through claim. 
Furthermore, the GOBC's aggregate estimation and the PWC survey do not 
contain the transaction-specific data we require in order to perform 
the competitive benefit test. For example, while the PWC survey 
provides company-specific log purchase data for 42 sawmills operating 
in the B.C. interior, these data are consolidated by supplier category 
(i.e., purchases from sawmills, purchases from sellers without 
sawmills, purchases from private land); they are not presented on a 
transaction-specific basis. As explained in the second administrative 
review, transaction-specific data are required in order for the 
Department to conduct the competitive benefit component of the pass-
through analysis. See Comment 5 of the Final Results of 2nd Review 
Decision Memorandum.
    In our March 2, 2006, supplemental questionnaire, we provided the 
GOBC an opportunity to respond to the pass-through appendix included in 
the Department's initial questionnaire. The GOBC refused to respond to 
the pass-through appendix, arguing that it was unduly burdensome and 
that the Department did not need the information solicited in the 
appendix for it to conduct a pass-through analysis. See page 1 of the 
GOBC's March 30, 2006, response. Instead, the GOBC submitted revised 
PWC survey data and reiterated its claim that the data it submitted 
were sufficient for purposes of the Department's pass-through analysis.
    Based on our approach in the prior administrative review and in 
light of the deficiencies in the data submitted by the GOBC and BCLTC, 
we preliminarily determine that we are unable to rely on the aggregate 
data submitted by the GOBC or on the PWC survey. On this basis, we 
preliminarily determine that the GOBC and BCLTC have failed to 
substantiate their respective pass-through claims and, therefore, we 
have not reduced the numerator of British Columbia's provincial subsidy 
rate calculation.
c. Ontario
    The GOO claims that the numerator of Ontario's provincial subsidy 
rate calculation should be reduced to account for fair-market, arm's-
length sales of Crown logs between unrelated parties. Specifically, the 
GOO claims that at least 2,501,472 m3 of softwood logs were 
acquired by sawmills in arm's-length transactions and, thus, the volume 
of logs should be removed from the numerator of the provincial subsidy 
rate calculation. See page ON-267 GOO's October 3, 2005, questionnaire 
response. In support of its claim, the GOO provided information on log 
purchases between the 25 largest sawmills in Ontario and tenure holders 
that do not own a sawmill. See Volume 20 of Exhibit ON-PASS-1 of the 
GOO's October 3, 2005, questionnaire response. In this exhibit, the GOO 
provided company-specific data indicating, by species, the volume and 
value of logs that sawmills acquired from each of their respective 
suppliers. The GOO also identified those sawmills that paid the 
stumpage fees on behalf of the harvester.\12\ See Exhibit ON-PASS-2 of 
the GOO's October 3, 2005, questionnaire response. The OLMA/OFIA 
separately submitted company-specific information for 11 companies 
covering numerous sawmills. See Volume I of the OFIA/OLMA's October 3, 
2005 questionnaire response and the OFIA/OLMA's May 12, 2006 response. 
The information from the OLMA/OFIA included transaction-specific data 
regarding sales between sawmills and harvesters, statements and 
certification of non-affiliation, and additional supporting 
documentation. The information from the OLMA/OFIA also identified those 
transactions in which the sawmill paid the stumpage fee to the Crown. 
See the OFIA/OLMA's May 12, 2006 questionnaire response.
---------------------------------------------------------------------------

    \12\ The GOO refers to sawmills as an ``agent for the Crown'' 
for transactions between a harvester and a sawmill in which the 
sawmill pays the stumpage fee to the Provincial Government.
---------------------------------------------------------------------------

    As explained above, based on our approach in the second 
administrative review, we find that a competitive benefit analysis is 
not warranted in instances in which the sawmill purchasing the log pays 
the stumpage fee directly to the Crown. In addition, based on the 
methodology employed in the second administrative review, we find a 
competitive benefit analysis is not warranted where the Department 
lacks transaction-specific data. As a result, we have not utilized the 
data provided by the GOO for our pass-through analysis. However, with 
respect to the company-specific/transaction-specific information and 
data provided by the OLMA/OFIA, we accept the certifications by the 
companies that the transactions they reported were between unaffiliated 
parties and preliminarily determine that they are sufficient for 
purposes of conducting a competitive benefit analysis.
    For these transactions, we then performed the next step of our 
pass-through analysis by examining whether the sawmill received a 
competitive benefit from the purchase of the subsidized logs. Pursuant 
to 19 CFR 351.523(c), we sought actual or average prices for 
unsubsidized input products, including imports, or an appropriate 
surrogate as the benchmark input price. We previously determined in the 
first and second administrative reviews that there were no private 
prices in Ontario that were suitable for use as benchmarks to measure 
the adequacy of remuneration of stumpage fees charged for Crown-origin 
trees. See ``Private Provincial Market Prices'' section and Comments 20 
and 21 of the Final Results of 1st Review Decision Memorandum; see also 
Notice of Preliminary Results of Countervailing Duty Administrative 
Review: Certain Softwood Lumber Products from Canada, 70 FR 33088 at 
33102 (June 7, 2005) (Preliminary Results of 2nd Review), and Comment 
17 of the Final Results of 2nd Review Decision Memorandum. As explained 
in the ``Provincial Stumpage Programs'' section below, we have reached 
the same conclusion based on the record in this proceeding.
    We also explained in the second review that in Ontario Crown-origin 
timber supplies a dominant portion of the log market and, as a result, 
the unit cost of this supply effectively determines the market prices 
of logs in the province. See Preliminary Results of 2nd Review, 70 FR 
at 33096; see also Comment 6 and 17 of the Final Results of 2nd Review 
Decision Memorandum. As demonstrated in this review, as well as in the 
prior reviews, the prices harvesters charge for logs are effectively 
determined by the prices they pay for stumpage plus harvesting costs. 
Because

[[Page 33939]]

of the relationship between timber (stumpage) and log prices, prices 
for logs in Ontario would be suppressed by the subsidized prices in the 
timber markets. As such, log prices in Ontario are unsuitable for 
purposes of measuring whether a competitive benefit has passed-through 
in transactions involving sales of Crown logs. Id.
    Instead, we have turned to private stumpage prices in the 
Maritimes, which we have found are market-determined, in-country 
prices. However, because we are measuring the competitive benefit for 
the sale of subsidized logs, we have derived species-specific benchmark 
log prices by combining the unsubsidized Maritimes stumpage prices with 
the various harvest, haul, road, and management costs reported by the 
GOO.
    We then compared the per-unit prices listed for each transaction 
reported by the OLMA/OFIA that we determined were eligible for a 
competitive benefit analysis based on our benchmark log prices. If the 
price per cubic meter was equal to or higher than the benchmark price, 
we determined that no competitive benefit passed through and the 
corresponding volume was excluded from the numerator of our 
calculations. Where the per-unit price was lower than the benchmark 
price, and where the difference between the benchmark and actual log 
prices was greater than the province-specific per-unit stumpage 
benefit, we capped the amount of the subsidy considered to have 
``passed through'' by the province-specific per-unit stumpage benefit. 
As such, the amount of the competitive benefit that was calculated to 
have passed though in the transaction was never greater than the 
subsidy granted by the Crown. This approach is consistent with the 
approach utilized in the second administrative review. See Preliminary 
Results of 2nd Review, 70 FR at 33095-33096; see also, the ``Pass-
Through'' section of the Final Results of 2nd Review Decision 
Memorandum. The result of these calculations is that only a small 
portion of the Crown harvest volume originally included in the 
numerator is excluded from the numerator of our revised subsidy 
calculations.\13\ Accordingly, a small reduction in the Ontario subsidy 
benefit is warranted. The calculations are business proprietary. See 
the May 31, 2006, Preliminary Calculations Memorandum for Ontario. As 
noted above, if we were unable to determine that the transaction 
qualified as an arm's-length transaction or was subject to other 
conditions (e.g., the stumpage fee for the log was paid directly to the 
provincial government by the sawmill), then we did not conduct a 
competitive benefit analysis and the corresponding volume associated 
with these transactions was not excluded from the numerator of the net 
subsidy calculation.
---------------------------------------------------------------------------

    \13\ We performed the same analysis for the data pertaining to 
the company with operations in Manitoba. See the May 31, 2006, 
Preliminary Calculations Memorandum for Manitoba.
---------------------------------------------------------------------------

d. Quebec
    There are two tenure licenses, Forest Management Contracts (FMCs) 
and Forest Management Agreements (FMAs), that in past reviews the 
Department has addressed in the context of the pass-through issue. 
While claiming in its initial questionnaire response that the volume of 
Crown timber harvested under FMCs and FMAs and subsequently sold in 
open market transactions are ``undoubtedly arm's length transactions,'' 
the GOQ did not make a formal pass-through claim with respect to log 
volumes harvested under these licenses. See page QC-144 of its October 
3, 2005, questionnaire response. Our treatment of these types of tenure 
in these preliminary results are discussed below.
FMC Licenses
    As explained in the prior review, pursuant to section 102 of the 
Forestry Act, the GOQ may grant an FMC license to any ``person.'' See 
Preliminary Results of 2nd Review, 70 FR at 33097. Thus, FMC license 
holders may include companies owning/operating sawmills. We further 
explained in the prior review that the GOQ often grants FMCs to 
municipalities in the province. Id.; see also page QC-144 of the GOC's 
October 3, 2005, questionnaire response of the current review in which 
the GOQ states that the majority of FMC holders are municipalities. In 
addition, in the second review we explained that sections 104.2 and 
104.3 of the Forestry Act stipulate that the holder of an FMC license 
must supply standing timber covered by the license to timber wood 
processing plants in Quebec in the amount specified on the license's 
management permit and that this stipulation was also reflected in the 
standard language of the FMC contract. See Preliminary Results of 2nd 
Review, 70 FR at 33097. Based on this information, in the second review 
we determined that the FMC volume reported by the GOQ included FMC 
licenses held by sawmills as well as softwood log volumes that were 
sold directly by government entities in Quebec (e.g., municipalities) 
to sawmills. Id.
    In the current review, the GOQ claims that no sawmills held FMCs 
during the POR and, thus, were not in the position to purchase Crown 
timber directly from the Provincial Government under an FMC license. 
See page QC-144 and Exhibit 56 of the GOQ's October 3, 2005, 
questionnaire response. The GOQ also failed to submit a response to our 
March 20, 2006, pass-through questionnaire appendix in which it was 
provided another opportunity to provide information concerning volumes 
harvested under FMC licenses. As explained in the second administrative 
review, the volume of timber harvest sold by municipalities to sawmills 
does not involve an ``indirect'' subsidy and, thus, such transactions 
are not eligible for the arm's-length analysis because they are no 
different from instances in which the Provincial Government itself 
sells the timber to sawmills. See Preliminary Results of 2nd Review, 70 
FR at 33097. In keeping with the precedent established in the previous 
review, we preliminarily determine that, with respect to Crown timber 
sold under FMC licenses, an arm's-length analysis is not warranted. 
Therefore, we have included all of the FMC harvest volume in the 
numerator of Quebec's net subsidy calculation.
    Regarding the FMC harvest volumes included in the numerator of 
Quebec's net subsidy calculation, we note that certain volumes lack 
corresponding value amounts. In the prior review, we explained that 
these volumes reflected the amount sold by municipalities and that 
lacking price information for these volumes, as facts available, we 
applied the unit prices that the GOQ reported for either the remaining 
amount of FMC volume or for TSFMA volume as appropriate. See 70 FR at 
33097-33098. See also, the May 31, 2006, Preliminary Calculations 
Memorandum for Quebec. For these preliminary results, we have utilized 
the same approach. See the May 31, 2006, Preliminary Calculations 
Memorandum for Quebec.
FMA Licenses
    We are not including the timber volumes harvested under FMA 
licenses in the numerator of Quebec's net subsidy calculation. Under 
section 84.1 of the Forestry Act, an FMA licensee may not be the holder 
of a wood processing permit or be affiliated with the holder of a wood 
processing permit. Although the record does not contain the prices 
which the FMA holders charge their customers for Crown logs, even if 
the full amount of the subsidy is assumed to pass through to the

[[Page 33940]]

customer, inclusion of this volume in the numerator has no impact on 
the portion of the country-wide rate attributable to Quebec. Therefore, 
we have not included any of the FMA harvest volume in our calculations. 
This approach is consistent with that employed in the prior review. 
See, e.g., Preliminary Results of 2nd Review, 70 FR at 33098.

Analysis of Programs

Programs Preliminarily Determined To Confer Subsidies

Provincial Stumpage Programs
    In Canada, the vast majority of standing timber sold originates 
from lands owned by the Crown. Each of the reviewed Canadian provinces, 
i.e., Alberta, British Columbia, Manitoba, Ontario, Quebec and 
Saskatchewan,\14\ has established programs through which it charges 
certain license holders ``stumpage'' fees for standing timber harvested 
from these Crown lands. With the exception of British Columbia, these 
administered stumpage programs have remained largely unchanged. Thus, 
for a description of the stumpage programs administered by the GOA, 
GOS, GOM, GOO, and GOQ, see ``Description of Provincial Stumpage 
Programs'' section of the Notice of Preliminary Results of 
Countervailing Duty Administrative Review: Certain Softwood Lumber 
Products from Canada, 69 FR 33204 at 33219-33227 (Preliminary Results 
of 1st Review). Changes to British Columbia administered stumpage 
system are discussed below.
---------------------------------------------------------------------------

    \14\ In this review, we did not examine the stumpage programs 
with respect to the Yukon Territory, Northwest Territories, and 
timber sold on federal land because the amount of exports to the 
U.S. is insignificant and would have no measurable effect on any 
subsidy rate calculated in this review.
---------------------------------------------------------------------------

Legal Framework
    In accordance with section 771(5) of the Act, to find a 
countervailable subsidy, the Department must determine that a 
government provided a financial contribution and that a benefit was 
thereby conferred, and that the subsidy is specific within the meaning 
of section 771(5A) of the Act. As set forth below, no new information 
or argument on the record of this review has resulted in a change in 
the Department's determinations from the final results of the first and 
second reviews that the provincial stumpage programs constitute 
financial contributions provided by the provincial governments and that 
they are specific.
Financial Contribution and Specificity
    In the underlying investigation, the Department determined, 
consistent with section 771(5)(D)(iii) of the Act, that the Canadian 
provincial stumpage programs constitute a financial contribution 
because the provincial governments are providing a good to lumber 
producers, and that good is timber. The Department further noted that 
the ordinary meaning of ``goods'' is broad, encompassing all ``property 
or possessions'' and ``saleable commodities.'' See ``Financial 
Contribution'' in the Final Determination Decision Memorandum. Further, 
the Department found that ``nothing in the definition of the term 
`goods' indicates that things that occur naturally on land, such as 
timber, do not constitute `goods.' '' To the contrary, the Department 
found that the term specifically includes ''* * * growing crops and 
other identified things to be severed from real property.'' Id. The 
Department further determined that an examination of the provincial 
stumpage systems demonstrated that the sole purpose of the tenures was 
to provide lumber producers with timber. Thus, the Department 
determined that regardless of whether the provinces are supplying 
timber or making it available through a right of access, they are 
providing timber. Id. No new information has been placed on the record 
of this review warranting a change in our finding that the provincial 
stumpage programs constitute a financial contribution in the form of a 
good, and that the provinces are providing that good, i.e., timber, to 
lumber producers. Consistent with our findings in the underlying 
investigation, we preliminarily continue to find that the stumpage 
programs constitute a financial contribution provided to lumber 
producers within the meaning of section 771(5)(D)(iii) of the Act.
    In the investigation, the Department determined that provincial 
stumpage subsidy programs were used by a ``limited number of certain 
enterprises'' and, thus, were specific in accordance with section 
771(5A)(D)(iii)(I) of the Act. More particularly, the Department found 
that stumpage subsidy programs were used by a single group of 
industries, comprised of pulp and paper mills, and the sawmills and 
remanufacturers that produce the subject merchandise. See 
``Specificity'' section of the Final Determination Decision Memorandum. 
This was true in each of the reviewed provinces. No information in the 
record of this review warrants a change in this determination and, 
thus, we preliminarily continue to find that the provincial stumpage 
programs are specific within the meaning of section 771(5A)(D)(iii)(I) 
of the Act.
Benefit
    Section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a) govern the 
determination of whether a benefit has been conferred from subsidies 
involving the provision of a good or service. Pursuant to section 
771(5)(E)(iv) of the Act, a benefit is conferred by a government when 
the government provides a good or service for less than adequate 
remuneration. Section 771(5)(E) further states that the adequacy of 
remuneration: Shall be determined in relation to prevailing market 
conditions for the good or service being provided * * * in the country 
which is subject to the investigation or review. Prevailing market 
conditions include price, quality, availability, marketability, 
transportation, and other conditions of * * * sale. The hierarchy for 
selecting a benchmark price to determine whether a government good or 
service is provided for less than adequate remuneration is set forth in 
19 CFR 351.511(a)(2). The hierarchy, in order of preference, is: (1) 
Market-determined prices from actual transactions within the country 
under investigation or review; (2) world market prices that would be 
available to purchasers in the country under investigation; or (3) an 
assessment of whether the government price is consistent with market 
principles.
    Under this hierarchy, we must first determine whether there are 
actual market-determined prices for timber sales in Canada that can be 
used to measure whether the provincial stumpage programs provide timber 
for less than adequate remuneration. Such benchmark prices could 
include prices resulting from actual transactions between private 
parties, actual imports, or, in certain circumstances, actual sales 
from competitively run government auctions. See 19 CFR 
351.511(a)(2)(i).
    The Preamble to the CVD Regulations provides additional guidance on 
the use of market-determined prices stemming from actual transactions 
within the country. See ``Explanation of the Final Rules '' 
Countervailing Duties, Final Rule, 63 FR 65348, 65377 (November 25, 
1998) (the Preamble). For example, the Preamble states that prices from 
a government auction would be appropriate where the government sells a 
significant portion of the good or service through competitive bid 
procedures that are open to everyone, that protect confidentiality, and 
that are based solely on price. The Preamble also

[[Page 33941]]

states that the Department normally will not adjust such competitively 
bid prices to account for government distortion of the market because 
such distortion will normally be minimal as long as the government 
involvement in the market is not substantial. 63 FR at 65377.
    The Preamble also states that ``[w]hile we recognize that 
government involvement in the marketplace may have some impact on the 
price of the good or service in that market, such distortion will 
normally be minimal unless the government provider constitutes a 
majority or, in certain circumstances, a substantial portion of the 
market. Where it is reasonable to conclude that actual transaction 
prices are significantly distorted as a result of the government's 
involvement in the market, we will resort to the next alternative in 
the hierarchy.'' \15\
---------------------------------------------------------------------------

    \15\ Preamble, 63 FR at 65377-78 (emphasis added); see also Hot-
Rolled Carbon Steel Flat Products from Thailand, 66 FR at 20259.
---------------------------------------------------------------------------

    The guidance in the Preamble reflects the fact that, when the 
government is the predominant provider of a good or service, there is a 
likelihood that it can affect private prices for the good or service. 
Where the government effectively determines the private prices, a 
comparison of the government price and the private prices cannot 
capture the full extent of the subsidy benefit. In such a case, 
therefore, the private prices cannot serve as an appropriate benchmark.
    In the first and second administrative reviews, the Department 
determined that there were no usable private market stumpage prices in 
the provinces whose stumpage programs are under review that could serve 
as benchmarks. See ``Private Provincial Market Prices'' section of the 
Final Results of 1st Review Decision Memorandum; see also ``Use of 
First-Tier Benchmarks in Measuring Stumpage Programs Administered by 
the GOA, GOBC, GOO, GOQ, GOM, and GOS'' section of the Final Results of 
2nd Review Decision Memorandum. For the reasons discussed below, the 
Department continues to find that there are no private stumpage market 
prices in the provinces under review that can serve as first-tier 
benchmarks in Alberta, British Columbia, Manitoba, Ontario, Quebec, and 
Saskatchewan.
There Are No Useable First-Tier Benchmarks in the Subject Provinces 
Measuring the Benefit on Stumpage Programs Administered by the GOA, 
GOBC, GOO, GOQ, GOM, and GOS
    In this administrative review, the GOA reported private price data 
and government competitive bid data as reported in Alberta's 2005 TDA 
update; the GOO provided an updated survey of private prices prepared 
by Demers Gobeil Mercier & Associes Inc. (DGM); the GOQ provided 
private stumpage prices charged in its province; and the GOBC provided 
prices from auctions the government administers under the B.C. Timber 
Sales (BCTS) program. As discussed below, we have preliminarily 
determined that pricing data reported by the GOA, GOO, GOQ, and GOBC 
are not suitable for use as a benchmark within the meaning of 19 CFR 
351.111(a)(2)(i).

