A-122-838
                                                        Investigation
                                                      Public Document
                                                                 G2O5

MEMORANDUM TO: Faryar Shirzad
               Assistant Secretary
                 for Import Administration

FROM:          Bernard T. Carreau
               Deputy Assistant Secretary
                 for Group II, Import Administration

DATE: March 21, 2002

SUBJECT: Issues and Decision Memorandum for the Antidumping Duty
Investigation of Certain Softwood Lumber Products From Canada

Summary

This memorandum addresses issues briefed or otherwise commented upon in
the above-referenced proceeding. Section I addresses the general issues
briefed by interested parties. Section II addresses the company-specific
issues briefed by interested parties. Section III addresses the scope
issues briefed by the interested parties. 

General Issues 

   Comment 1:  Whether the Department should rescind the initiation and
               terminate the investigation
   Comment 2:  Whether dumping exists 
   Comment 3:  Critical circumstances
   Comment 4:  Value-based cost allocation methodology
   Comment 5:  Fair comparisons in the application of the sales below 
               cost test
   Comment 6:  Constructed value profit 
   Comment 7:  Product matching
   Comment 8:  Value-based difference in merchandise (difmer) adjustments
   Comment 9:  Whether Softwood Lumber Agreement (SLA) export taxes should 
               be deducted from U.S. price
   Comment 10: Treatment of trim ends/trim blocks
   Comment 11: By-product revenue offset
   Comment 12: Treatment of negative margins
   Comment 13: Exclusion of Maritime Provinces

Company-Specific Issues 

  Issues Specific to Abitibi

   Comment 14: Whether Scierie Saguenay Ltee. should be collapsed into the
               Abitibi Group
   Comment 15: Financial expense ratio
   Comment 16: General and administrative (G&A) expense ratio

   Issues Specific to Canfor

   Comment 17: Canfor, Lakeland, and The Pas' product reporting
   Comment 18: Treatment of three U.S. sales
   Comment 19: G&A expenses for Canfor, Lakeland, and The Pas
   Comment 20: Canfor's packing cost

   Issues Specific to Slocan

   Comment 21: Futures contracts
   Comment 22: Unreported freight expenses
   Comment 23: Unreported comparison market freight rebates
   Comment 24: Overstated freight rebates
   Comment 25: Donations
   Comment 26: Cost differences for precision end trimmed products
   Comment 27: Mackenzie Ospika Division Lathe and Precut
   Comment 28: Profits on log sales
   Comment 29: Depreciation expenses at the Plateau Sawmill
   Comment 30: Unreported foreign exchange losses
   Comment 31: Timber tenure amortization
   Comment 32: Startup adjustments 

   Issues Specific to Tembec

   Comment 33: G&A expense

   Issues Specific to West Fraser

   Comment 34: Downstream sales 
   Comment 35: Inventory carrying costs
   Comment 36: Log sales
   Comment 37: Prior period stumpage and silviculture

   Issues Specific to Weyerhaeuser

   Comment 38: Sales verification
   Comment 39: The petitioners received inadequate time to examine the
               Weyerhaeuser sales verification report
   Comment 40: Warehousing expenses for WBM inventory sales
   Comment 41: British Columbia Coastal's (BCC) warehousing expenses
   Comment 42: Early payment discounts
   Comment 43: CLB's SLA tax amounts
   Comment 44: CLB's quota-transfer sales
   Comment 45: Critical circumstances data for Monterra Lumber
   Comment 46: Log/wood costs
   Comment 47: Depletion expenses
   Comment 48: G&A expenses
   Comment 49: Interest expense

Scope Issues 

   Comment 50: Due process
   Comment 51: Authority to define the scope
   Comment 52: Class or kind of products
   Comment 53: Other scope issues 
   Comment 54: Industry support
   Comment 55: Whether including certain products is harmful to 
               U.S. industry
   Comment 56: Remanufactured products
   Comment 57: Scope exclusion requests


Background

On October 30, 2001, the Department of Commerce (the Department) issued
the preliminary determination of the antidumping duty investigation of
certain softwood lumber products from Canada.(1) After analyzing
allegations of ministerial errors in the preliminary determination by two
of the six mandatory respondents,(2) we agreed that certain allegations
constituted ministerial errors, but that they did not amount to
"significant ministerial errors" within the meaning of the Department's
regulations. As such, we did not issue an amended preliminary
determination.(3) The corrections are reflected in the final margin
calculations. The period of investigation (POI) is April 1, 2000, through
March 31, 2001. The respondents in this case are: Abitibi-Consolidated
Inc. (Abitibi), Canfor Corporation (Canfor), Slocan Forest Products Ltd.
(Slocan), Tembec Inc. (Tembec), West Fraser Timber Co. Ltd. (West Fraser),
and Weyerhaeuser Company (Weyerhaeuser). We verified the information
submitted on the record by the respondents, and issued the verification
reports in January and February 2002. On February 12 and 19, 2002, we
received case briefs and/or rebuttal briefs, respectively, from the
petitioners,(4) the respondents, and other interested parties.(5) The
petitioners and the respondents requested a public hearing, which was held
on February 25, 2002. 

On March 12, 2002, we issued a memorandum detailing our preliminary
findings with respect to class or kind and certain scope exclusion issues.
Case briefs and rebuttal briefs were filed by a number of interested
parties. A public hearing was held on these issues on March 19, 2002.

Scope of the Investigations

The products covered by these investigations are softwood lumber,
flooring and siding (softwood lumber products). Softwood lumber products
include all products classified under headings 4407.1000, 4409.1010,
4409.1090, and 4409.1020, respectively, of the Harmonized Tariff Schedule
of the United States (HTSUS), and any softwood lumber, flooring and siding
described below. These softwood lumber products include:

   (1) coniferous wood, sawn or chipped lengthwise, sliced or peeled,
   whether or not planed, sanded or finger-jointed, of a thickness exceeding
   six millimeters;

   (2) coniferous wood siding (including strips and friezes for parquet
   flooring, not assembled) continuously shaped (tongued, grooved, rabbeted,
   chamfered, V-jointed, beaded, molded, rounded or the like) along any of
   its edges or faces, whether or not planed, sanded or finger-jointed;

   (3) other coniferous wood (including strips and friezes for parquet
   flooring, not assembled) continuously shaped (tongued, grooved, rabbeted,
   chamfered, V-jointed, beaded, molded, rounded or the like) along any of
   its edges or faces (other than wood 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 under
investigation is dispositive. Preliminary scope exclusions and
clarifications were published in three separate federal register notices.

Final Scope Exclusions

On February 11, 2002, we published an amendment to the preliminary
antidumping determination which modified the list of products excluded
from the scope of the AD and CVD softwood lumber investigations. See
Notice of Amendment to Preliminary Determination of Sales at Less Than
Fair Value: Certain Softwood Lumber Products from Canada; Amendment to
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, 67 FR 6230, 6231 (February
11, 2002) (Amended Preliminary). In our review of the comments received
throughout the course of these proceedings, we found that the definitions
for some of the excluded products required further clarification and/or
elaboration. Based on our analysis of the comments received, we have
modified the list of excluded products as follows:(6) 


Softwood lumber products excluded from the scope only if they meet
certain requirements:

   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 the investigations
      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 Customs' satisfaction that
      the lumber is of U. S. origin. 