1. Province of Alberta

    In response to the Department's request for private timber prices, 
the GOA explained that it did not have such data. See GOA's October 3, 
2005, questionnaire response, Volume 1 at page IX-1. However, the GOA 
instead submitted the TDA survey as a source of data for arm's-length, 
cash only private log sales.\16\ Id. at Volume 1, page IX-1 and Exhibit 
AB-S-79. We have examined the data in the updated TDA survey and 
continue to find that the TDA prices are not suitable for use as 
benchmarks. See Preliminary Results of 1st Review, 69 FR at 33214, 
``Private Provincial Market Prices'' section of the Final Results of 
1st Review Decision Memorandum and at Comment 19, Preliminary Results 
of 2nd Review, 70 FR at 33099, and Final Results of 2nd Review Decision 
Memorandum at ``Pass-Through'' section and Comment 12 in which we made 
similar findings.
---------------------------------------------------------------------------

    \16\ According to the GOA, the TDA survey covers calendar year 
2004.
---------------------------------------------------------------------------

    According to the GOA, the TDA program began in the mid-1990s as a 
means for mediating disputes between timber operators and other 
industrial operators concerning the value of standing timber adversely 
affected by industrial operations on timber tenures. Pursuant to these 
efforts, a consultant collected information on log purchases made by 
participants in the TDA program. In describing the methodology in past 
reviews, they stated that ``the values on the {TDA{time}  table are 
derived by consultants from a two-year average of competitive 
Commercial Timber Permit (CTP) sales values, as well as the value of 
arm's-length log purchases, adjusted to stumpage values by backing out 
harvesting and haul costs.'' See Preliminary Results of 2nd Review, 70 
FR at 33099.
    The GOA's response indicates that the methodology used to report 
the TDA private timber transaction data for this administrative review 
has not changed since the period covered by the prior administrative 
review. See page IX-1, Volume 1 of the GOA's October 3, 2005, initial 
questionnaire. In particular, the GOA states that the TDA survey 
continues not to differentiate between logs sold that were harvested 
from private lands and those sold that originated from provincial 
lands. Id. As explained in the prior review, with respect to the TDA 
survey, the source of the logs and additional information, such as the 
respective volume and value of the TDA logs sales in Alberta, are 
highly relevant for determining whether Crown prices affect private 
prices in the province. See Comment 12 of the Final Results of 2nd 
Review Decision Memorandum. Such information is relevant because, as 
stated in the underlying investigation, ``where the market for a 
particular good or service is so dominated by the presence of the 
government, the remaining private prices in the country in question 
cannot be considered to be independent of the government price.'' See 
the ``There Are No Market-based Internal Canadian Benchmarks'' and 
``Private, Provincial, and CTP and CTL Prices as Benchmark'' sections 
of the Final Determination Decision Memorandum.
    However, despite the lack of specific information regarding 
transactions from private lands contained in the TDA survey, the GOA 
has estimated that only 290,439 m\3\ of standing timber were harvested 
from private lands during the POR. See page XII-1 of the GOA's October 
3, 2005, questionnaire response. Therefore, even if the entire volume 
of private transactions were included in the TDA values, the private 
transactions would comprise only about two percent of the total 
provincial harvest volume for the POR. As a result, the private 
transactions are a negligible proportion of the overall harvest and, as 
such, are overwhelmingly dominated by the Crown-provided timber. See 
Comment 12 of the Final Results of 2nd Review Decision Memorandum where 
the Department reached the same conclusion. Although the TDA survey 
data have been updated for the POR, the TDA survey methodology has not 
changed from that which was reported in the investigation and prior 
administrative reviews. Based on the fact that no new information has 
been presented that would warrant a change in our position and for the 
same reasons outlined in the prior review, we preliminarily determine 
that the prices in the TDA survey cannot be used to determine the 
amount by which the Alberta stumpage program confers a benefit. See 
Final Results of 2nd Review Decision Memorandum at Comment 12.

[[Page 33942]]

Therefore, based on the record evidence and consistent with the 
Department's prior determinations, we continue to find that the TDA 
survey prices cannot serve as an appropriate benchmark.

2. Province of British Columbia

    British Columbia did not provide private stumpage prices for the 
record of this proceeding. Instead, as in the second administrative 
review, the Province provided prices from auctions the government 
administers under section 20 of the Forest Act. These auctions were 
formerly conducted under the Small Business Forest Enterprise Program 
(SBFEP). In the investigation and first administrative review, the 
Department determined that the auction prices under the SBFEP program 
were not suitable for use as benchmarks in determining whether the GOBC 
sold Crown timber for less than adequate remuneration because the SBFEP 
auctions were only open to small business forest enterprises. As such, 
we determined that these prices did not reflect prices from a 
competitively run government auction, as required by our regulations. 
See 19 CFR 351.511(a)(2)(i) and the Preamble, 63 FR at 65377; see also 
the ``Private Provincial Market Prices'' section of the Final Results 
of 1st Review Decision Memorandum and Preliminary Results of 1st 
Review, 69 FR at 33214.
    On June 20, 2003, the Ministry amended the Forest Act to create a 
new agency called B.C. Timber Sales (BCTS). On November 4, 2003, during 
the second review, the SBFEP was replaced by the BCTS program. Before 
the amendment, section 20 sales under the SBFEP were classified under 
three categories. Category one was broadened to include individuals or 
corporations that own or lease a timber processing facility. This 
change effectively eliminated the restriction of section 20 auction 
sales to small businesses, allowing them to include all applicants in 
the Province. The second and third categories were subsumed into the 
new BCTS program largely unchanged, and continue to contain the same 
restrictions on participants as before the amendments to the law.
    The GOBC claimed in the second review that, pursuant to the 
changes, category one ``unrestricted'' section 20 auction prices may 
serve as first-tier benchmarks to determine whether Crown timber in 
British Columbia was sold for less than adequate remuneration. However, 
in reviewing the changes to the small business program, the Department 
determined that record evidence did not support the use of the auction 
prices as benchmarks to measure the adequacy of remuneration for Crown 
stumpage. For example, the Department concluded that the volume sold at 
auction is not ``significant'' and does not meet the standard set out 
in 19 CFR 351.511(a)(2)(i). See Preliminary Results, 70 FR at 33100 and 
Comment 14 of the Final Results of 2nd Review Decision Memorandum.
    In the second administrative review, the Department further found 
that the auction prices are effectively limited by Crown stumpage 
prices paid by Crown tenure-holding sawmills. Thus, the Department 
determined that the prices for Crown timber auctioned under section 20 
of the Forest Act, as amended, are not market-determined prices, but 
rather reflect prices for administratively set Crown stumpage. We based 
this conclusion on three factors. First, participants in the auctions 
included Crown tenure-holding sawmills but, most often, were loggers 
who then sold the timber to Crown tenure-holding sawmills. Second, the 
price that Crown tenure-holding mills are willing to pay at auction or, 
more frequently, to loggers is determined by the price the sawmills pay 
for Crown stumpage because of the non-binding Annual Allowable Cut 
(AAC) in British Columbia. Third, the price loggers bid at the auctions 
is limited by the price they receive from their customers, the largest 
of whom are tenure-holding sawmills. Based on these factors, we 
concluded that the auction prices, represented directly or indirectly 
by sales to Crown tenure-holding sawmills, are effectively determined 
by Crown stumpage prices. We further determined that the substantial 
presence of valuations by Crown tenure-holding sawmills within the BCTS 
prices means that the BCTS auction prices are not market-determined 
prices as required in the Department's regulations and are not useable 
as benchmarks for measuring the adequacy of remuneration. See 
Preliminary Results of 2nd Review, 70 FR at 33100 and Comments 13 and 
14 of the Final Results of 2nd Review Decision Memorandum.
    In the current review, the GOBC maintains its position that 
category one ``unrestricted'' section 20 auction prices may serve as 
first-tier benchmarks to determine whether Crown timber in British 
Columbia was sold for less than adequate remuneration. Furthermore, 
according to the GOBC, effective February 29, 2004, auctions of 
standing timber are used to determine the stumpage price for the timber 
harvested under long-term tenures. During the current POR, 
``unrestricted'' category one BCTS auction sales accounted for 6.5 
percent of the total log harvest compared to 1.1 percent (covering five 
months) in the second review period. Although the GOBC granted more 
timber auctions under category one during the current POR than in the 
previous administrative review, for purposes of these preliminary 
results we continue to find that the volume of Crown timber sold by the 
GOBC through these auctions cannot be considered to represent a 
``significant'' portion of the timber sold in British Columbia, and 
that the prices from these auctions, therefore, do not meet a key 
requirement for their consideration as benchmarks for measuring the 
adequacy of remuneration for government-provided goods as specified 
under 19 CFR 351.511(a)(2)(i).
    Additionally, the factors noted above that led the Department in 
the past to conclude that section 20 BCTS auction prices were not 
suitable for use as benchmarks continue during the current POR. For 
example, we continue to find that loggers that have acquired Crown-
origin timber through the BCTS auctions typically resell the logs to 
tenure-holding sawmills. See, e.g., Preliminary Results of 2nd Review, 
70 FR at 33100, citing to a study commissioned by the BCLTC and 
prepared by Susan Athey and Peter Cramton of Market Design Inc., 
entitled, ``Competitive Auction Markets in British Columbia'' (BCLTC 
Study).\17\ Furthermore, we continue to find that loggers consider the 
price they will receive from tenure-holding sawmills and that this 
price effectively determines what the loggers bid in the BCTS auctions. 
See, e.g., Preliminary Results of 2nd Review, 70 FR at 33101, citing 
the BCLTC Study which states that sawmills' valuations of logs are 
reflected in the prices loggers pay at the BCTS auctions.
---------------------------------------------------------------------------

    \17\ Evidence also indicates that sawmills continue to 
participate in the BCTS auctions. See BC-IV-43 of the GOBC's October 
3, 2005, questionnaire response, which indicates that three sawmills 
were among the 20 largest category one BCTS participants during the 
POR. The 20 largest BCTS participants accounted for 9 percent of the 
total BCTS volume billed and harvested during the POR.
---------------------------------------------------------------------------

    Moreover, the record of the current review indicates that, as we 
found in prior periods, the price that Crown tenure-holding mills are 
willing to pay at auction or, more frequently, to loggers is 
effectively determined by the price they pay for Crown stumpage because 
of the non-binding AAC in B.C. See, e.g., Preliminary Results of 2nd 
Review, 70 FR at 33101. The record shows that these large Crown tenure-
holding sawmills did not exhaust the amount of timber they could 
harvest from their tenures during the POR. As such, they

[[Page 33943]]

were not forced to obtain timber from other sources, such as the BCTS 
section 20 auctions, because of a scarcity of available timber on their 
own tenure. Specifically, the Crown tenure-holding sawmills, which hold 
forest licenses and tree farm licenses, were allocated 64.5 million 
cubic meters of timber or 82 percent of the AAC, which is the annual 
rate of timber harvesting specified in each Timber Supply Area (TSA), 
during the POR. However, these licensees harvested only 54.8 million 
cubic meters or 85 percent of their AAC, a shortfall of 9.7 million 
cubic meters. See GOBC's October 3, 2005, Questionnaire Response at BC-
S-156.
    In the current review, the GOBC has argued that BCTS auction prices 
were used during the POR to determine the stumpage prices for Crown 
timber harvested under long-term tenures, thereby demonstrating the 
viability of using the auction prices as benchmarks in the Department's 
subsidy calculations. However, as noted above, the price loggers bid at 
the BCTS auctions is limited by the price they receive from their 
customers, most of which are tenure-holding sawmills that have access 
to abundant supplies of standing timber in the Crown forest. Therefore, 
in the absence of new information that would warrant reconsideration of 
the issue, we preliminarily determine that the factors that led us in 
earlier periods to conclude that (1) the BCTS auction sale prices are 
not market-determined and (2) that they reflect prices for 
administratively set Crown stumpage continued to exist during the POR. 
Thus, we preliminarily find that section 20 BCTS auction prices cannot 
be used as valid benchmarks to measure the adequacy of remuneration of 
B.C.'s administered stumpage system.

3. Province of Ontario

    In the first and second administrative reviews, we determined that 
the prices for private standing timber in Ontario placed on the record 
by the GOO could not be used for benchmark purposes. Specifically, we 
determined that the prices reported in surveys commissioned by the GOO 
could not be used as benchmarks because the prices are effectively 
determined by the price for public timber. We also concluded that 
private stumpage prices in Ontario are not useable for benchmark 
purposes because they cannot be considered to be market-determined 
prices. See Preliminary Results of 1st Review, 69 FR at 33204, 33214-
33215; Final Results of 1st Review Decision Memorandum at Comments 20 
and 21, Preliminary Results of 2nd Review, 70 FR at 33088, 33095-33096; 
and Final Results of 2nd Review Decision Memorandum at Comment 16.
    As new information for this administrative review, the GOO 
submitted estimates (based on mill return data) of the volumes of 
private timber delivered to the various mills during the POR. See the 
GOO's October 4, 2005, questionnaire response at Vol. I, page ON-3 and 
ON-4 and Vol. 2 at ON-STATS-1. The GOO also submitted a survey of 
prices of standing timber from private lands conducted by Bearing Point 
for 2004-2005 and an assessment of the survey by Charles River 
Associates. See the GOO's December 6, 2006, submission at Exhibit 1 and 
Exhibit 2.\18\
---------------------------------------------------------------------------

    \18\ The GOO submitted copies of price surveys and assessments 
that it had commissioned for the first and second administrative 
reviews. See the GOO's December 6, 2006, submission at Exhibits 4-7.
---------------------------------------------------------------------------

    For the reasons described below, the new information submitted by 
the GOO has not led us to alter our findings from the first and second 
administrative reviews. In the second administrative review, we 
determined that information on the record shows that sawmills in 
Ontario rely on Crown timber for the vast majority of their timber 
supply needs and use private timber only in relatively small 
quantities. Evidence on the record of the current review leads us to 
the same conclusion.
    According the GOO, all mills in Ontario that use more than 1000 
cubic meters of timber per year are required to be licensed by the MNF, 
and, as of April 1, 2004, there were 81 licenced mills which produce 
softwood lumber.\19\ See ON-99 through ON-100 of the GOO's October 3, 
2005, questionnaire response. The data indicate that 91 sawmills in 
Ontario reported utilization of softwood timber at the ``commercial'' 
level of 1000 cubic meters per year, for a total of 15,990,167 million 
cubic meters. See ON-TNR-3 of the GOO's October 3, 2005, questionnaire 
response and the May 31, 2006, Memorandum to the File from Robert 
Copyak, Financial Analysts, AD/CVD Operations, Office 3, entitled, 
``Ontario Mill Return Data'' (Ontario Mill Return Memorandum). These 
data also indicate that only 11 of these ``commercial'' mills used 
private timber exclusively and the other 80 used either Crown timber 
exclusively or both Crown timber and timber from private lands. These 
11 mills account for only 3.62 percent of the total private harvest. 
The remaining 80 mills account for 99.62 percent of the overall timber 
consumption by ``commercial'' mills in Ontario and consume 96.38 
percent of the timber harvested from Ontario's private forest. Further, 
the 25 largest sawmills, which account for the large majority of timber 
consumed in the Province, used more than 11 million cubic meters of 
Crown timber and over 1 million cubic meters of private timber. 
Although private timber consumption by these largest 25 sawmills is 
small relative to their overall consumption (only 8.49 percent), it 
accounts for 63.28 percent of the all private timber consumed by 
``commercial'' producers during the POR. In other words, although the 
private standing timber market is a minor source of supply for these 
tenure-holding sawmills, they represent the main market for sellers of 
private standing timber in Ontario. See Exhibit ON-TNR-3, Volume 11 of 
the GOO's October 3, 2005, questionnaire response and the Ontario Mill 
Return Memorandum.
---------------------------------------------------------------------------

    \19\ In the first administrative review, the GOO further 
explained that it is not necessary to obtain a license if the mill 
consumes less than 1,000 cubic meters of timber a year, stating that 
anything less than 1,000 cubic meters is not considered a commercial 
quantity. See page 2 of the June 2, 2004 Memorandum from Robert 
Copyak, Financial Analyst, AD/CVD Operations, Office 3, to Melissa 
G. Skinner, Director, Office of AD/CVD Enforcement VI, entitled, 
``Verification of Information Submitted In Questionnaire Responses 
by the Government of Ontario,'' which was submitted as Exhibit ON-
VER-1, Volume 20 of the GOO's October 3, 2005, questionnaire 
response.
---------------------------------------------------------------------------