   6. Softwood lumber products contained in single family home packages or
      kits, regardless of tariff classification, are excluded from the scope 
      of the orders if the following criteria are met: 

      1.  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; 

      2.  the package or kit must contain all necessary internal and external
          doors and windows, nails, screws, glue, subfloor, sheathing, beams,
          posts, connectors and if included in purchase contract decking, 
          trim, drywall and roof shingles specified in the plan, design or
          blueprint; 

      3.  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; 

      4.  the whole package must be imported under a single consolidated 
          entry when permitted by the U.S. Customs Service, whether or not 
          on a single or multiple trucks, rail cars or other vehicles, 
          which shall be on the same day except when the home is over 
          2,000 square feet; 

      5.  the following documentation must be included with the entry 
          documents: 

          1.  a copy of the appropriate home design, plan, or blueprint 
              matching the entry; 

          2.  a purchase contract from a retailer of home kits or packages 
              signed by a customer not affiliated with the importer; 

          3.  a listing of inventory of all parts of the package or kit being
              entered that conforms to the home design package being entered; 

          4.  in the case of multiple shipments on the same contract, all 
              items listed in 5(c) which are included in the present shipment
              shall be identified as well. 


We have determined that the excluded products listed above are outside
the scope of these investigations provided the specified conditions are
met. See Section C (Scope Issues) and Section D (Scope Exclusion Analysis)
of this decision memorandum for further discussion. Lumber products that
Customs 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 these investigations and may be classified
under HTSUS subheadings 4418.90.40.90, 4421.90.70.40, and 4421.90.98.40.
On January 24, 2002, Customs informed the Department of certain changes 
in the 2002 HTSUS affecting these products. Specifically, subheading
4418.90.40.90 and 4421.90.98.40 were changed to 4418.90.45.90 and 
4421.90.97.40, respectively. Therefore, we are adding these subheadings 
as well.

DISCUSSION OF ISSUES

General Issues 

Comment 1: Whether the Department should rescind the initiation and
terminate the investigation

Abitibi, Tembec, the Government of Canada, the British Columbia Lumber
Trade Council (BCLTC) and its Constituent Associations (the Cariboo Lumber
Manufacturers' Association, the Coast Forest & Lumber Association, the
Interior Lumber Manufacturers' Association, and the Northern Forest
Products Association), and the Ontario Forest Industries Association and
Ontario Lumber Manufacturers Association (OFIA/OLMA) note that, despite
ample time to do so, the Department failed to respond to the July 19,
2001, submission of the Government of Canada and other Canadian parties
(referred to as "Joint Submission" within this comment) regarding
deficiencies in the petition. Had the Department adequately examined the
petition and the Joint Submission, these parties contend that an
investigation would not have been initiated.(7) 

As argued in the Joint Submission, the parties claim that the petition
did not meet the standards described in section 732(b)(1) of the Tariff
Act of 1930, as amended (the Act), specifically because the petitioners
did not provide company-specific information. According to the parties,
this information was reasonably available to the petitioners because
International Paper Inc., one of the members of the Coalition for Fair
Lumber Imports Executive Committee, wholly owns the seventh largest
Canadian producer. Accordingly, these parties assert that the petitioners
could have based the alleged margins on company-specific information, but
did not do so because such information would have undermined the
contention of dumping.

The parties also argue that the Department should reexamine the petition
before making a final determination in this investigation. Citing Gilmore
Steel Corp. v. United States, 585 F. Supp. 670, 674 (Ct. Int'l Trade
1984)(Gilmore) and Article 5.8 of the Antidumping Agreement, the BCLTC
contends that the Department can terminate an investigation, based on a
finding of inaccuracies in the petition or a lack of sufficient evidence
of dumping or injury, even after the initial 20-day initiation period.(8)
As a result, the BCLTC argues that the Department should reexamine the
petition and rescind the initiation.

In their response, the petitioners point out that the Department's
regulations only require that the petition contain information "to the
extent reasonably available to the petitioner."(9) If the Department's
analysis of the petition indicates that an investigation is justified, the
petitioners note that section 732(a)(1) of the Act unambiguously states
that the Department "shall" initiate an investigation. According to the
petitioners, the parties' arguments both ignore and fail to provide
alternatives to the Department's long-standing initiation standards and
practices and that, absent alternative standards, the Department has no
reason to reconsider its initiation of the investigation. In addition, the
petitioners argue that there is no legal support for the parties'
suggestion that the Department engage in continual evaluation of the
petition throughout the investigation. 

The petitioners further argue that Canadian Law has the same standards
for initiation of an investigation, and that the Canadian Government has
initiated antidumping investigations where the petitioner could only
provide estimates or other reasonably available information.(10) The
petitioners insist that, as is the case with the Department, the Canadian
Government is required to initiate an investigation when it receives a
properly documented petition.

With respect to the petition itself, the petitioners argue that they
provided ample information in the form of "affidavits, proprietary
pricing/sales information, industry data, and evidence from Canadian
sources,"(11) that Canadian softwood lumber was being dumped in the United
States. They note that the Act does not require them to provide separate
allegations for "each individual product, grade, species, division,
category or type of the subject merchandise,"(12) yet they provided
pricing data for approximately 80 percent of the subject merchandise. In
addition, the fact that one of the petitioning companies is affiliated
with a Canadian respondent does not prove that the information regarding
the company was reasonably available to the petitioners. In fact,
according to the petitioners, it was not available. Furthermore, the
petitioners claim that the evidence of dumping was sufficient without any
further proprietary information.

Finally, the petitioners argue that the Department thoroughly analyzed
the petition and supplemental information the Department requested
regarding certain parts of the petition. According to the petitioners, the
Department's deficiency comments demonstrated that it had painstakingly
reviewed the petition. As a result, because the petition contains the
necessary information for initiation and the Department exhaustively
reviewed the petition prior to initiation, there is no merit to the
parties' suggestions that the Department should rescind the investigation.

Department's Position: We agree with the petitioners. After careful
consideration of the petition, including a request for supplemental
information, the Department determined that the petition included
reasonably available information indicating an investigation was
warranted; therefore, the Department was obligated to initiate an
investigation.(13) 

We also note that, since the Gilmore decision cited by the respondents
was made prior to the implementation of the Uruguay Round Agreements Act
(URAA),(14) the issue of standing remained open until the final
determination in that case. Effective January 1, 1995, the Act was
changed, in accordance with the URAA, to comply with international
obligations. Section 732(c)(4)(E) of the Act clearly states that the
Department's determination regarding industry support will not be
reconsidered after initiation. According to the Statement of
Administrative Action (SAA), "arguments regarding industry support should
not be made to either Commerce or the Commission following
initiation."(15) Thus, by law, policy, and practice the Department does
not revisit the issue of industry support during an investigation.(16)
Accordingly, the Department continues to find the petition sufficient for
the purposes of initiation.

Comment 2: Whether dumping exists

The six respondent companies and ACAH argue that the record evidence
proves the Canadian producers/exporters were not dumping but, rather, that
the Department's "flawed" methodologies generated dumping.(17) The parties
note that, during the POI, Canadian softwood lumber prices (either on
average or as charged by the respondent companies) were higher in the
United States than in Canada. The six respondent companies also argue that
they were profitable during the POI and, therefore, were not selling below
the cost of production. 

ACAH contends that it is counterintuitive to find dumping in a period
during which the SLA was in effect, as the SLA limited supply (except
where a high fee was paid), thereby keeping U.S. prices high. Tembec
argues that, because the POI coincides with the last year of the SLA, the
Department is analyzing a distorted market situation and inappropriately
applying a trade law that is designed for "normal" times. As a result, the
parties commenting on this issue conclude that the dumping margins found
by the Department in the preliminary determination were the result of the
illogical and unfair methodology employed by the Department. According to
Canfor, this methodology is a violation of Article 2.4 of the WTO
Antidumping Agreement, which directs the Department to make a fair
comparison between export price and normal value.(18) 