    The information on the record indicates that the GOO is willing to 
meet any amount of demand for public timber at a fixed, 
administratively set price. The allocation and harvest figures provided 
by the GOO indicate that tenure holders in Ontario are virtually 
unconstrained in the amount of Crown timber they can obtain from the 
GOO. During the POR, the GOO made available approximately 30 million 
cubic meters of public timber, yet loggers and mills in Ontario 
harvested only 70 percent of this annual allocation. See Exhibit ON-
TNR-11 of the GOO's October 3, 2005, questionnaire response. Similarly, 
in each of the last four years, the harvest level never approached the 
amount allocated by the GOO. Rather, the harvest level ranged from as 
low as 56.6 percent to no more than 88.9 percent of the annual 
allocation. Id.
    With no constraints on the amount of Crown timber that sawmills can 
obtain, the price that loggers are willing to bid on private stumpage 
is effectively determined by the difference of the expected sale price 
of the log and their harvesting costs plus profit. Loggers who sell to 
tenure-holding mills cannot expect to charge more for their private 
logs than the cost of the logs that the mills can source from their 
public tenure. The largest 25 softwood sawmills, producing the vast 
majority of the lumber in Ontario, have Crown

[[Page 33944]]

tenure for which they pay government-set stumpage prices. As we 
previously explained, because the AAC in Ontario is not binding, mills 
with public tenure can always harvest more timber from their tenure 
and, therefore, are not driven to the private market by demand that 
cannot be met from their Crown tenure-holdings. See Final Results of 
1st Review Decision Memorandum at Comments 20 and 21; see also Final 
Results of 2nd Review Decision Memorandum at Comment 16. Their 
willingness to pay for logs from other sources will be limited by their 
costs for obtaining timber from their own tenures. Therefore, the 
prices loggers bid for private stumpage are effectively determined by 
the public stumpage prices paid by these mills.
    Furthermore, at the verification conducted during the 
investigation, GOO officials explained that the allocation of public 
timber is based on elaborate five-year plans and annual forecasts.\20\ 
They then explained that harvest levels fluctuate but the overall 
harvest need only remain below the five-year target:

    \20\ Ontario uses the term ``available harvest area'' (AHA) 
rather than ``annual allowable cut'' (AAC) for harvest planning 
purposes. AHAs are set for five years in the five-year forest 
management plans. The management unit's AHA is calculated based on 
adjusted net area (total area in the unit minus lakes and protected 
areas) and the ages and species of the stands. The officials stated 
that sustainable forestry is the goal, so considerations such as 
species preservation and wildlife habitat are taken into account. 
The officials explained that, in general, about 0.5 percent of the 
area of each management unit is harvested annually.'' See page 9 of 
the February 15, 2002, Memorandum to Melissa Skinner, Director, 
Office of AD/CVD Enforcement VI, from Robert Copyak and David 
Salkeld, Case Analysts, Office of AD/CVD Enforcement VI, titled 
``Countervailing Duty Investigation of Certain Softwood Lumber 
Products from Canada: Verification of Questionnaire Responses 
Submitted by the Government of Ontario'' and included in ON-VER-1 of 
the GOO's October 3, 2005 questionnaire response (GOO Investigation 
Verification Report).
---------------------------------------------------------------------------

    The yearly forecast harvest amounts differ from the yearly 
actual harvest amounts. The officials explained that this yearly 
variation is normal because companies need only harvest less than 
the total AHA for the five-year period. The officials explained that 
a tenure holder may harvest more one year and less the next year 
(say in an effort to take advantage of high lumber prices), so long 
as the overall levels set out in the five-year plan are not 
exceeded. If there is a drastic change in available harvest area 
(due to a large fire, for example), then AHAs agreed to in the five-
year forest management plans may be altered, with salvage areas 
being swapped for areas originally slated for harvest.

See GOO Verification Report at page 10; see also Final Results of 2nd 
Review Decision Memorandum at Comment 16.
    As noted above, the data indicate that the yearly ``planned'' 
allocation amounts far exceed the actual amounts harvested in each of 
the last four years. The GOO reported that the private timber harvest 
destined to softwood sawmills during the POR was 1,072,233 cubic 
meters. See Exhibit ON-STATS-1, Volume 2 of the GOO's October 3, 2005, 
questionnaire response. Thus, the amount of public timber allocated by 
the GOO for the POR was greater than the public and private harvest 
combined. In addition, the total amount of public timber harvested 
during the five-year planning period did not approach the amount 
allocated for the period. See Id. at ON-TNR-11.
    With regard to the argument that the comparability of private 
prices and public prices indicates that tenure holders do not have 
leverage with regard to negotiating with private sellers, in the second 
administrative review we found that, given the fact that the public 
price is fixed, if anything, such comparability could indicate the 
opposite. The market for private standing timber in Ontario is 
determined by the vast supply of Crown timber because the allocation of 
timber by the GOO is such that tenure holders may obtain as much timber 
from the Crown as they choose. Because the allocation of Crown timber 
to tenure holders exceeds the tenure holders' demand, tenure holders 
would only be willing to purchase private timber at prices which result 
in a net outlay equivalent to the cost of public timber. Private land 
owners are, therefore, faced with the choice of selling at a price 
equivalent to the public price or foregoing a sale. Although the 
private land owners are ``price takers'' in one sense, this type of 
``price taking'' is not the result of a functional competitive market. 
Rather, it is the result of a market dominated by a supplier that does 
not price or allocate its supply using market mechanisms. The fact that 
private timber from Ontario is purchased by parties in Quebec or the 
United States is not necessarily indicative of a functional market for 
timber in Ontario. It simply indicates that Ontario private prices are 
comparable to or lower than other available stumpage prices. See Final 
Results of 2nd Review Decision Memorandum at Comment 16.
    For the above reasons, the Department finds that the transactions 
recorded in the Bearing Point survey are effectively determined by the 
Crown stumpage prices and are, hence, not suitable benchmarks for 
assessing adequacy of remuneration. No new information has been 
provided on the record to warrant reconsideration of this 
determination.

4. Province of Quebec

    In the first and second administrative reviews, we concluded that 
prices for private standing timber in Quebec could not serve as 
benchmarks for determining whether the GOQ sells Crown timber for less 
than adequate remuneration because the incentives that tenure holders 
face vis-a-vis the private market are distorted. We based our 
conclusion on the following factors:
     Tenure-holding sawmills have an interest in maintaining a 
low value of standing trees in private forests, as this value provides 
the basis for calculating Crown timber prices (the Feedback Effect).
     Sawmills with access to Crown timber can avoid sourcing in 
the private forest because, among other things, the annual allowable 
cut on Crown land is not binding.
     Tenure-holding sawmills dominate the private market.
     Sawmills without access to Crown timber account for small 
harvest volume in the private forest.

See Preliminary Results of 1st Review, 69 FR at 33215-33217, Final 
Results of 1st Review Decision Memorandum at Comments 22 through 33, 
Preliminary Results of 2nd Review, 70 FR at 33102, and Final Results of 
2nd Review Decision Memorandum at Comments 18 and 19.
    A review of the information on the record of this review has not 
led us to alter this finding. Similar to the first and second 
administrative reviews, the GOQ provided the aggregate sourcing 
patterns of Quebec's 1,000 softwood sawmills during 2004. The mills 
were divided into four categories: mills sourcing exclusively from 
public sources (purely public mills), mills sourcing exclusively from 
private sources (purely private mills), mills sourcing from public and 
private sources, and mills sourcing from public, private, and other 
(e.g., imports) sources (public/private/other mills).\21\ Analysis of 
the data provided shows that the purely private mills identified by the 
GOQ sourced 317,040 cubic meters of softwood timber which accounted for 
only 0.89 percent (i.e., 317,040m\3\/ 35,642,392m\3\) of the volume of 
softwood harvested in the province. See GOQ's stumpage response at 
Exhibits QC-S-47-48, and GOQ's

[[Page 33945]]

May 8, 2006, supplemental stumpage response at Exhibit 123; see also 
the May 31, 2006, Memorandum to the File from Brian Ledgerwood, 
``Quebec Internal Price Memorandum'' (Quebec Internal Price 
Memorandum). Further, record evidence indicates that the average 
consumption rate of the 120 purely private mills identified by the GOQ 
continues to be small, on average approximately 2,642 cubic meters, 
relative to the 148 dual-source mills, (i.e., mills that source from 
public and private sources),\22\ whose average consumption rate was 
approximately 169,422 cubic meters. Id.
---------------------------------------------------------------------------

    \21\ In this review, the GOQ claims that, due to changes to its 
Forestry Act, sawmills processing less than 2,000 cubic meters of 
timber per year no longer have to obtain permits and thus, are also 
not required to report log consumption information to the provincial 
government. As a result, there are 700 hundred small sawmills for 
which the GOQ claims it cannot provide any information regarding 
sourcing patterns. See GOQ's October 3, 2005, stumpage response at 
page QC-46.
    \22\ As explained above, the GOQ no longer collects consumption 
information for sawmills consuming less than 2,000 cubic meters of 
timber per year. Information from the first and second reviews 
indicates that the purely private mill category is dominated by 
mills with very small operations. We note that in the first and 
second reviews, the GOQ indicated that these small sawmills source 
exclusively from the private forest. See, e.g., Preliminary Results 
of 2nd Review, 70 FR at 33102. Thus, the average consumption of 
sawmills in the purely private category is likely even smaller than 
the data from the GOQ indicate.
---------------------------------------------------------------------------

    In addition, evidence on the record of this review indicates that 
dual-source mills dominate the market for private standing timber. The 
148 dual-source mills accounted for 90.76 percent of the private timber 
harvested in 2004 (i.e., pub/priv = 45.82% + pub/priv/oth = 44.94%). 
Id. At the same time, dual-source mills obtained only a small 
percentage of their total harvest during 2004 from private lands. For 
instance, public/private/other mills obtained 19.34 percent of their 
total harvest from the private forest while public/private mills 
sourced just 9.20 percent of their softwood from the private forest. 
Id. Thus, the data continue to indicate that the public stumpage market 
is a much more important sourcing component for dual-source mills and, 
thus, continues to be the market on which these mills focus the 
majority of their interests and operations.
    As in the first and second administrative reviews, record evidence 
indicates that the dominance of the dual-source mills is pronounced at 
the corporate level. In the GOQ's May 8, 2006, response at Exhibit 141, 
the GOQ provided actual consumption data for 185 of Quebec's softwood 
sawmills.\23\ The data in the GOQ's May 8, 2006, response at Exhibit 
141 indicate that in 2004 six corporations, whose mills source from 
both public and private sources, consumed approximately 55 percent of 
the total timber harvest, 63 percent of the public harvest, and 32 
percent of the private harvest. See Table 2 of the Quebec Internal 
Price Memorandum. Further, sorting the data in Exhibit 141 by private 
timber consumption indicates that 20 corporations (14 of which operate 
dual-source mills) account for over 72 percent of the private timber 
harvest. See Table 3 of the Quebec Internal Price Memorandum. However, 
while these orporations consume the majority of private timber in 
Quebec, private-origin timber accounts, on a weighted-average basis, 
for 11 percent of their inputs while public timber accounts for 81 
percent.
---------------------------------------------------------------------------

    \23\ These 185 mills accounted for the vast majority (88.55 
percent--i.e., 29,482,951/33,294,432) of the softwood lumber 
processed in the Province during the POR. See GOQ's May 8, 2006 
response at Exhibits 123 and 141). Thus, we find that the data in 
the GOQ's May 8, 2006 response at Exhibit 141 provide a reasonable 
summary of the consumption patterns of Quebec's softwood sawmills in 
operation during 2004.
---------------------------------------------------------------------------

    In addition, information on the record of this review indicates 
that there have been no changes to Quebec's Forestry Act that would 
lead us to alter our previous findings that feedback effects inherent 
in the GOQ's administered stumpage system encourage tenure holders to 
maintain low prices for private timber. We also continue to find that 
sawmills with access to Crown timber can avoid sourcing in the private 
forest. Therefore, for purposes of these preliminary results, we find 
that private prices for standing timber in Quebec cannot serve as 
benchmarks within the meaning of 19 CFR 351.511(a)(2)(i) when 
determining whether the GOQ sells Crown timber for less than adequate 
remuneration, because these prices are distorted by a combination of 
the GOQ's administered stumpage system, the relative size of public and 
private markets, feedback effects between the private and public 
markets, and a non-binding AAC.

5. Provinces of Manitoba and Saskatchewan

    With respect to Manitoba and Saskatchewan, the provincial 
governments did not supply private market timber prices upon which to 
base a first-tier benchmark arising from those provinces.

Private Stumpage Prices in New Brunswick and Nova Scotia May Serve as a 
First-Tier Benchmarks in the Subject Provinces

    As in the first and second administrative reviews, the GONB and 
GONS submitted on the record of this review, private stumpage prices 
for New Brunswick and Nova Scotia (together, the Maritimes). These 
prices are contained in separate price surveys prepared by AGFOR, Inc. 
Consulting (AGFOR) for each of the Maritime governments. See New 
Brunswick AGFOR Report at Exhibit 4 of the GONB's October 3, 2005, 
questionnaire response. See Nova Scotia AGFOR Report at Exhibit 6 of 
the GONS's October 3, 2005, questionnaire response. These are the same 
private price surveys that were on the records of the first and second 
administrative reviews. In its initial questionnaire response, the GONS 
submitted a new report on private stumpage prices collected by 
Innovative Resource Elements (IRE) between July 1, 2004, and December 
31, 2004, and January 1, 2005, and June 30, 2005. See Survey Results 
and Prices for Standing Timber Sales from Nova Scotia Private Woodlots 
for the period July 1 to December 31, 2004, prepared by IRE (August 3, 
2005) (``2004 IRE Report''), at Exhibit 5 of the GONS's October 3, 
2005, questionnaire response and Survey Results and Prices for Standing 
Timber Sales from Nova Scotia Private Woodlots for the period January 1 
to June 30, 2005, prepared by IRE (November 21, 2005), at Exhibit 3 of 
the GONS's January 31, 2006, supplemental questionnaire response. Nova 
Scotia Primary Forest Products Marketing Board (NSFPMB) commissioned 
the study. IRE claims that it conducted the stumpage price study using 
a survey methodology created by AGFOR in 2004. The IRE reports 
collected price data similar to that collected by AGFOR in its previous 
Nova Scotia and New Brunswick reports.
    In the first and second administrative reviews, we determined that 
private stumpage prices in the Maritimes constituted market-determined, 
in-country prices consistent with the first tier of the adequate 
remuneration hierarchy of 19 CFR 351.511(a)(2). Therefore, we used 
these prices to assess the adequacy of remuneration of the Crown 
stumpage provided by the GOA, GOM, GOO, GOQ, and GOS. See, e.g., the 
``Private Stumpage Prices in New Brunswick and Nova Scotia'' section 
and Comments 34, 35, 37, and 38 of the Final Results of 1st Review 
Decision Memorandum; see also Comments 20 through 25 of the Final 
Results of 2nd Review Decision Memorandum. As explained in the first 
and second administrative reviews, record evidence indicated that in 
establishing their Crown stumpage rates, the Maritimes consider the 
prevailing prices for stumpage in the private market and the 
calculations for the Crown stumpage rates are thus directly linked to 
actual market-based transactions in the private market. See e.g. 
,Preliminary Results of 2nd Review, 70 FR at 33103. In addition, in the 
first and second administrative reviews, we

[[Page 33946]]

found that the private supply of standing timber constitutes a 
significant portion of the overall market in the Maritimes. See e.g., 
Preliminary Results of 2nd Review, 70 FR at 33103. During the POR of 
this administrative review, private supply accounts for 50 percent of 
the total harvest in New Brunswick and over 91 percent in Nova Scotia. 
See 2003 Timber Utilization Survey (``TUS'') at Exhibit 1 of the GONB's 
October 3, 2005, questionnaire response and Registry of Buyers 2004 
Calendar Year at Exhibit 1 of the GONS's October 3, 2005, submission.
    Although interested parties have contested our use of Maritimes' 
private stumpage prices in this review, we find their comments do not 
contain any new evidence or argument that would warrant a 
reconsideration of our prior finding. For example, the argument that 
Maritimes' private stumpage prices do not reflect prevailing market 
conditions in the subject provinces is fully addressed in the first and 
second administrative reviews. See Final Results of 1st Review Decision 
Memorandum at Comment 38; See also Final Results of 2nd Review Decision 
Memorandum at Comments 20 to 25. Thus, we preliminarily determine that 
the Maritimes' private prices are market-determined prices in Canada, 
and are, therefore, usable under the first tier of our adequate 
remuneration hierarchy. Consistent with our approach in the first and 
second administrative reviews, we have used Maritimes' private prices 
to measure the adequacy of remuneration of the stumpage programs 
administered by the GOA, GOS, GOM, GOO, and GOQ.\24\
---------------------------------------------------------------------------

    \24\ In the first and second administrative reviews, we 
determined that Maritimes' private prices were not the most 
appropriate benchmark for British Columbia. See e.g., ``Benchmark 
Prices for B.C.'' section of the Final Results of 1st Review 
Decision Memorandum; See also ``Selection of Benchmark Price Used 
for British Columbia'' section of the Final Results of 2nd Review 
Decision Memorandum. We have continued to adopt this approach in the 
current review. See ``Maritimes Prices are not the most appropriate 
Benchmark for British Columbia'' section of these preliminary 
results for further discussion.
---------------------------------------------------------------------------

    With respect to New Brunswick, we continue to rely on the private 
stumpage price information contained in the New Brunswick AGFOR Report. 
However, regarding Nova Scotia, for purposes of these preliminary 
results we are basing our benchmark on data from the IRE Report. Like 
the Nova Scotia AGFOR Report, the IRE Report is based on a survey of 
stumpage fees charged on sales of standing timber in Nova Scotia's 
private forest. Further, record evidence indicates that the IRE Report 
followed a survey methodology designed by the same firm that produced 
the Nova Scotia AGFOR Report. See IRE 2004 Report at p. 9. Moreover, 
the IRE Report reflects private price data that correspond to the POR, 
as opposed to the data in the Nova Scotia Report, which tracked private 
stumpage prices charged during 1999.