Tembec and the OFIA/OLMA also argue that it is illogical to find dumping
in a free trade area. Both parties contend that, in a free trade area, if
goods were being sold across the border at less than fair value, the goods
would simply cross back over the border for resale. As a result, it is
only appropriate to apply the antidumping law when a home market is closed
and not, as in this case, when countries share an open border. According
to the OFIA/OLMA case brief, which cites several publications on the
matter, the antidumping law and a free trade area are mutually exclusive.
Imposing antidumping duties in this case contradicts NAFTA and injures the
North American economy. The brief also urges the Department to consider
the free trade policy objectives of NAFTA and the WTO in its final
determination, and to use the antidumping law, which restrains trade,
"wisely and sparingly."(19) 

According to the petitioners, the policies of the federal and provincial
governments in Canada distort the Canadian market,(20) thereby causing
excess production and distorted input prices. These market distortions
lead to dumping of Canadian softwood lumber in the United States.
Furthermore, the petitioners contend that, during the POI, the Canadian
press, many respondent companies, and government reports, readily admitted
that, due to government policies, the industry was selling below the cost
of production and losing money.(21) As a result, the petitioners argue
that the Canadian producers know they are dumping softwood lumber in the
United 

States - the Department only needs to measure the amount of dumping. 

In their rebuttal briefs, all six respondents and the BCLTC argue that
the Department does not determine whether dumping is occurring by an
examination of articles in newspapers and other sources. Furthermore, the
parties point out that the majority of articles cited by the petitioners
concern government subsidies, but evidence of subsidies neither suggests
nor proves dumping.(22) 

Instead, the parties contend, in an antidumping investigation, the
Department must examine the company-specific, verified data the
respondents placed on the record. According to the parties, the
petitioners resort to newspaper articles because the data on the record in
this investigation do not support a contention of dumping.(23) 

The BCLTC and Tembec also contend that the petitioners have never
addressed the distortions caused by the SLA during the POI. According to
both parties, the SLA restricted the exports of Canadian softwood lumber
to the United States, thereby forcing Canadian prices lower than the
prices for the same products in the United States. Even though prices were
higher in the United States than in Canada during the POI, the parties all
argue that the Department's flawed cost test caused home market sales of
mid-level products to fail the cost test and thus to be compared to
constructed value. As a result of this methodology (and the Department's
skewed methodologies regarding comparisons to sales of similar products,
CV profit, etc.), the parties argue that the Department did not find
dumping as much as it generated it. 

Department's Position: The Department conducts a dumping analysis based
on data supplied by respondent companies. Accordingly, in this
investigation, the Department has not considered the petitioners' claims
that newspaper articles prove dumping, the respondent companies'
assertions that they are not dumping, the theoretical arguments regarding
dumping in a free trade area, or the SLA's affect on pricing. Rather,
despite the respondents' arguments to the contrary (addressed below), the
Department considered the respondents' own sales and cost data for the
preliminary and final determinations and made those determinations in
accordance with U.S. law. 

Arguments about the Department's methodology, with respect to the cost
test, product comparisons, and CV profit, are addressed in detail
elsewhere in this memorandum. Notwithstanding those arguments, the
Department's final determination in this investigation is based on a
strict adherence to the statute and the Department's regulations, as
applied to the respondents' own information, verified by the Department.
Likewise, with respect to Canfor's argument vis a vis Article 2.4 of the
Antidumping Agreement that the Department's methodology did not allow for
a fair comparison of export price or constructed export price to normal
value, we make two points. First, in response to parties' comments
regarding the preliminary determination, we have made certain revisions to
the methodologies used in this final determination. Those revisions are
explained elsewhere in this memorandum in response to the relevant
comments. Second, we have made our final determination based on a fair
comparison of export price and constructed export price to normal value in
accordance with section 773 of the Act, the section of the statute which
implements our obligations under the Antidumping Agreement.

As to whether SLA has distorted Canadian and U.S. timber prices, we find
that the likely distortion is at most minimal. Moreover, removing all
"distortion" would be nearly impossible.