Comparability of Maritimes Standing Timber and Standing Timber in 
Alberta, Manitoba, Ontario, Quebec, and Saskatchewan

    The IRE and New Brunswick Reports contain prices for the general 
timber species category of eastern SPF.\25\ SPF species are also the 
primary and most commercially significant species reported in the 
species groupings for Quebec, Ontario, Manitoba, Saskatchewan and 
Alberta, accounting for over 97 percent of the entire timber harvest 
across these provinces.\26\
---------------------------------------------------------------------------

    \25\ This category includes, among other species, white spruce, 
black spruce, red spruce, jack pine, and balsam fir, and represents 
the vast majority of the species harvested in the Maritimes.
    \26\ 98.5 percent for Quebec, 93.5 percent for Ontario, 99.89 
percent for Saskatchewan, 99.64 percent for Manitoba, and 99.9 
percent for Alberta.
---------------------------------------------------------------------------

    In the first and second administrative reviews, we found that 
although there is some minor variation of the relative concentration of 
individual species across provinces, this does not affect comparability 
for benchmark purposes. See, e.g., Preliminary Results of 1st Review, 
69 FR at 33219; and ``Private Stumpage Prices in New Brunswick and Nova 
Scotia'' section of the Final Results of 1st Review Decision Memorandum 
and at Comment 38; see also Preliminary Results of 2nd Review, 70 FR at 
33104 and Comments 21 and 25 of the Final Results of 2nd Review 
Decision Memorandum. We further found that the provinces themselves do 
not generally differentiate between these species; rather, they tend to 
group all SPF species into one category for data collection and 
pricing, e.g., Quebec charges one stumpage price for ``SPF.'' See e.g., 
Comment 25 of the Final Results of 2nd Review Decision Memorandum.
    As in the past review, petitioners contend that it is not 
appropriate to measure the adequacy of the GOA's administered stumpage 
system using a Maritimes benchmark. In addition to reiterating 
arguments from the second administrative review, petitioners assert 
that new information concerning the regional and species make-up of 
Alberta's Crown harvest supports their contention that it is 
inappropriate to use a Maritimes benchmark to measure the adequacy of 
remuneration of the GOA's administered stumpage system. Using a report 
produced by the Alberta Forest Products Association that lists sawmill 
consumption in Alberta by region, petitioners estimate that nearly two-
thirds of Alberta's softwood harvest comes from the southwestern region 
bordering the Rockies. See e.g., page 14 of petitioners' May 1, 2006, 
pre-preliminary results filing. Petitioners argue that this new 
information disproves the GOA's previous claims that over 80 percent of 
the Alberta harvest comes from the norther portion of the province. 
Petitioners assert that the southwestern region of Alberta is in an eco 
zone that more closely resembles British Columbia and, thus, is not at 
all similar to the Maritimes.
    Petitioners further argue that evidence submitted by the GOA 
indicates that lodgepole pine is the dominant species in Alberta, which 
is absent in any of the eastern provinces. Id. at page 18.\27\ 
Petitioners argue that lodgepole pine is a Western SPF species that is 
inherently larger than other species growing in the province and is 
certainly much larger than any of the Eastern SPF species present in 
the Maritimes. Petitioners assert that the disparity in the size of 
lodgepole pine is particularly pronounced in southwestern Alberta. Id. 
at 17-18.
---------------------------------------------------------------------------

    \27\ Petitioners argue that information from the GOA 
demonstrates that lodgepole pine accounts for 45 percent of 
Alberta's harvest.
---------------------------------------------------------------------------

    In the first and second administrative reviews, the Department 
relied on survey data obtained by KPMG in determining that the average 
diameter at breast height (DBH) of standing timber in Alberta was 8 
inches. See, e.g., Preliminary Results of 2nd Review, 70 FR at 33104. 
In the current review, the GOA submitted an updated version of the 
survey in its initial questionnaire response. See the study conducted 
by Bearing Point, which was included as Exhibit AB-S-25 of the GOA's 
October 3, 2005, questionnaire response. This survey indicates that the 
average DBH of SPF species in Alberta is 8.04 inches. Petitioners 
contend that the DBH measurements contained in the Bearing Point survey 
were based on inventory data and, thus, include both mature and 
immature trees. As a result, petitioners argue that the average DBH 
reported in the study is understated due to the inclusion of young 
trees. Petitioners further claim that the Bearing Point study does not 
specify that any of the timber included in the survey was harvested for 
lumber production. Referencing data they submitted on the record of the 
second administrative review and netting out trees they claim are too 
small to produce lumber,

[[Page 33947]]

petitioners estimate that the average DBH of SPF trees that entered 
Alberta's sawmills was, in fact, 9.74 inches. They argue, therefore, 
that trees in Alberta are too large to be compared to trees in the 
Maritimes, which the Department has found to average 7.8 inches DBH. 
See, e.g., petitioners' presentation attached to the April 18, 2006, 
memorandum to the file from Eric B. Greynolds, Program Manager, Office 
3, Operations titled, ``Ex Parte Meeting with Counsel to the Coalition 
for Fair Lumber Imports Concerning the Upcoming Preliminary Results'; 
see also page 18 and 19 of petitioners' May 1, 2006, filing.
    On this basis, petitioners argue that the Department should measure 
the adequacy of remuneration of Alberta's administered stumpage program 
using log prices from Montana. At the very least, petitioners argue 
that the Department should use a Montana-based log benchmark to measure 
the adequacy of remuneration of lodgepole pine harvested from Alberta's 
Crown forest. See page 24 of petitioners' May 1, 2006, submission.
    We disagree with petitioners' argument that differences due to 
forest conditions, ecosystems, climate, geography, species variations 
and differences in timber quality warrant refusing to use Maritimes'-
based price data for measuring adequacy of remuneration with respect to 
the provinces located east of British Columbia. As explained in the 
second administrative review, in terms of species, the Maritimes 
benchmark consists of prices for the Eastern SPF species group, which 
includes jack pine, balsam fir, and black, red and white spruce. We 
have grouped these timber species together for benchmark purposes 
because the various species share similar characteristics that allow 
them to be commercially interchangeable in lumber applications (i.e., 
the lodgepole pine species is considered commercially interchangeable 
with the pine species that comprise the Eastern SPF classification). 
Due to the fact that the precise mix of the species will vary in the 
SPF grouping, the interchangeability of the individual species that 
comprise the SPF species group eliminates the need to identify a 
species-specific benchmark for lodgepole pine in Alberta. As a result, 
the lack of lodgepole pine in the Maritimes does not compromise the 
adequacy of the Maritimes SPF benchmark for comparison to Alberta's 
timber in the benefit calculations. See Comment 21 of the Final Results 
of 2nd Review Decision Memorandum. In fact, petitioners themselves have 
claimed that different species within the SPF species category are 
interchangeable:

    Any comparisons based on log prices should be species-specific. 
With the exception of the BC Coast, however, the large majority of 
Canadian timber falls into the spruce-pine-fir (``SPF'') category, 
which is generally recognized as commercially interchangeable.

See Preliminary Results of 2nd Review, 70 FR at 33104.\28\
---------------------------------------------------------------------------

    \28\ In different segments of this proceeding, petitioners have 
also argued that ``adjustments for species within the SPF group * * 
* are not necessary.'' Id.

    Furthermore, in these preliminary results we continue to find that 
record evidence demonstrates that SPF trees from the Maritimes and 
Alberta are comparable across their entire growing range, as evidenced 
by diameter.\29\ As noted in the second administrative review, tree 
diameter is one of the most important characteristics in terms of 
lumber use. Id. In the current review, the data in the Bearing Point 
study and from the Maritimes continue to indicate that the average DBH 
in Alberta and New Brunswick is 8.04 and 7.8 inches, respectively.
---------------------------------------------------------------------------

    \29\ We also continue to find that trees in the Maritimes are 
comparable to those in Quebec, Ontario, Manitoba, and Saskatchewan.
---------------------------------------------------------------------------

    We disagree with petitioners' assertion that the Bearing Point 
survey relies on inventory data and, therefore, understates the average 
DBH in Alberta. The Bearing Point study clearly indicates that it was 
based on ``coniferous timber harvested by Alberta softwood lumber 
producers between April 1, 2004 and March 31, 2005.'' See e.g., page 1 
of Exhibit AB-S-25 of the GOA's October 3, 2005, questionnaire 
response, emphasis added. Further, we disagree with petitioners' claim 
that the Bearing Point study fails to specify whether the timber 
covered by the survey was harvested for lumber production. Again, the 
Bearing Point study clearly indicates that it surveyed ten of Alberta's 
largest softwood lumber producers, which accounted for 56 percent of 
the softwood harvest for FMA and CTL licensees during the POR. Id., 
emphasis added.\30\
---------------------------------------------------------------------------

    \30\ This finding is consistent with the Department's previous 
determinations that Alberta's calculation of average DBH is 
reliable. See, e.g., Comment 25 of the Final Results of 2nd Review 
Decision Memorandum; see also, e.g., page 12 of the February 15, 
2002, memorandum to Melissa G. Skinner, Director, Office of AD/CVD 
Enforcement VI, from Tipten Troidl and Darla Brown, Case Analysts, 
entitled, ``Countervailing Duty Investigation (CVD) of Certain 
Softwood Lumber from Canada: Verification of the Questionnaire 
Responses Submitted by the Government of Alberta (GOA),'' (GOA 
Investigation Verification Report), which states that the authors of 
the DBH report contacted large operators in the province who own 
sawmills and solicited the average DBH of the trees in Alberta 
``from which logs were harvested during the POI.'' The public 
version of the GOA Investigation Verification Report is on file in 
the CRU.
---------------------------------------------------------------------------

    Petitioners argue that, based on their estimation, the average DBH 
of softwood timber in Alberta is actually 9.74 inches. First, we note 
that the source of this estimation is not based on new information. 
Petitioners submitted this same information during the second 
administrative review. Regarding the source of information, the 
Department found it inconclusive given that it did not consistently 
demonstrate larger DBH measurements than those reported in the studies 
submitted by the GOA. See Comment 25 of the Final Results of 2nd Review 
Decision Memorandum. Further, as explained in the second administrative 
review, petitioners themselves have conceded that diameter differences 
do not significantly impact the price of logs for sizes up to 10 inches 
in diameter:

    {F{time} or sawlog sizes up to the 10-inch diameter class--the 
vast bulk of relevant logs in both the U.S. and Canada, outside of 
the B.C. Coast--log prices do not substantially vary on a per-unit-
basis, as long as the logs are of a sufficient size and quality to 
be sold to sawmills for milling into lumber.

Id.
    In this review, petitioners also claim that over 45 percent of tree 
stems in southwestern Alberta have a diameter of 10 inches or greater. 
See page 23 of petitioners' May 1, 2006, submission. However, on this 
point, petitioners concede that there are no data available from the 
GOA to conduct such a precise analysis and, thus, have based this claim 
on the diameter study submitted in the second administrative review. 
Id. at 22. As stated above, in the second administrative review the 
Department found petitioners' study ``inconclusive'' and did not rely 
upon its findings in reaching its determination.
    Furthermore, we note that the average DBH of 7.8 inches for the 
Maritimes is based on merchantable timber. Merchantable timber refers 
to standing timber that has reached a sufficient maturity level to be 
harvested. However, unlike the DBH data in the Bearing Point survey 
that is based on timber harvested by softwood lumber mills, the data 
used to derive the average DBH for the Maritimes makes no distinction 
between sawlog- and pulplog-sized timber.\31\ Thus, the average DBH of 
logs entering sawmills in the Maritimes may be even closer to that of 
Alberta than is

[[Page 33948]]

currently indicated by the average DBHs calculated for the respective 
provinces.
---------------------------------------------------------------------------

    \31\ Pulplogs, which are used in pulpmills, are generally 
smaller in diameter and less valuable than sawlogs, which are used 
by sawmills to make lumber.
---------------------------------------------------------------------------

    Therefore, we continue to find that the differences which may exist 
regarding forest conditions, climate, geography, and ecosystems do not 
significantly impact diameter for the provinces east of British 
Columbia.
    In sum, we preliminarily determine that Maritimes prices for 
Eastern SPF are comparable to Crown stumpage prices for the SPF species 
groupings in Quebec, Ontario, Manitoba, Saskatchewan, and Alberta. 
Accordingly, consistent with 19 CFR 351.511(a)(2)(i), we have compared 
these market-determined, in-country prices to the Crown stumpage prices 
in each of the provinces to determine whether the Crown prices were for 
less than adequate remuneration.

Application of Maritimes Prices

    Having preliminarily found that the Maritimes' prices are in-
country, market-determined prices, we next consider how to apply these 
prices in our benefit calculations.

1. Indexing

    The IRE Report contains price data for Nova Scotia that corresponds 
to the POR. However, the New Brunswick Report contains price data for 
the period July 1, 2002, to November 30, 2002. In the second review, we 
indexed the data in the Nova Scotia and New Brunswick Reports using a 
lumber-specific index reported for the Atlantic Region by STATCAN. See 
e.g., Preliminary Results of 2nd Review, 70 FR at 33104. However, new 
evidence on the record of this review indicates that the GONS does not 
rely exclusively on the STATCAN lumber index when indexing its 
provincial stumpage prices. See Appendix F of AGFOR's ``Methodology to 
Survey and Report Standing Timber Prices in Nova Scotia,'' which was 
submitted as Exhibit 1 of the GONS's January 31, 2006, supplemental 
questionnaire response. The response of the GONS indicates that the 
index is a combination of data from the STATCAN lumber index and an 
index derived from prices of lumber delivered in Boston, as published 
by Random Lengths, converted to Canadian dollars. Id. In light of this 
new information indicating that a Maritimes government is using the 
composite index, we preliminarily determine to use the composite index 
to convert the private price data in the New Brunswick Report to POR-
dollars. For additional information, see the May 31, 2006, Maritimes 
Calculation Memorandum.

2. Costs That Must Be Paid in Order To Harvest Private Standing Timber 
in New Brunswick and Nova Scotia

    In the first and second administrative reviews, we found that the 
pricing data for New Brunswick and Nova Scotia reflect the prices paid 
by harvesters for standing timber and include the value of the timber 
being purchased in addition to any landowner costs. See e.g., Final 
Results of 1st Review Decision Memorandum at Comment 39; see also Final 
Results of 2nd Review Decision Memorandum at Comments 36 through 38. We 
also found that harvesters in the Maritimes incur additional costs that 
must be paid in order to be able to acquire private timber. 
Specifically, we found that harvesters in New Brunswick are required to 
pay silviculture fees as well as administrative fees to the marketing 
board operating within the region. In Nova Scotia, in order to be able 
to acquire the standing timber, the registered buyer must either pay 
for or perform in-kind activities equal to C$3.00 for every cubic meter 
of private wood harvested. Id.\32\ For purposes of these preliminary 
results, we find there have been no new information or arguments from 
interested parties that would warrant reconsideration of these 
findings. Therefore, we added these costs to the indexed stumpage 
prices to obtain the average stumpage price for softwood logs from New 
Brunswick and Nova Scotia. For additional information, see the May 31, 
2006, Maritimes Calculation Memorandum.
---------------------------------------------------------------------------

    \32\ In the final results of the first and second administrative 
reviews, we also confirmed that harvesters of private standing 
timber in Nova Scotia and New Brunswick do not incur any other 
charges (i.e., road building/maintenance costs, fire prevention 
costs, or land owner related costs).
---------------------------------------------------------------------------

3. Weighting of Studwood in the Nova Scotia Benchmark

    The GONS does not collect harvest volume data by log type (i.e., 
studwood log, sawlog, or treelength log). Thus, in the second 
administrative review, we weight-averaged the sawlog and studwood 
prices in Nova Scotia, as reported by AGFOR in a survey it conducted on 
behalf of the GONS, by using the actual harvest volumes reported by the 
harvesters. This approach was consistent with our use of volume data in 
the New Brunswick Report to derive average marketing board levies for 
New Brunswick. See Comment 34 of the Final Results of 2nd Review 
Decision Memorandum. However, in its January 31, 2006, supplemental 
questionnaire response at part G, the GONS provided a breakdown of 
studwood and sawlogs harvested in the province. Therefore, for the 
purposes of these preliminary results, we find it appropriate to weight 
studwood and sawlogs according to those percentages. For additional 
information, see the May 31, 2006, Maritimes Calculation Memorandum.

Benchmark Prices Used for British Columbia

Maritimes' Stumpage Prices Are Not the Most Appropriate Benchmarks for 
British Columbia

    In the final results of the first review, we concluded that the 
Maritimes' private stumpage prices were not suitable as benchmarks for 
British Columbia because of the lack of commercial interchangeability 
between the species in British Columbia and the Eastern SPF species in 
the Maritimes. See ``Maritimes Benchmarks Are Not the Most Appropriate 
for B.C.'' section of the Final Results of 1st Review Decision 
Memorandum; see also ``Selection of Benchmark Price Used for British 
Columbia'' section of the Final Results of 2nd Review Decision 
Memorandum. We preliminarily determine that the record does not contain 
any new evidence which would warrant a reconsideration of our finding 
from the final results of the first review.

B.C. Log Prices Are Not an Appropriate Benchmark

    In the final results of the first and second reviews, we found that 
stumpage and log markets in British Columbia were closely intertwined 
and, therefore, Crown stumpage prices affected both stumpage and log 
prices. See ``B.C. Log Prices Are Not An Appropriate Benchmark'' 
section of the Final Results of 1st Review Decision Memorandum; see 
also Preliminary Results of 2nd Review, 70 FR at 33106, and ``Selection 
of Benchmark Price Used for British Columbia'' section and Comment 15 
of the Final Results of 2nd Review Decision Memorandum. We further 
found that Crown logs were, in fact, sold in substantial quantities on 
the log market. See e.g., Preliminary Results of 2nd Review, 70 FR at 
33106. For example, we found that the great majority of wood sold in 
B.C. (apart from allocated Crown wood) was purchased by large 
integrated tenure-holding producers who purchase wood for their 
sawmills following standard purchase contracts that were structured as 
log or stumpage purchases. Thus, we determined that these producers 
were indifferent as to which form of wood, i.e., either timber or logs, 
they purchased for use in softwood lumber production and that the 
decision to

[[Page 33949]]

purchase either timber or logs would instead ultimately depend on 
price.
    In the final results of the first and second administrative 
reviews, we further determined that, because these companies 
simultaneously purchased and used both forms of wood, they must in 
principle view the cost of stumpage and logs as equivalent, i.e., 
stumpage price plus the cost of harvesting should equate to the cost of 
a log. In addition, we explained that the fact that these producers 
used both timber and logs throughout the period of the first review to 
produce softwood lumber meant that stumpage-log price equivalence was 
maintained throughout that review period and that this, in turn, 
suggested that the timber and log prices were linked (e.g., low (or 
high) timber prices means low (or high) log prices). Id. For these 
reasons, we determined that B.C. log prices are not market-determined 
prices independent from the effects of the underlying Crown stumpage 
prices and, therefore, cannot be used to assess the adequacy of 
remuneration of B.C.'s stumpage program. In addition, we noted that the 
log price data submitted by the GOBC did not distinguish between Crown 
logs and private logs and, thus, even if we found that purely private 
log prices were not affected by the Crown stumpage prices, it would be 
impossible to isolate such prices from the Crown log prices to 
establish a benchmark. See Comment 15 of the Final Results of 2nd 
Review Decision Memorandum. For purposes of these preliminary results, 
we find that the record does not contain any new evidence that would 
warrant a reconsideration of our finding from the final results of the 
first review.

U.S. Stumpage Prices Are Not the Most Appropriate Benchmark for British 
Columbia

    In the first and second administrative reviews, we explained that 
we were cognizant of the fact that a NAFTA Panel, considering the B.C. 
benchmark employed in the underlying investigation, found that standing 
timber is not a good that is commonly traded across borders. See 
``World Market Prices'' in Final Results of 1st Review Decision 
Memorandum; see also Preliminary Results of 2nd Review, 70 FR at 33106, 
and ``Selection of Benchmark Price Used for British Columbia'' section 
of the Final Results of 2nd Review Decision Memorandum. We also 
explained, in considering U.S. stumpage prices as a benchmark under our 
regulatory hierarchy, that using those prices would require complex 
adjustments to the available data. We therefore turned our analysis to 
U.S. log prices. See e.g., Preliminary Results of 2nd Review, 70 FR at 
33106. For purposes of these preliminary results, we find that the 
record of this review does not contain any new evidence that would 
warrant a reconsideration of our finding from the final results of the 
first review.

U.S. Log Prices Are a More Appropriate Benchmark

    In the final results of the first and second administrative 
reviews, we found that U.S. log prices may constitute third-tier 
benchmarks when determining the adequacy of remuneration of the GOBC's 
administered stumpage program (i.e., a benchmark that is consistent 
with market principles under 19 CFR 351.511(a)(2)(iii)). See ``U.S. Log 
Prices Are a More Appropriate Benchmark'' in Final Results of 1st 
Review Decision Memorandum; see also Comment 28 of the Final Results of 
2nd Review Decision Memorandum. In the final results of the first and 
second administrative reviews, we stated that a market principles 
analysis by its very nature depends on the available information 
concerning the market sector at issue, and must, therefore, be 
developed on a case-by-case basis. In this case, we found that using 
U.S. log prices is consistent with a market principles analysis, 
because (1) stumpage values are largely derived from the demand for 
logs produced from a given tree; (2) the timber species in the U.S. 
Pacific Northwest and British Columbia are very similar and, therefore, 
U.S. log prices, properly adjusted for market conditions in British 
Columbia, are representative of prices for timber in British Columbia; 
and (3) U.S. log prices are market determined. See e.g., ``Selection of 
Benchmark Price Used for British Columbia'' section and Comments 28 and 
29 of the Final Results of 2nd Review Decision Memorandum. For purposes 
of these preliminary results, we find that the record of the current 
review does not contain any new evidence that would warrant a 
reconsideration of our finding from the final results of the first 
review. We also continue to make the same adjustments employed in the 
first and second administrative reviews to derive the market stumpage 
prices for British Columbia. See ``Calculation of the ``Derived Market 
Stumpage Price'' section below.

Application of U.S. Log Prices

1. Selection of Data Sources

    In the final results of the second administrative review, our U.S. 
log benchmark prices for the B.C. Interior consisted of prices from the 
Oregon Department of Forestry (covering the area east of the Cascade 
Mountains), Northwest Management Inc.''s Log Market Report (covering 
Eastern Washington, North Idaho, and Western Montana), the University 
of Montana's Montana Sawlog and Veneer Price Report (covering Western 
Montana), the Oregon Log Market Report (covering Eastern Oregon), and 
the Washington Log Market Report (covering Eastern Washington, Idaho, 
and Montana). In the final results of the second administrative review, 
our U.S. log benchmark prices for the B.C. Coast consisted of prices 
from Log Lines (covering the coastal, northwest, and southwest regions 
of Washington and Oregon), the Oregon Department of Forestry (covering 
coastal, northwest, and southwest regions of Oregon), Pacific Rim Wood 
Market Report (covering western Washington and Oregon), the Oregon Log 
Market Report (covering northwest and southwest Oregon), and the 
Washington Log Market Report (covering eastern Washington, Idaho, and 
Montana).
    In the current administrative review, petitioners have reiterated 
arguments from the previous segment of the proceeding, asserting that 
the Department should limit its U.S. log benchmark to those regions 
that are contiguous to Coastal and Interior British Columbia. With 
respect to Interior British Columbia, petitioners contend that the 
Department should limit its U.S. log benchmark to the two data sources 
utilized in the first administrative review, Northwest Management 
Inc.'s Log Market Report (covering Eastern Washington, North Idaho, and 
Western Montana), the University of Montana's Montana Sawlog and Veneer 
Price Report (covering Western Montana). They contend that the use of 
other data sources results in the inclusion of logs sourced from areas 
whose ecosystems and species mix are drastically different from those 
found in the B.C. Interior. They also argue that logs harvested far 
from the B.C. border are less likely to be integrated with the B.C. 
Interior and, thus, less comparable than those logs harvested in 
regions contiguous to the province. See pages 2 through 5 of 
petitioners' May 1, 2006, filing.
    At the very least, petitioners argue that the Department should 
refrain from using log price data for Eastern Oregon, as published by 
the Oregon Log Market Report, when measuring the adequacy of the GOBC's 
administered stumpage program in Interior British Columbia. Petitioners 
allege that the prices in the

[[Page 33950]]

report do not reflect actual sales, are not collected on a month-to-
month basis as evidenced by the lack of price changes in certain 
regions during several consecutive months, are based on reports from 
voluntary respondents, and are based on reports from a limited number 
of lumber producers with a limited amount of production. See pages 5 
through 11 of petitioners' May 1, 2006, filing; see also petitioners' 
presentation attached to the April 18, 2006, memorandum to the file 
from Eric B. Greynolds, Program Manager, Office 3, Operations, 
entitled, ``Ex Parte Meeting with Counsel to the Coalition for Fair 
Lumber Imports Concerning the Upcoming Preliminary Results.'' They 
further argue that harvesting activities in Eastern Oregon are less 
intense, as measured by harvest density, compared to both the B.C. 
Interior and the U.S. benchmark regions contiguous with the B.C. 
border. They argue the differences in harvesting density demonstrate 
that data from Eastern Oregon are less comparable than data from the 
states contiguous to B.C. border. See petitioners' May 11, 2006, 
submission. Petitioners also contend that in the second administrative 
review, the Department used criteria similar to that employed by 
petitioners in their evaluation of the Oregon Log Market Report to 
reject the use of a log-based price index advocated by petitioners for 
use in calculating the Maritimes benchmark. Petitioners contend that 
the application of the same rigorous assessment of the reliability and 
representativeness of the log-based price index would lead to the 
conclusion that the eastern Oregon log prices contained in the Oregon 
Log Market Report cannot be used in constructing a benchmark for the 
B.C. Interior. Id.
    We have previously addressed petitioners' arguments about the 
comparability of timber from regions that are not contiguous with the 
B.C. border. As explained in the second administrative review, the data 
contained in the reports reflect species harvested in the Pacific 
Northwest (PNW) that are representative of the dominant species 
harvested in British Columbia. For example, in the B.C. Interior, the 
three dominant species are lodgepole pine, spruce, and douglas fir. All 
of the U.S. log reports relating to the B.C. Interior contain U.S. log 
prices for each of these dominant species. See Comment 47 of the Final 
Results of 2nd Review Decision Memorandum.
    We disagree with petitioners' claim that the data for eastern 
Oregon in the Oregon Log Market Report are unreliable due to data flaws 
and methodological errors. On April 21, 2006, staff from the Department 
of Commerce contacted the editor of the Oregon Log Market Report and 
asked him to explain the concerns raised by petitioners during their ex 
parte meetings with the Department, as well as answer questions posed 
by Department staff regarding the report. See the May 2, 2006, 
Memorandum to the File from Eric B. Greynolds, Program Manager, and 
Tipten Troidl, Case Analyst, Office 3, Operations, entitled, 
``Telephone Call to the Editor of the Oregon Log Market Report.'' As 
indicated in the memorandum, the editor of the report stated that all 
prices in the Oregon Log Market Report reflect actual transaction 
prices, that his survey respondents include log buyers, sawmills, wood 
chippers, and log sellers, and that he collects price data from his 
respondents on a monthly basis. Id.
    We also disagree with petitioners' contention that the criteria 
employed in the second administrative review to reject the use of a 
log-based price index compel the Department to also discard the log 
price data for eastern Oregon in the Oregon Log Market Report. As noted 
above, evidence indicates that the data in the Oregon Log Market Report 
reflect transaction prices, which was not the case with respect to the 
source of petitioners' Maritime log-based price index in the second 
review. Furthermore, in the second administrative review, the 
Department was forced to choose between using price indices that were 
based on different products and data sets. As such, the Department was 
confronted with an either/or situation. In contrast, in calculating its 
U.S. log benchmark, the Department is seeking to construct the most 
representative and robust data set for comparable species in the PNW 
and, therefore, does not face an either/or situation. Petitioners' 
characterization of our approach in the second administrative review 
does not take this distinction into account.
    On this basis, we preliminarily determine that it is appropriate to 
construct our U.S. log benchmarks for Coastal and Interior British 
Columbia, using the same data sources utilized in the second 
administrative review. For further information on data sources used, 
see the May 31, 2006, ``Preliminary Results Calculation for the 
Province of British Columbia Calculation Memorandum (``British Columbia 
Calculation Memorandum'').

2. Derivation of U.S. Log Prices on a Per-Unit Basis for Use in 
Comparison to Log Prices on the B.C. Coast and Interior

a. Weighting of U.S. Log Price Sources
    Consistent with our approach in the second administrative review, 
to make the benefit calculations for Coastal and Interior B.C., we 
first constructed a U.S. log price benchmark for each species harvested 
on the B.C. Coast and Interior, respectively. To construct the U.S. log 
price benchmarks, we calculated an annual average price for each 
species. We have done this, first, by simple-averaging log prices for 
each species reported in each U.S. log price report for the POR and, 
second, by taking a simple average of those species-specific annual 
average prices by source to arrive at a final species-specific annual 
average price. See Comment 48 of the Final Results of 2nd Review 
Decision Memorandum.\33\ For purposes of these preliminary results, we 
find that the record does not contain any new evidence which would 
warrant a reconsideration of our approach from the final results of the 
second administrative review.
---------------------------------------------------------------------------

    \33\ As explained in the second administrative review, this 
approach is necessary because we lack data regarding the volume of 
reported U.S. log sales that would allow us to calculate weighted-
average prices. See Preliminary Results of 2nd Review, 70 FR at 
33107; see also Comment 48 of the Final Results of 2nd Review 
Decision Memorandum.
---------------------------------------------------------------------------

b. Conversion of U.S. Log Prices Into Canadian Dollar (CAD)/Cubic Meter
    The U.S. log price data was expressed in U.S. dollars (USD) per 
thousand board feet (mbf). Therefore, it was necessary to convert our 
benchmark data so that they were expressed in the same currency and 
unit of measure as the B.C. administered stumpage prices. In the final 
results of the first and second administrative reviews, we converted 
U.S. log price data for the B.C. Coast using a conversion factor of 
6.76 USD/cubic meter. For the B.C. Interior, we used a conversion 
factor of 5.93 USD/cubic meter. We then converted the benchmark prices 
into Canadian currency based on the average of the daily USD/CAD daily 
exchange rate, as published by the Federal Reserve Bank of New York. 
See e.g., Comment 44 of the Final Results of 2nd Review Decision 
Memorandum. For purposes of these preliminary results, we find that the 
record does not contain any new evidence that would warrant a 
reconsideration of our approach from the final results of the first 
review. Therefore, we continue to apply the same conversion factors and 
exchange approach that was employed in the final

[[Page 33951]]

results of the first and second administrative reviews.

Calculation of Provincial Benefits

Adjustment to Administrative Stumpage Unit Price

    As explained in the final results of the second administrative 
review, we employed a methodology for adjusting the unit prices of the 
Crown stumpage programs administered by the GOA, GOS, GOM, GOO, and 
GOQ. In making our adjustments, we focused on those costs that are 
assumed under the timber contract (e.g., the Crown tenure agreement) 
and those costs that are necessary to access the standing timber for 
harvesting (but that may differ substantially depending on the location 
of the timber). Where such costs are incurred by harvesters in either 
the Maritimes or the subject provinces, we included them in our benefit 
calculations. We did not, however, make adjustments for costs that 
might be necessary to access the standing timber for harvesting but 
that do not differ substantially based on the location of the timber 
(e.g., costs for tertiary road construction and harvesting). Because 
the Maritimes data reflect prices at the point of harvest, we also did 
not include post-harvest activities such as scaling and delivering logs 
to mills or market. Id. In this manner, we adjusted the unit stumpage 
prices of the GOA, GOS, GOM, GOO, and GOQ such that they were on the 
same ``level'' as the private stumpage prices we obtained from the 
Maritimes. See the ``Calculation of Provincial Benefits'' section of 
the Final Results of 2nd Review Decision Memorandum.
    For purposes of these preliminary results, we find that the record 
does not contain any new evidence that would warrant a reconsideration 
of our approach from the final results of the second review. Therefore, 
to calculate the unit benefit conferred under the five provinces' 
administered stumpage programs, we subtracted from the species-specific 
benchmark prices the cost-adjusted weighted-average stumpage price per 
species. Next, we calculated the species-specific benefit by 
multiplying the species-specific unit benefit by the total softwood 
timber harvest volume for that species during the POR. We then summed 
the species-specific benefits to calculate the total stumpage benefit 
for each province.
1. Province of Alberta
a. Derivation of Administered Stumpage Unit Prices
    To derive Alberta's administratively established stumpage rate, we 
divided the total timber dues charged to tenure holders during the POR 
for each species by the total softwood stumpage billed under each 
tenure for each species. In this manner, we obtained a weighted-average 
stumpage price per species that was paid by tenure holders during the 
POR.
b. Adjustments to Administered Stumpage Unit Price
    Pursuant to the methodology established in the final results of the 
first and second administrative reviews, we have added the following 
costs to Alberta's administered stumpage unit price: \34\
---------------------------------------------------------------------------

    \34\ For a description of the derivation of the unit costs added 
to the GOA's administered stumpage price, see the May 31, 2006, 
Preliminary Calculations Memorandum for Alberta. The derivations of 
the unit costs for the GOS, GOM, GOO, and GOQ are also described in 
this calculation memorandum. The categories of costs added to the 
administered stumpage prices of the GOA, GOS, GOM, GOO, and GOQ are 
the same as those used in the final results of the second review. 
See the ``Calculation of Provincial Benefits'' section of the Final 
Results of 2nd Review Decision Memorandum.
---------------------------------------------------------------------------

     Costs for Primary and Secondary Roads (e.g., Permanent 
Road Costs in Road Classes 1 Through 4).
     Basic Reforestation.
     Forest Management Planning.
     Holding and Protection.
     Environmental Protection.
     Forest Inventory.
     Reforestation Levy.
     Fire, Insect, and Disease Protection.
c. Calculation of the Benefit
    To calculate the unit benefit under this program, we compared the 
species-specific benchmark prices (the Maritimes private stumpage 
prices described above) to the GOA's corresponding adjusted 
administered stumpage prices. In this manner, we calculated a unit 
benefit for each species group. Next, we calculated the species-
specific unit benefit by the total species-specific softwood timber 
billed volume in Alberta during the POR.
    Regarding the softwood timber billed volume used in the benefit 
calculations, the GOA claims that its stumpage classification system 
does not allow the province to isolate the wood volumes going strictly 
to sawmills and used to produce lumber. Thus, it is necessary to derive 
the volume of softwood Crown logs that entered and were processed by 
Alberta's sawmills during the POR (i.e., logs used in the lumber 
production process). We performed a similar calculation in the first 
administrative review. However, upon identifying additional information 
discussed below, we determined that it is necessary to alter our 
approach to the calculations for Alberta.
    The GOA argues that this volume amount harvested by non-sawmill-
owning tenure holders should not be included in our calculations. 
However, by the GOA's own admission, this volume amount includes logs 
that were subsequently sold to sawmills. See, e.g., page 8 of the GOA's 
May 2, 2005 supplemental questionnaire response. Further, with respect 
to this volume amount, the GOA provided no means by which we could 
identify the portion of the volume that went to sawmills and the 
portion that was exported or went to non-sawmills. Thus, because there 
is no way to break out this volume amount and because the GOA has 
offered no information on whether any subsidies attributable to this 
softwood timber did or did not pass through to any sawmills, we have, 
as a starting point, included the entire timber volume in question when 
determining the volume of Crown logs to include in the numerator of 
Alberta's provincial subsidy rate calculation.
    In order to determine the volume of Crown logs that went to 
sawmills (a.k.a., ``net-down'' approach), we have slightly revised the 
methodology that was used in the first administrative review. 
Specifically, we have used the GOA's Section 80/81 timber data from 
Table 39, Exhibit AB-S-87 that has not been ``netted down'' as the 
basis for Alberta's benefit calculation. This data differs from the 
data set reported in the first review (Alberta Verification Exhibit, 
GOA-3, AR Table 43, Exhibit AB-S-70) because it represents the Section 
80/81 basket category of timber which has not been ``netted down'' to 
exclude the volumes from tenure holders who do not own sawmills.
    We subsequently added the volumes of certain non-lumber categories 
to the Crown Section 80/81 data to capture the universe of timber going 
to sawmills which corresponds to the provincial softwood billed volume 
identified in the PwC survey and reported by the GOA in Exhibit AB-S-
107. The resulting aggregate Crown softwood billed volume was then 
``netted down'' using the ``percentage of survey billed volume as 
lumber'' reported in the PwC survey results. This calculation enabled 
the Department to derive the Alberta's total Crown stumpage billed 
volume on a species-specific basis, which reflects the volume of 
provincial stumpage cut by tenure holders and sent to sawmills for 
processing into lumber and co-products. For further discussion, see the 
Preliminary Calculation

[[Page 33952]]

Memorandum.\35\ Finally, we summed the species-specific benefits to 
calculate the total stumpage benefit for the province.
---------------------------------------------------------------------------

    \35\ We note that this volume of timber is separate from the 
volume of timber included in the GOA's pass-through claim. For 
further information regarding the GOA's pass-through claim, see the 
``Pass Through'' section of these preliminary results.
---------------------------------------------------------------------------

d. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit by Alberta's POR stumpage program denominator. 
For a discussion of the denominator used to derive the provincial rate 
for stumpage programs, see ``Numerator and Denominator Used for 
Calculating the Stumpage Programs' Net Subsidy Rates'' in these 
preliminary results. As explained in ``Aggregate Subsidy Rate 
Calculation,'' we weight-averaged the benefit from this provincial 
subsidy program by Alberta's relative share of total exports of 
softwood lumber to the United States during the POR. The total 
countervailable subsidy for the provincial stumpage programs can be 
found in ``Country-Wide Rate for Stumpage.''
2. Province of Manitoba
a. Adjustments to Administered Stumpage Unit Price
    The GOM reported average, per-unit stumpage prices for the POR. 
Thus, our next step was to adjust the per-unit stumpage prices pursuant 
to the methodology described above in ``Calculation of Provincial 
Benefits.'' Specifically, we have added the following costs to 
Manitoba's administered stumpage unit price:
     Forest Renewal Charge.
     Forest Management License Silviculture.
     Costs for Permanent Roads (e.g., Primary and Secondary 
Roads).
     Forest Inventory.
     Forest Management Planning.
     Environmental Protection.
     Fire Protection.
b. Calculation of the Benefit
    To calculate the unit benefit conferred under the GOM's 
administered stumpage program, we subtracted from the species-specific 
benchmark prices the cost-adjusted weighted-average stumpage price per 
species. Next, we calculated the species-specific benefit by 
multiplying the species-specific unit benefit by the total softwood 
timber harvest volume for that species during the POR. We then summed 
the species-specific benefits to calculate the total stumpage benefit 
for the province.
c. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit for Manitoba by the POR stumpage program 
denominator. For a discussion of the denominator used to derive the 
provincial rate for stumpage programs, see ``Numerator and Denominator 
Used for Calculating the Stumpage Programs' Net Subsidy Rates.'' As 
explained in ``Aggregate Subsidy Rate Calculation,'' we weight-averaged 
the benefit from this provincial subsidy program by Manitoba's relative 
share of total exports of softwood lumber to the United States during 
the POR. The total countervailable subsidy for the provincial stumpage 
programs can be found in ``Country-Wide Rate for Stumpage.''
3. Province of Saskatchewan
a. Derivation of Administered Stumpage Unit Prices
    To derive Saskatchewan's administratively established stumpage 
rate, we divided the total stumpage collections for each species by the 
corresponding volume of Crown softwood timber destined to sawmills. In 
this manner, we obtained a weighted-average stumpage price per species 
that was paid by tenure holders during the POR.
b. Adjustments to Administered Stumpage Unit Price
    Next, we adjusted the administered stumpage unit prices pursuant to 
the methodology describe above in ``Calculation of Provincial 
Benefits.'' Specifically, we have added the following costs to 
Saskatchewan's administered stumpage unit price:
     Forest Management Fee.
     Processing Facilities License Fee.
     Forest Product Permit Application Fee.
     Forest Management Activities.
     Costs for Permanent Roads (e.g., Primary and Secondary 
Roads).
c. Calculation of the Benefit
    To calculate the unit benefit conferred under the GOS's 
administered stumpage program, we subtracted from the species-specific 
benchmark prices the cost-adjusted weighted-average stumpage price per 
species. Next, we calculated the species-specific benefit by 
multiplying the species-specific unit benefit by the total softwood 
timber harvest volume for that species during the POR. We then summed 
the species-specific benefits to calculate the total stumpage benefit 
for the province.
d. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit for Saskatchewan by the POR stumpage program 
denominator. For a discussion of the denominator used to derive the 
provincial rate for stumpage programs, see ``Numerator and Denominator 
Used for Calculating the Stumpage Programs' Net Subsidy Rates.'' As 
explained in ``Aggregate Subsidy Rate Calculation,'' we weight-averaged 
the benefit from this provincial subsidy program by Ontario's relative 
share of total exports of softwood lumber to the United States during 
the POR. The total countervailable subsidy for the provincial stumpage 
programs can be found in ``Country-Wide Rate for Stumpage.''
4. Province of Ontario
a. Derivation of Administered Stumpage Unit Prices
    To derive Ontario's administratively established stumpage rate, we 
divided the total stumpage collections for each species by the 
corresponding volume of Crown softwood timber destined to sawmills. In 
this manner, we obtained a weighted-average stumpage price per species 
that was paid by tenure holders during the POR.
b. Adjustments to Administered Stumpage Unit Price
    Next, we adjusted the administered stumpage unit prices pursuant to 
the methodology describe above in the ``Calculation of Provincial 
Benefits'' section of these preliminary results. Specifically, we have 
added the following costs to Ontario's administered stumpage unit 
price:
     Forest Management Planning.
     Construction and Maintenance of Primary and Secondary 
Roads.
     Fire Protection.
     First Nations and Management Fees. c. Calculation of the 
Benefit
    To calculate the unit benefit conferred under the GOO's 
administered stumpage program, we subtracted from the species-specific 
benchmark prices the cost-adjusted weighted-average stumpage prices per 
species. Next, we calculated the species-specific benefit by 
multiplying the species-specific unit benefit by the total softwood 
timber harvest volume for that species during the POR. We then summed 
the species-specific benefits to calculate the total stumpage benefit 
for the province.

[[Page 33953]]

d. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit for Ontario by the POR stumpage program 
denominator. For a discussion of the denominator used to derive the 
provincial rate for stumpage programs, see ``Numerator and Denominator 
Used for Calculating the Stumpage Programs' Net Subsidy Rates.'' As 
explained in ``Aggregate Subsidy Rate Calculation,'' we weight-averaged 
the benefit from this provincial subsidy program by Ontario's relative 
share of total exports of softwood lumber to the United States during 
the POR. The total countervailable subsidy for the provincial stumpage 
programs can be found in ``Country-Wide Rate for Stumpage.''
5. Province of Quebec
a. Derivation of Administered Stumpage Unit Prices
    To derive Quebec's administratively established stumpage rate, we 
divided the total stumpage collections for each species by the 
corresponding volume of Crown softwood timber destined to sawmills. In 
this manner, we obtained a weighted-average stumpage price per species 
that was paid by tenure holders during the POR.
b. Adjustments to Administered Stumpage Unit Price
    Next, we adjusted the administered stumpage unit prices pursuant to 
the methodology describe above in ``Calculation of Provincial 
Benefits.'' Specifically, we have added the following costs to Quebec's 
administered stumpage unit price:
     Forest Fund.
     Administrative Forest Planning.
     Non-Credited Silviculture.
     Construction and Maintenance of Primary and Secondary 
Roads.
     Fire and Insect Protection.
     Logging Camps.
     Silviculture Credits for Non-Mandatory Activities 
(Negative Adjustment).
c. Calculation of the Benefit
    To calculate the unit benefit conferred under the GOQ's 
administered stumpage program, we subtracted from the species-specific 
benchmark prices the cost-adjusted weighted average stumpage prices per 
species. Next, we calculated the species-specific benefit by 
multiplying the species-specific unit benefit by the total softwood 
timber harvest volume for that species during the POR. We then summed 
the species-specific benefits to calculate the total stumpage benefit 
for the province.
d. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit for Quebec by the POR stumpage program 
denominator. For a discussion of the denominator used to derive the 
provincial rate for stumpage programs, see ``Numerator and Denominator 
Used for Calculating the Stumpage Programs'' Net Subsidy Rates.'' As 
explained in ``Aggregate Subsidy Rate Calculation,'' we weight-averaged 
the benefit from this provincial subsidy program by Ontario's relative 
share of total exports of softwood lumber to the United States during 
the POR. The total countervailable subsidy for the provincial stumpage 
programs can be found in ``Country-Wide Rate for Stumpage.''
6. Province of British Columbia
a. Derivation of Administered Stumpage Unit Prices
    To derive British Columbia's administratively established stumpage 
rate, we divided the total stumpage collections for each species for 
the Coast and Interior by the corresponding Crown softwood sawlog 
volume. In this manner, we obtained a weighted-average stumpage price 
per species.
b. Calculation of the ``Derived Market Stumpage Price''
    Consistent with our approach from the first and second 
administrative reviews, we calculated a ``derived market stumpage 
price'' for each species by using U.S. log prices as the benchmark for 
standing timber prices to measure the adequacy of remuneration of 
B.C.''s administered stumpage system. See supra section on use of U.S. 
log prices as B.C. benchmarks. Specifically, we deducted from the U.S. 
log prices all B.C. harvesting costs, including costs associated with 
Crown tenure for calendar 2004. See, October 3, 2005, questionnaire 
response by the Government of British Columbia at BC-S-194. As in the 
first and second administrative reviews, we relied on cost data from 
surveys of major tenure holders prepared by PwC. Specifically, PwC was 
engaged by the B.C. Ministry of Forests (MOF) to collect calendar year 
2003 logging and forest management cost data for the Coast and Interior 
regions of British Columbia. The cost data presented by PwC was derived 
from three separate surveys--the MOF's 2004 annual Coast survey and two 
surveys (one for the Coast and the other for the Interior) conducted by 
PwC itself.
    In these preliminary results, we have subtracted the following unit 
costs from the U.S. log price benchmarks used for the B.C. Coast:
     Tree-to-Truck.
     Hauling.
     Dump, Sort, Boom, and Rehaul.
     Crew Transportation Labor.
     Road Maintenance.
     Towing/Barging.
     Helicopter Logging.
     Camp Operations and Overhead.
     Road Construction.
     Head Office, General Administration.
     Logging Fees and Taxes.
     Forestry, Engineering, and Fire Protection.
    In these preliminary results, we have subtracted the following unit 
costs from the U.S. log price benchmarks used for the B.C. Interior:
     Tree-to-Truck.
     Hauling.
     Dump, Sort, and Boom.
     Towing/Barging.
     On-Block Road and Bridge Maintenance.
     Mainline/Secondary Road and Bridge Maintenance.
     Post Logging Treatment.
     Administration/Overhead.
     Camp Operation.
     Depreciation, Depletion, and Amortization.
     Mainline/Secondary Road and Bridge Construction.
     Mainline/Secondary Road and Bridge Deactivation.
     On-Block Road and Bridge Construction.
     On-Block Road and Bridge Deactivation.
     Protection (Fire, Insect, and Disease Control).
     Silviculture and Reforestation.
    In the second administrative review, we addressed whether to 
subtract a per-unit profit component from the ``derived market stumpage 
prices'' used in the benefit calculations for the B.C. Coast and 
Interior. The issue revolved around the extent to which our cost data 
from the PWC survey report of B.C. logging and forest management costs 
accounted for any profit that may have been incurred by independent 
harvesters.
    Based on information from the GOBC that all harvesting activities 
are performed by contractors, we determined in the second 
administrative review that the cost data contained in the PWC's survey 
of the B.C. Interior reflect ``fee for service'' payments made by 
sawmills to independent harvesters and, thus already included a profit 
component. On this basis, we determined that no profit adjustment was 
appropriate for U.S. log benchmark

[[Page 33954]]

prices used in the benefit calculation of the B.C. Interior. See 
Preliminary Results of 2nd Review, 70 FR at 33110; see also 
``Methodology for Adjusting the Unit Prices of the Crown Stumpage 
Program Administered by the GOBC'' and Comment 52 of the Final Results 
of 2nd Review Decision Memorandum.
    Regarding Coastal B.C., information on the record of the second 
administrative review indicated that at least 50 percent of the 
harvesting activities on the coast must be conducted by independent 
contractors. Further, information from the GOBC indicated that 
harvesting activities by in-house, company crews were conducted on a 
``limited'' basis. On this basis, in the second administrative review, 
we assumed that the majority of harvesting activities for Coastal B.C. 
were performed by independent harvesters and, thus, the majority of the 
harvesting costs in the PWC survey for the B.C. Coast already contained 
a profit component. Lacking any other information and, based on the 
GOBC's characterization of company crew harvesting costs as being 
``limited,'' we determined that in-house company crews employed by 
tenure holders are used 25 percent of the time on the B.C. Coast and 
the remaining amount is performed by independent contractors. 
Accordingly, we found that 75 percent of the costs in the PWC survey 
did not warrant a profit adjustment. However, we applied a profit 
component to the remaining 25 percent of the costs contained in the PWC 
survey for the B.C. Coast. Id.
    To calculate the profit amount, we relied on publically available 
profit data for the B.C. logging industry from ``Industry Canada,'' a 
department of the Canadian federal government through its business and 
consumer site ``strategis.gc.ca.''.\36\ Specifically, we obtained a 3.7 
percent profit figure for the B.C. logging industry. This profit figure 
is an average calculated from financial data for the year 2002 (the 
most recent year for which data were available) from all small 
businesses (incorporated and unincorporated) in the B.C. logging 
industry.\37\ Thus, we multiplied the per-unit B.C. logging profit 
figure from Industry Canada by 25 percent and subtracted the resulting 
product from the per-unit ``derived market stumpage price'' for the 
B.C. Coast. See Comment 52 of the Final Results of 2nd Review Decision 
Memorandum; see also Tab A, Table 5A, and page 12 of the B.C. Final 
Results Calculation Memorandum for the second administrative 
review.\38\
---------------------------------------------------------------------------

    \36\ Strategis (http://www.strategis.gc.ca) offers interactive 
financial applications, e.g., building industry profiles for 
specific provinces via Performance Plus, a software tool.
    \37\ The Logging Industry classification is number 1133 under 
the North American Industry Classification System (NAICS).
    \38\ In the final results of the second administrative review, 
our methodological approach concerning the profit issue remained 
unchanged from our preliminary findings. However, minor changes were 
made to our profit calculations. See Comment 52 of the Final Results 
of 2nd Review Decision Memorandum. In the current review, we have 
continued to utilize the calculation approach employed in the final 
results of the second administrative review.
---------------------------------------------------------------------------

    No new information has been placed on the record of this review 
warranting a change in our finding from the second administrative 
review. Therefore, for these preliminary results we have continued not 
to apply a profit adjustment to the harvesting costs calculated for the 
B.C. Interior. For the B.C. Coast, we have applied a profit component 
of 25 percent to the harvesting costs, as reported by the PWC survey. 
Further, in these preliminary results, we have continued to use the 3.7 
percent profit figure for the B.C. logging industry as the source of 
our profit rate, as reported by Industry Canada.
c. Calculation of the Benefit
    To calculate the unit benefit per species conferred under the 
GOBC's administered stumpage program, we subtracted from the cost-
adjusted, ``derived market stumpage prices'' the corresponding average 
administered stumpage prices. Consistent with our approach in the first 
and second administrative reviews, we reduced the total Crown harvest 
to capture that volume of logs destined to sawmills. See, e.g., 
Preliminary Results of 2nd Review, 70 FR at 33111; see also, the 
``Methodology for Adjusting the Unit Prices of the Crown Stumpage 
Program Administered by the GOBC'' section of the Final Results of 2nd 
Review Decision Memorandum. Specifically, we multiplied the Coast and 
Interior Crown volumes by their respective percentage of logs entering 
sawmills for 2004, i.e., 47.50 percent and 87.50 percent, respectively. 
See the GOBC's October 3, 2005, questionnaire response at BC-I-5-6 and 
BC-S-3-4 Next, we multiplied the species-specific unit benefit by the 
Crown volume destined to sawmills. We then summed the species-specific 
benefits for the Coast and the Interior to calculate the provincial 
benefit.
d. Calculation of Provincial and Country-Wide Rate
    To calculate the province-specific subsidy rate, we divided the 
total stumpage benefit for British Columbia by the POR stumpage program 
denominator. For a discussion of the denominator used to derive the 
provincial rate for stumpage programs, see ``Numerator and Denominator 
Used for Calculating the Stumpage Programs' Net Subsidy Rates' section. 
As explained in the ``Aggregate Subsidy Rate Calculation'' section, we 
weight-averaged the benefit from this provincial subsidy program by 
British Columbia's relative share of total exports of softwood lumber 
to the United States during the POR. The total countervailable subsidy 
for the provincial stumpage programs can be found in the ``Country-Wide 
Rate for Stumpage'' section.

Country-Wide Rate for Stumpage

    The preliminary country-wide subsidy rate for the provincial 
stumpage programs is 10.88 percent ad valorem.

II. Other Programs Determined To Confer Subsidies

Non-Stumpage Programs Determined To Confer Subsidies

Programs Administered by the Government of Canada

1. Western Economic Diversification Program: Grants and Conditionally 
Repayable Contributions
    Introduced in 1987, the Western Economic Diversification program 
(WDP) is administered by the GOC's Department of Western Economic 
Diversification headquartered in Edmonton, Alberta, whose jurisdiction 
encompasses the four western provinces of B.C., Alberta, Saskatchewan 
and Manitoba. The program supports commercial and non-commercial 
projects that promote economic development and diversification in the 
region.
    In the first and second administrative reviews, we found that the 
provision of grants under the WDP constitutes a government financial 
contribution and confers a benefit within the meaning of sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. See Preliminary 
Results of 1st Review, 69 FR at 33228, ``Western Economic 
Diversification Program Grants and Conditionally Repayable 
Contributions'' section of the Final Results of 1st Review Decision 
Memorandum, ``Western Economic Diversification Program (WDP): Grants 
and Conditionally Repayable Contributions'' section and Comment 62 of 
the Final Results of 2nd Review Decision Memorandum. Further, we 
determined that the WDP is specific under section 771(5A)(D)(iv) of the 
Act because assistance under the program is

[[Page 33955]]

limited to designated regions in Canada. On this basis, we found 
recurring and non-recurring grants provided to softwood lumber 
producers under the WDP to be countervailable subsidies. Id. No new 
information has been placed on the record of this review to warrant a 
change in our finding that the WDP is countervailable.
    During the current POR, the WDP provided grants to softwood lumber 
producers or associations under two ``sub-programs,'' the International 
Trade Personnel Program (ITPP) and WDP Projects program. Under the ITPP 
and WDP Projects programs, companies were reimbursed for certain salary 
expenses in Alberta, British Columbia, Manitoba, Saskatchewan.
    Consistent with our past approach, where the employee's activities 
were directed towards exports of softwood lumber to all markets, we 
attributed the subsidy to total softwood lumber exports. Where the 
employee's activities were directed towards exports of softwood lumber 
to the United States, we attributed the subsidy to U.S. exports. Where 
the personnel promoted exports to non-U.S. markets, we did not 
attribute any of the benefit to U.S. sales. See, e.g., ``Western 
Economic Diversification Program (WDP): Grants and Conditionally 
Repayable Contributions'' section of the Final Results of 2nd Review 
Decision Memorandum. Where personnel promoted softwood lumber 
production, in general, we attributed the subsidy to total softwood 
lumber sales. Regarding the WDP program, evidence on the record of this 
review indicates that benefits were limited to Alberta's softwood 
lumber industry. Therefore, for the WDP program, we limited the 
denominator of our expense test to Alberta's total softwood lumber 
sales. In accordance with 19 CFR 351.524(b)(2), we determine that all 
ITPP and ``WDP Project'' grants were less than 0.5 percent of their 
corresponding denominator in the year of receipt.\39\ Therefore, we are 
expensing all grants received during the POR under this program to the 
year of receipt.
---------------------------------------------------------------------------

    \39\ We reduced these denominators, where appropriate, to 
account for any excluded company sales.
---------------------------------------------------------------------------

    To calculate the countervailable subsidy rate for this program, we 
summed the rates for the ITPP and WDP sub-projects. Next, as explained 
in ``Aggregate Subsidy Rate Calculation,'' for the ITPP program, we 
multiplied the program rate by the four provinces' relative share of 
total world-wide exports of softwood lumber to the United States. We 
adjusted the provinces' total exports of softwood lumber to the United 
States to account for any excluded company sales. For the WDP program, 
we multiplied the program rate by Alberta's total softwood lumber 
sales. Using this methodology, we preliminarily determine the 
countervailable subsidy from this program to be less than 0.005 percent 
ad valorem.
2. Natural Resources Canada (NRCAN) Softwood Marketing Subsidies
    In 2002, the GOC approved a total of C$75 million in grants to 
target new and existing export markets for wood products and to provide 
increased research and development to supplement innovation in the 
forest products sector. This total was allocated to three sub-programs: 
Canada Wood Export Program (Canada Wood), Value to Wood Program (VWP), 
and the National Research Institutes Initiative (NRII). The programs 
were placed under the administration of NRCAN, a part of the Canadian 
Forest Service.\40\
---------------------------------------------------------------------------

    \40\ We found the Canada Wood program to be not countervailable 
in the first administrative review. See Preliminary Results of 1st 
Review, 69 FR at 33229.
---------------------------------------------------------------------------

    The VWP is a five-year research and technology transfer initiative 
supporting the value-added wood sector, specifically through 
partnerships with academic and private non-profit entities. In 
particular, NRCAN entered into research contribution agreements with 
Forintek Canada Corp. (Forintek) to do research on efficient resource 
use, manufacturing process improvements, product development, and 
product access improvement.
    In the first and second administrative reviews, we found that 
grants provided to Forintek under the VWP constitute a government 
financial contribution and confer a benefit to softwood lumber 
producers within the meaning of sections 771(5)(D)(i) and 771(5)(E) of 
the Act, respectively. See Preliminary Results of 1st Review, 69 FR at 
33229, the ``Natural Resources Canada (NRCAN) Softwood Marketing 
Subsidies'' in the Final Results of 1st Review Decision Memorandum, and 
the ``Natural Resources Canada (NRCAN) Softwood Marketing Subsidies'' 
section of the Final Results of 2nd Review Decision Memorandum. We also 
determined that, because VWP grants are limited to Forintek, which 
conducted research related to softwood lumber and manufactured wood 
products, the program is specific within the meaning of section 
771(5A)(D)(i) of the Act. Id. Consequently, we found the grants under 
the NRCAN program to be countervailable.
    The NRII is a two-year program that provides salary support to 
three national research institutes: the Forest Engineering Research 
Institute of Canada (FERIC), Forintek, and the Pulp & Paper Research 
Institute of Canada (PAPRICAN). In the first and second administrative 
reviews, we found that research undertaken by FERIC constitutes a 
government financial contribution to commercial users of Canada's 
forests within the meaning of section 771(5)(D)(i) of the Act. Id. 
Further, we found that FERIC's research covers harvesting, processing, 
and transportation of forest products, silviculture operations, and 
small-scale operations and, thus, we determined that government-funded 
R&D by FERIC benefits, inter alia, producers of softwood lumber within 
the meaning of section 771(5)(E) of the Act.
    Similarly, we found that Forintek's NRII operations, which pertain 
to resource utilization, tree and wood quality, and wood physics, also 
constitute a government financial contribution and confer a benefit, 
inter alia, upon the softwood lumber industry within the meaning of 
sections 771(5)(D)(i) and 771(5)(E) of the Act. Id.
    In the first and second administrative reviews, we determined that 
because grants offered under the NRII are limited to Forintek and 
FERIC, institutions that conducted research related to the forestry and 
logging industry, the wood products manufacturing industry, and the 
paper manufacturing industry, the program is specific within the 
meaning of 771(5A)(D)(i) of the Act. Id. On this basis, we found the 
Forintek and FERIC grants offered under the NRII are 
countervailable.\41\ No new information has been placed on the record 
of this review to warrant a change in our finding that grants under the 
VWP and NRII programs are countervailable.
---------------------------------------------------------------------------

    \41\ We found NRII's support of PAPRICAN to be not 
countervailable in the first administrative review. See Preliminary 
Results of 1st Review, 69 FR at 33229.
---------------------------------------------------------------------------

    In accordance with 19 CFR 351.524(b)(2), we first examined whether 
the non-recurring grants under the VWP and NRII programs should be 
expensed to the year of receipt. We summed the funding approved for 
Forintek during the POR under the VWP and NRII programs, and divided 
this sum by the total sales of the wood products manufacturing industry 
in the year of approval. We also divided the funding approved for FERIC 
under the NRII program during the POR by the total sales of the wood 
products

[[Page 33956]]

manufacturing and paper industries in the year of approval. Combining 
these two amounts, we preliminarily determine that the benefit under 
the NRCAN softwood marketing subsidies program should be expensed in 
the year of receipt.
    Consistent with our approach in the first and second administrative 
reviews, we then calculated the countervailable subsidy rate during the 
POR by dividing the amounts received by Forintek during the POR under 
the VWP and NRII programs by Canada's total sales of the wood products 
manufacturing industry during the POR. We also divided the funding 
received by FERIC under the NRII during the POR by Canada's total sales 
of the wood products manufacturing and paper industries during the POR. 
We adjusted these sales amounts to account for any excluded company 
sales. See, e.g., ``Natural Resources Canada (NRCAN) Softwood Marketing 
Subsidies'' section of the Final Results of 2nd Review Decision 
Memorandum. Combining these two amounts, we preliminarily determine the 
net subsidy rate from the NRCAN softwood marketing subsidies program to 
be 0.02 percent ad valorem.
3. Federal Economic Development Initiative in Northern Ontario (FEDNOR)
    FEDNOR is an agency of Industry Canada, a department of the GOC, 
which encourages investment, innovation, and trade in Northern Ontario. 
A considerable portion of the GOC assistance under FEDNOR is provided 
to Community Futures Development Corporations (CFDCs), non-profit 
community organizations providing small business advisory services and 
offering commercial loans to small and medium enterprises (SMEs). 
Assistance in the form of grants is also provided under the FEDNOR 
program.
    In the underlying investigation and first and second administrative 
reviews, we determined that grants and loans under the FEDNOR program 
constitute government financial contributions to softwood lumber 
producers within the meaning of section 771(5)(D)(i) of the Act. See 
e.g., Preliminary Results of 1st Review, 69 FR at 33228; see also 
Preliminary Results of 2nd Review, 70 FR at 33114. In addition, we 
found that grants under the program confer a benefit to softwood lumber 
producers under section 771(5)(E) of the Act and that CFDC loans confer 
a benefit to softwood lumber producers under section 771(5)(E)(ii) of 
the Act to the extent that the amount they pay on CFDC loans are less 
than the amount they would pay on a comparable commercial loan that 
they could actually obtain on the market. Id. Furthermore, we found 
that the grants and loans provided under the FEDNOR program are 
specific within the meaning of section 771(5A)(D)(iv) of the Act, 
because assistance under the program is limited to certain regions in 
Ontario. Id. On this basis, we found the program to be countervailable. 
No new information has been placed on the record of this review to 
warrant a change in our findings.
    In this administrative review, the GOC provided grants during the 
POR as well as several long and short-term CFDC loans that were 
outstanding during the POR.
    Consistent with our approach in the first and second administrative 
reviews, to determine the benefit attributable to loans offered under 
the FEDNOR program, we compared the long-term and short-term interest 
rates charged on these loans during the POR to the long-term and short-
term benchmark interest rates. Id. Our benchmark interest rates are 
described in ``Benchmarks for Loans & Discount Rates.'' As the interest 
amounts paid on the loans under the FEDNOR program were greater than 
what would have been paid on a comparable commercial loan, as indicated 
by our benchmark interest rate, we preliminarily determine that this 
program did not confer a benefit upon softwood lumber producers in 
accordance with section 771(5)(E)(ii) of the Act during the POR.
    We have treated the grant received during the POR as non-recurring. 
In accordance with 19 CFR 351.524(b)(2), we have determined that the 
approved amount of the grant is less than 0.5 percent of total sales of 
softwood lumber for Ontario during the POR. Therefore, we have expensed 
the benefit from this grant in the year of receipt.
    To calculate the countervailable subsidy provided under this 
program, we divided the grant amounts disbursed during the POR by the 
value of total sales of softwood lumber for Ontario during the POR, net 
of excluded company sales. Next, as explained in the ``Aggregate 
Subsidy Rate Calculation'' section of this notice, we multiplied this 
amount by Ontario's relative share of total exports to the United 
States. Using this methodology, we preliminarily determine the 
countervailable subsidy from this program to be less than 0.005 percent 
ad valorem.

Programs Administered by the Government of British Columbia

1. Forestry Innovation Investment Program (FIIP)

    The Forestry Innovation Investment Program came into effect on 
April 1, 2002. On March 31, 2003, FIIP was incorporated as Forestry 
Innovation Investment Ltd. (FII). FII funds are used to support the 
activities of universities, research and educational organizations, 
government ministries and industry associations producing a wide range 
of wood products. FII's strategic objectives are implemented through 
three sub-programs addressing: Research, product development and 
international marketing. In this review, the GOBC states that research 
grants provided under the FII are now provided under Forest Science 
Program (FSP), as of April 1, 2004. For purposes of this review, we 
find that the FSP is sufficiently similar to the research program 
previously provided under the FII program. Therefore, in these 
preliminary results, we have treated the FSP as a successor program to 
the FII program.
    In the first and second administrative reviews, we determined that 
the FII grants provided for research as well as those to support 
product development and international marketing constitute a government 
financial contribution and confer a benefit within the meaning of 
sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. See e.g., 
Comment 69 of the Final Results of 2nd Review Decision Memorandum. 
Further, we found that the grants are specific within the meaning of 
section 771(5A)(D)(i) of the Act because they are limited to 
institutions and associations conducting projects related to wood 
products generally and softwood lumber, in particular. Id. No new 
information has been placed on the record of this review to warrant a 
change in our finding that grants FIIP are countervailable.
    To calculate the benefit from this program, we first determined 
whether these non-recurring subsidies should be expensed in the year of 
receipt. See 19 CFR 351.524(b)(2). For grants given to support product 
development, we divided the amount approved by the total sales of woods 
products manufacturing industry for B.C. during the year of approval. 
With respect to the international marketing sub-program, for projects 
targeting the U.S. market, we divided the amount approved by the total 
exports of softwood lumber to the United States during the year of 
approval. For international marketing projects relating to the wood 
products industry in general, we divided the

[[Page 33957]]

amounts by the total sales of the wood products manufacturing industry, 
excluding co-products, during the year of approval. See 19 CFR 
351.525(b)(4). For research grants under the FSP, the successor program 
to the FII research program, we divided the grants approved by total 
sales of the wood products manufacturing and paper industries in B.C. 
during the year of approval. Combining these three amounts, we have 
preliminarily determined that the FII benefit should be expensed in the 
POR.
    Consistent with our approach in the second administrative review, 
we then calculated the countervailable subsidy rate during the POR by 
dividing the amounts disbursed during the POR by their corresponding 
sales denominator, which are described above. We combined these amounts 
and, as explained in ``Aggregate Subsidy Rate Calculation,'' we 
multiplied this total by B.C.'s relative share of total exports to the 
United States. On this basis, we have preliminarily determined the 
countervailable subsidy from the FIIP to be 0.04 percent ad valorem.

2. British Columbia Private Forest Property Tax Program

    In the second administrative review we explained that B.C.'s 
property tax system has two classes of private forest land--Class 3, 
``unmanaged forest land,'' and Class 7, ``managed forest land''--that 
incurred different tax rates in the 1990s through the POR. In the first 
and second administrative reviews, we found that property tax rates for 
Class 7 were generally lower than for Class 3 land at all levels of tax 
authority for most, though not all, taxes. See ``British Columbia 
Private Forest Property Tax Program'' section of Final Results of 1st 
Review Decision Memorandum; see also ``British Columbia Private Forest 
Property Tax Program'' and Comment 72 of the Final Results of 2nd 
Review Decision Memorandum. We further found that the various municipal 
and district (i.e., regional) level authorities imposed generally lower 
rates for Class 7 than for Class 3 land. Id.
    The tax program is codified in several laws, of which the most 
salient is the 1996 Assessment Act (and subsequent amendments). Section 
24(1) of the Assessment Act contains forest land classification 
language expressly requiring that, inter alia, Class 7 land be ``used 
for the production and harvesting of timber.'' Additionally, section 
24(3) or 24(4) of the Assessment Act, depending on the edition of the 
statute, requires the assessor to declassify all or part of Class 7 
land if ``the assessor is not satisfied* * *that the land meets all 
requirements'' for managed forest land classification. Amendments to 
the provision, enacted from 1996 through 2003, retained the same 
language stating these two conditions. Thus, the law as published 
during the POR required that, for private forest land to be classified 
and remain classified as managed forest land, it had to be ``used for 
the production and harvesting of timber.''
    In the first and second reviews, we found that because the tax 
authorities impose two different tax rates on private forest land, the 
governments are foregoing revenue when they collect taxes at the lower 
rate, and we, therefore, determined that the program constitutes a 
government financial contribution as defined in section 771(5)(D)(ii) 
of the Act. See e.g., ``British Columbia Private Forest Property Tax 
Program'' and Comment 72 of the Final Results of 2nd Review Decision 
Memorandum. We also determined that the program confers a benefit in 
the form of tax savings within the meaning of section 771(5)(E) of the 
Act. Id. In the second administrative review, we further determined 
that because the Assessment Act expressly requires that Class 7 land be 
``used for the production and harvesting of timber,'' and additionally 
requires the assessor to declassify any Class 7 land not meeting all 
the Class 7 conditions (of which timber use was one), the B.C. private 
forest land tax program is specific as a matter of law (i.e., de jure 
specific) within the meaning of section 771(5A)(D)(i) of the Act. See 
``British Columbia Private Forest Property Tax Program'' and Comment 72 
of the Final Results of 2nd Review Decision Memorandum. No new 
information has been placed on the record of this review to warrant a 
change in our finding that the B.C. private forest land tax program is 
countervailable.
    In the current review, pursuant to revisions to the Assessment Act 
during the POR, Class 3 tax rates on ``unmanaged land'' were repealed, 
effective December 31, 2004. See, e.g., page BC-T-12, Volume 34 of the 
GOBC's October 3, 2005, questionnaire response. Since we are unable use 
the Class 3 tax rate as our benchmark for the portion of the POR 
covering 2005, we have used the next most applicable tax, which for 
purposes of these preliminary results, we find is the Class 5 tax rate 
for light industries. Because the revisions to the Assessment Act did 
not take effect until 2005, we have continued to use the Class 3 tax 
rate for unmanaged land as our benchmark the for calculating the 
benefit under the program during the portion of the POR covering 2004.
    Consistent with our approach in the first and second reviews, and 
in accordance with 19 CFR 351.509(a), we find that the benefit received 
under this program is the sum of the tax savings enjoyed by Class 7 
sawmill landowners at the provincial, regional, and sub-provincial (or 
local) levels of tax authority in B.C. See ``British Columbia Private 
Forest Property Tax Program'' and Comment 72 of the Final Results of 
2nd Review Decision Memorandum. With regard to the provincial tax, the 
assessed value is calculated as the sum of the land value and a 
formulaic valuation of the timber harvested from the land in the prior 
year. The tax is levied by applying the tax rate to this assessed 
value. The GOBC did not submit data on the timber value. Accordingly, 
the Department calculated the tax benefit at the provincial level based 
solely on the tax savings conferred upon Class 7 land with sawmills.
    Consistent with our approach in the second administrative review, 
we determined the tax benefit at the regional and local level using the 
data submitted by the GOBC on local tax rates, and on the value and 
acreage of Class 7 land held by sawmill landowners in the various 
jurisdictions.\42\ Only those jurisdictions whose tax differential 
resulted in a tax savings for Class 7 sawmill landowners were included 
in the benefit calculation. Id.
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    \42\ Unlike the second administrative review, the GOBC was able 
to provide the land values for Class 7 land with sawmills at the 
regional level.
---------------------------------------------------------------------------

    The provincial, regional, and local level benefit amounts were 
summed to produce an overall POR benefit amount. Consistent with our 
approach in the first and second administrative reviews, we used the 
POR total value of B.C. sawmill softwood product shipments (i.e., 
lumber, co-products, and ``residual'' products from primary sawmills) 
as the denominator, and, adjusting for B.C.''s share of the total 
exports to the United States, we preliminarily determine the 
countervailable subsidy under this program to be 0.10 percent ad 
valorem during the POR. See e.g., ``British Columbia Private Forest 
Property Tax Program'' of the Final Results of 2nd Review Decision 
Memorandum.

3. Compensation for Tenure Reclamation Under the Protected Areas Forest 
Compensation Act (PAFCA) and Forest Revitalization Act (FRA)

    The Protected Area Forests Compensation Act (PAFCA) clarifies the

[[Page 33958]]

rights of certain tenure holders whose tenures have been taken back by 
the GOBC. Specifically, the program provides a means through which 
qualifying tenure holders may seek compensation from the GOBC pursuant 
to negotiation or third-party arbitration. Payment of compensation 
under PAFCA is administered by the B.C. Ministry of Forests and Range.
    Enacted on May 20, 2002, PAFCA sets forth provisions that 
compensate tenure holders for tenure areas reclaimed for the purpose of 
creating 376 identified parks, protected areas, and ecological reserves 
established under the GOBC's Protected Areas Strategy. PAFCA covers 
tenure take backs that occurred from 1995 to the end of 2001 for which 
compensation claims were not otherwise settled. According to the GOBC, 
claims for compensation are initiated when a licensee whose harvesting 
rights has been affected by a park subject to PAFCA contacts the B.C. 
Ministry of Forests and Range to undertake negotiations or commercial 
arbitration.
    Under section 60 of the Forest Act, the Minister of Forests is 
authorized to take back without compensation up to five percent of a 
license area or AAC. However, where more than five percent of an AAC, 
section 60 mandates compensation for the value of the tenure for the 
remaining term. Moreover, section 60(5) requires the GOBC to compensate 
the tenure holder for any unamortized costs incurred for improvements, 
such as roads and bridges that become useless to the tenure holder as a 
result of the taking. Furthermore, under section 60.93, if the GOBC and 
the tenure holder cannot agree on the amount of compensation, the issue 
must be submitted for third-party arbitration as provided in the 
Commercial Arbitration Act.
    During the POR there were three pending arbitration proceedings 
under the Commercial Arbitration Act pursuant to section 60.93 
involving tenure take backs that occurred prior to the POR. One of the 
tenure holders received a favorable ruling in August 2004. As a result, 
the GOBC made a C$14 million payment to the company during the POR, 
pursuant to a settlement between the company and the GOBC. At the end 
of the POR, the arbitration for the other two tenure holders had not 
yet begun.
    The GOBC conducts a similar take back program pursuant to the 
Forestry Revitalization Act (FRA). Under the FRA, which took effect on 
March 31, 2003, the GOBC reduced certain areas of Crown land covered by 
a timber license.\43\ According to the GOBC, it reclaimed the tenure 
areas in order to reallocate Crown timber harvesting rights from long-
term tenure holders to the BCTS program. In return, the GOBC 
compensates tenure holders for the reclamations in an amount equal to 
the value of the affected timber rights as well as for any tenure 
improvements approved by the provincial government and not otherwise 
paid for by the provincial government. The amount of compensation is 
determined by negotiation between the parties or through binding 
arbitration under provisions of the Commercial Arbitration Act. During 
the POR, five companies received compensation payments from the GOBC 
totaling C$ 87.5 million. The payments determined by negotiation 
between the parties were the first payments made under the FRA.
---------------------------------------------------------------------------

    \43\ The GOBC defines a timber license as an area of Crown land 
that is not in a tree farm licence area, and is held by a person who 
is the holder of a licence in a group of licences. See the FRA, 
which is included as Exhibit BC-S-90 of the GOBC's October 3, 2005, 
questionnaire response.
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    In the first administrative review, petitioners included the PAFCA 
program among their new subsidy allegations. Petitioners claimed that 
because tenure holders paid little or no money for the land rights, and 
because the government owns the land and timber, any payments made to 
tenure holders in exchange for a reduction in AAC rights are not on 
market terms. In light of the information submitted by petitioners, the 
Department initiated an investigation of the PAFCA program. See 
Memoranda to Melissa G. Skinner, Director, Office of AD/CVD Enforcement 
VI, through Eric B. Greynolds, Program Manager from Margaret Ward, Case 
Analyst regarding ``New Subsidy Allegations,'' dated February 6, 2004 
(New Subsidy Allegation Memorandum) which is in the public file in the 
CRU.
    Based on the record information of the current review, we 
preliminarily determine that the GOBC provided compensation settlements 
under the PAFCA and FRA in the form of cash in exchange for land rights 
that were provided for little or no money. We find that the 
compensation from the GOBC constitutes a financial contribution and 
confers benefits to lumber producers within the meaning of sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. We further find 
that the benefits were specific to tenure holders and, therefore 
specific within the meaning of section 771(5A)(D) of the Act.
    In accordance with 19 CFR 351.504(a) and (b), we are treating these 
benefits as grants approved and received during the POR. Further, we 
preliminarily determine that these grants are non-recurring within the 
meaning of 19 CFR 351.524(c)(2), because they are not addressed under 
19 CFR 524(c)(1) and they confer benefits that are exceptional in the 
sense that the recipient cannot expect to receive additional subsidies 
under the same program on an on-going basis. Finally, we preliminarily 
determine that these grants are attributable to tenure holders and, 
thus we calculated the provincial rate by dividing the amount of 
reclamation payments to tenure holders during the POR by the sales of 
those products produced as part of B.C's softwood lumber manufacturing 
process.\44\
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    \44\ Specifically, the denominator consists of the following: 
Softwood lumber, including softwood lumber that undergoes some 
further processing (so-called ``remanufactured'' lumber), softwood 
co-products (e.g., wood chips and sawdust) that resulted from 
softwood lumber production at sawmills, and residual products 
produced by sawmills that were the result of the softwood lumber 
manufacturing process, specifically, softwood fuelwood and untreated 
softwood ties.
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    Because the PAFCA and FRA programs are administered under different 
statutes, we are treating them as separate programs in these 
preliminary results. Regarding the PAFCA program, because the grant 
amount is less than 0.5 percent of the corresponding sales denominator 
in the year of approval, we expensed all of the benefits to the POR, 
which is the year of receipt. See 19 CFR 351.524(b)(1). We then 
calculated the provincial rate under this program by dividing the 
benefit amount allocated to the POR by the sales of those products 
produced during the POR as part of B.C.'s softwood lumber manufacturing 
process. As explained in the ``Aggregate Subsidy Rate Calculation'' 
section of these preliminary results, we then multiplied the provincial 
rate by B.C.'s relative share of total exports of softwood lumber to 
the United States during the POR.
    Regarding the FRA program, pursuant to 19 CFR 351.524(b)(2), 
because the sum of the benefit amounts under this program is larger 
than 0.5 percent of the corresponding sales denominator in the year of 
approval, we have allocated the benefit amounts pursuant to the 
allocation methodology described under 19 CFR 351.524(d). In accordance 
with 19 CFR 351.524(d)(3)(i)(B), we have used as our discount rate, the 
long-term benchmark rate described in the ``Benchmarks for Loans and 
Discount Rate'' section of these preliminary results. We then 
calculated the provincial rate under this program by dividing the 
benefit amount allocated to the POR by the sales of those products

[[Page 33959]]

produced as part of B.C.'s softwood lumber manufacturing process. As 
explained in the ``Aggregate Subsidy Rate Calculation'' section of 
these preliminary results, we then multiplied the provincial rate by 
B.C.'s relative share of total exports of softwood lumber to the United 
States during the POR.
    On this basis, we preliminarily determine the net countervailable 
subsidy for the FRA and PAFCA programs to be 0.09 and 0.10 percent ad 
valorem, respectively.

Programs Administered by the Government of Quebec

Private Forest Development Program

    In the first and second administrative reviews, we determined that 
the provision of grants to producers of softwood lumber under the 
Private Forest Development Program (PFDP) constitutes a government 
financial contribution and confers a benefit under sections 
771(5)(D)(i) and 771(5)(E) of the Act, respectively. See the ``Private 
Forest Development Program'' section of the Final Results of 1st Review 
Decision Memorandum; see also ``Private Forest Development Program'' 
section of the Final Results of 2nd Review Decision Memorandum. In 
addition, we determined that assistance provided under this program is 
specific under section 771(5A)(D)(i) of the Act because assistance is 
limited to private woodlot owners. Id.
    Every holder of a wood processing plant operating permit must pay 
the fee of C$1.20 for every cubic meter of timber acquired from a 
private forest. These fees fund, in part, the PFDP. The recipients of 
payments under the PFDP are owners of private forest land. Thus, the 
sawmill operators that received assistance under the PFDP received 
assistance because they owned private forest land. Therefore, in the 
first and second administrative reviews, we determined that the fees 
paid to harvest timber from private land do not qualify as an offset to 
the grants received under the PFDP pursuant to section 771(6) of the 
Act. Id. Section 771(6) of the Act specifically enumerates the only 
adjustments that can be made to the benefit conferred by a 
countervailable subsidy and fees paid by processing facilities do not 
qualify as an offset against benefits received by private woodlot 
owners. Id. Consistent with our treatment of the PFDP in the first 
administrative review, we treated these payments as recurring in 
accordance with 19 CFR 351.524(c). Id. No new information has been 
placed on the record of this review to warrant a change in our finding 
that the PFDP is countervailable.
    Consistent with our approach in the first and second administrative 
reviews, to calculate the countervailable subsidy under the PFDP, we 
first summed the reported amount of grants provided to sawmills that 
produce softwood lumber (and other products) during the POR. We then 
divided the net benefit amount by total sales of softwood lumber (i.e., 
lumber from primary mills and in-scope lumber from remanufacturers), 
hardwood lumber, and softwood co-products. Id. We adjusted the sales 
denominator to account for sales of excluded companies from Quebec. 
Next, as explained in ``Aggregate Subsidy Rate Calculation,'' we 
multiplied this amount by Quebec's relative share of exports to the 
United States, adjusted for sales of excluded companies. On this basis, 
we preliminary determine the countervailable subsidy from this program 
is less than 0.005 percent ad valorem.

Programs Determined Not To Confer a Benefit

Government of British Columbia

Forest Renewal B.C. Program
    The Forest Renewal program was enacted by the GOBC in the Forest 
Renewal Act in June 1994 to renew the forest economy of British 
Columbia by, among other things, improving forest management of Crown 
lands, supporting training for displaced forestry workers, and 
promoting enhanced community and First Nations involvement in the 
forestry sector. To achieve these goals, the Forest Renewal Act created 
Forest Renewal B.C., a Crown corporation. The corporation's strategic 
objectives were implemented through three business units: The Forests 
and Environment Business Unit, the Value-Added Business Unit, and the 
Communities and Workforce Business Unit.
    The Forest Renewal B.C. program provides funds to community groups 
and independent financial institutions, which may in turn provide loans 
and loan guarantees to companies involved in softwood lumber 
production.\45\ Effective March 31, 2002, the B.C. legislature 
terminated the Forest Renewal B.C. program. However, during the POR, 
there remained active Forest Renewal B.C. loans, with interest payments 
outstanding during the POR.
---------------------------------------------------------------------------

    \45\ Grants have also been provided directly to softwood lumber 
producers. However, the GOBC has reported that no such grants were 
provided during the POR.
---------------------------------------------------------------------------

    As explained in the second administrative review, Forest Renewal 
B.C. provided blanket guarantees with respect to all loans outstanding 
under the program during the POR. See Preliminary Results, 70 FR at 
33115. Accordingly, in the second administrative review we found that 
the loan guarantees provided under the program constitutes a government 
financial contribution within the meaning of section 771(5)(D)(i) of 
the Act. Further, we found that because assistance under the Forest 
Renewal B.C. program was limited to the forest products industry, the 
program was specific within the meaning of section 771(5A)(D) of the 
Act. Id. No new information has been placed on the record of this 
review to warrant a change in our findings.
    To determine whether the active Forest Renewal loans provided 
benefits to the softwood lumber industry, in accordance with section 
771(5)(E)(ii) of the Act, we compared the interest rates charged on the 
Forest Renewal loans to the benchmark interest rates described in 
``Benchmarks for Loans and Discount Rates.'' Using this methodology, we 
have preliminarily determined that no benefit was provided by the 
Forest Renewal loans because the interest rates charged under this 
program were equal to or higher than the interest rates charged on 
comparable commercial loans.

Government of Quebec

1. Assistance Under Article 28 of Investment Quebec
    Assistance under Article 28 is administered by Investissement 
Quebec, a government corporation. In the underlying investigation, the 
Department investigated assistance from the GOQ under Article 7, which 
was administered by the Societe de Developpement Industriel du Quebec 
(SDI). Article 28 supplanted Article 7 in 1998. Under Article 7, SDI 
provided financial assistance in the form of loans, loan guarantees, 
grants, assumption of interest expenses, and equity investments to 
projects that would significantly promote the development of Quebec's 
economy. According to the GOQ's response, prior to authorizing 
assistance, SDI would review a project to ensure that it had strong 
profit potential and that the recipient business possessed the 
necessary financial structure, adequate technical and management 
personnel, and the means of production and marketing required to 
complete the proposed project. The Article 28 program operates 
fundamentally in the same manner as Article 7.

[[Page 33960]]

    During the POR, there was one outstanding loan under Article 28. 
There were no outstanding loans under Article 7. No other assistance 
was provided to softwood lumber companies under Article 7 or Article 
28. Regarding the outstanding loan, it was held by a company that 
subsequently entered into bankruptcy during the POR. The GOQ indicates 
that the company paid no interest on the loan during the POR.
    The Department does not automatically find reorganizations, workout 
programs or bankruptcy proceedings to be countervailable. Rather, the 
Department must find that such events transpired in a manner that is 
inconsistent with typical practice. See e.g., Final Results of 
Countervailing Duty Administrative Review: Stainless Steel Sheet and 
Strip in Coils from the Republic of Korea, 69 FR 2113 (January 14, 
2004), and Accompanying Issues and Decision Memorandum at Comment 4 
(where the Department found that KAMCO's debt forgiveness to Sammi was 
not specific or preferential as it was similar to debt forgiveness to 
other companies in court receivership where KAMCO was the lead 
creditor), Final Affirmative Countervailing Duty Determination and 
Negative Critical Circumstances Determination: Carbon and Certain Alloy 
Seel Wire Rod from Germany, 67 FR 55808 (August 30, 2002), and 
Accompanying Issues and Decision Memorandum at 24-25 (where the 
Department found that Saarstahl and its creditors followed established 
procedures and that there was no evidence indicating that the German 
government acted in a manner that caused the terms of Saarstahl's 
bankruptcy/restructuring proceedings to be unduly favorable to the 
company), and Notice of Preliminary Results of Countervailing Duty 
Administrative Review: Certain Hot-Rolled Carbon Steel Flat Products 
from India, 71 FR 1512 (January 10, 2006).
    For purposes of these preliminary results, we find that there is no 
allegation or evidence the bankruptcy in question transpired in a 
manner inconsistent with typical practice. Therefore, we preliminarily 
determine that this program did not provide any countervailing benefits 
during the POR.
2. Assistance From the Societe de Recuperation d'Exploitation et de 
Developpement Forestiers du Quebec (Rexfor)
    SGF Rexfor, Inc. (Rexfor) is a corporation, all of whose shares are 
owned by the Societe Generale de Financement du Quebec (SGF). SGF is an 
industrial and financial holding company that finances economic 
development projects in cooperation with industrial partners. Rexfor is 
SGF's vehicle for investment in the forest products industry.
    Rexfor receives and analyzes investment opportunities and 
determines whether to become an investor either through equity or 
participative subordinated debentures. Debentures are used as an 
investment vehicle when Rexfor determines that a project is worthwhile, 
but is not large enough to necessitate more complex equity 
arrangements. Consistent with our approach in the underlying 
investigation, we have not analyzed equity investments by Rexfor 
because (1) there was no allegation that Rexfor's equity investments 
were inconsistent with the usual investment practice of private 
investors, and (2) there is no evidence on the record indicating that 
Rexfor's equity investments conferred a benefit.
    Also, consistent with our approach in the investigation and first 
and second reviews, we examined whether Rexfor's participative 
subordinated debentures, i.e., loans, conferred a subsidy. Because 
assistance from Rexfor is limited to companies in the forest products 
industry, we have preliminarily determined that this program is 
specific under section 771(5A)(D)(i) of the Act. The long-term loans 
provided by Rexfor qualify as a financial contribution under section 
771(5)(D)(i) of the Act. To determine whether the single loan 
outstanding to a softwood lumber producer during the POR provided a 
benefit, we compared the interest rates on the loan from Rexfor to the 
benchmark interest rates as described in ``Benchmarks for Loans and 
Discount Rates.'' See 771(5)(E)(ii) of the Act. See, e.g., Preliminary 
Results of 2nd Review, 70 FR at 33116.
    Using this methodology, we have preliminarily determined that no 
benefit was provided by this loan because the interest rates charged 
under this program were higher than the interest rates charged on 
comparable commercial loans. On this basis, we have preliminarily found 
that the debt forgiveness by Rexfor did not confer a benefit in the POR 
and, thus, provides no countervailable subsidy.

Preliminary Results of Review

    In accordance with section 777A(e)(2)(B) of the Act, we have 
calculated a single country-wide subsidy rate to be applied to all 
producers and exporters of the subject merchandise from Canada, other 
than those producers that have been excluded from this order. This rate 
is summarized in the table below:

------------------------------------------------------------------------
             Producer/exporter                    Net subsidy rate
------------------------------------------------------------------------
All Producers/Exporters...................  11.23 percent ad valorem.
------------------------------------------------------------------------

    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct CBP to assess 
countervailing duties as indicated above. The Department also intends 
to instruct CBP to collect cash deposits of estimated countervailing 
duties of 11.23 percent of the f.o.b. invoice price on all shipments of 
the subject merchandise from reviewed companies, entered, or withdrawn 
from warehouse, for consumption on or after the date of publication of 
the final results of this review.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of 
publication of this notice. Pursuant to 19 CFR 351.309, interested 
parties may submit written comments in response to these preliminary 
results. Case briefs must be submitted within 30 days after the date of 
publication of this notice, and rebuttal briefs, limited to arguments 
raised in case briefs, must be submitted no later than seven days after 
the time limit for filing case briefs. Parties who submit argument in 
this proceeding are requested to submit with the argument: (1) A 
statement of the issues, and (2) a brief summary of the argument. Case 
and rebuttal briefs must be served on interested parties in accordance 
with 19 CFR 351.303(f). Please note that an interested party may still 
submit case and/or rebuttal briefs even though the party is not going 
to participate in the hearing.
    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
these preliminary results. Any requested hearing will be held at the 
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Individuals who wish to request a hearing must 
submit a written request within 30 days of the publication of this 
notice in the Federal Register to the Assistant Secretary for Import 
Administration, U.S. Department of Commerce, Room 1870, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number

[[Page 33961]]

of participants; and, (3) to the extent practicable, an identification 
of the arguments to be raised at the hearing. An interested party may 
make an affirmative presentation only on arguments included in that 
party's case or rebuttal briefs.
    This administrative review is issued and published in accordance 
with section 751(a)(1) and 777(i)(1) of the Act.

    Dated: May 31, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. 06-5221 Filed 6-9-06; 8:45 am]
BILLING CODE 3510-DS-P