A border measure, such as the SLA, could affect a market-oriented timber
industry across North America by driving down stumpage prices in Canada
and driving up stumpage prices in the United States. However, we find that
this theory is not applicable to the facts of this case. Moreover,
throughout the duration of the SLA, Canadian lumber exports to the United
States consistently exceeded the specified volume thresholds that
triggered the export fees. Therefore, it is unclear to what extent, if
any, the SLA actually constrained the quantity of lumber exported to the
United States. For all these reasons, the SLA likely did not cause any
significant distortion of lumber prices in the United States during the
POI. However, even if the SLA had caused a substantive distortion, it is
unclear whether, how, and under what circumstances we could account for
any distortion. 

Comment 3: Critical circumstances

The petitioners argue that the Department must revisit its preliminary
negative critical circumstances determination. In that determination, the
Department found that the requisite surge of imports did not take place,
based on an analysis of import data for five months after the filing of
the case. The petitioners argue that the Department's normal practice is
to analyze import data for three months, not five months.(24) Also, the
petitioners note that the imports had surged within the three-month time
frame until the affirmative critical circumstances determination in the
companion countervailing duty (CVD) investigation. 

Although the Department has used periods of time longer than three months
in other investigations, the petitioners assert that this had occurred
only where the exporters or producers had reason to believe - prior to the
proceeding - that a petition was likely to be filed. Using a five-month
period in this case, after finding imports massive over a three-month
period in the CVD investigation, penalized the petitioners. 

The Government of Canada (GOC) argues that the Department's usual
practice is to base its analysis of massive imports on the longest period
for which data are available. The GOC cites the Department's final
determination in Certain Steel Concrete Reinforcing Bars from Turkey for
the statement that the period for the analysis of massive imports normally
begins "with the month of filing the petition and . . . {ends} with the
date of the preliminary determination."(25) In those cases in which the
Department limited its analysis of massive imports to a three-month period
at the time of the preliminary determination, the Department expanded the
period for its final determination to include the longest period for which
information was available.(26)

The GOC also argues that the petitioners' position that the preliminary
determination concerning critical circumstances in the companion CVD
investigation of certain softwood lumber products from Canada has some
relationship to a critical circumstances determination in the antidumping
investigation is wrong as a matter of law. The critical circumstances
determination in the antidumping investigation must be based on the
factual record of the antidumping investigation.

Both the GOC and OFIA/OLMA addressed the Department's critical
circumstances determination as it affects the "all others" group, claiming
that the Department should base its "all others" critical circumstances
determination on its critical circumstances for a majority of the
mandatory respondents.(27) These parties note that in its preliminary
determination, the Department examined U.S. Bureau of the Census (Census)
data for the companies in the "all others" category. In that analysis,
however, the parties contend that the Department significantly understated
the seasonal adjustment factor. As explained by the GOC in its October 11,
2001, submission, the Department should have accounted for seasonal
variation by comparing the period following the filing of the petition
with the same months in prior years.

Each of the respondents points out that there is no history of
dumping(28) and no basis for imputing knowledge of dumping(29) nor of
material injury,(30) absent such knowledge or the imputation of such
knowledge, the Department cannot make an affirmative critical
circumstances determination. 

Department's Position: We agree with the Government of Canada that the
Department's practice is to base its analysis of massive imports on the
longest period for which data are available. Section 351.206(i) of the
Department's regulations provides that the comparison period must be at
least three months. Using import data for a longer period than three
months, as data become available to the Department, is consistent with the
Department's regulations and practice. See, e.g., Notice of Final
Determination of Sales at Less Than Fair Value: Certain Polyester Staple
Fiber from the Republic of Korea, 65 FR 16880 (March 30, 2000). Therefore,
for this Final Determination, because data for six months are available to
the Department, we have compared import and shipment data during the six-
month period immediately after initiation with the six-month period
immediately preceding initiation to determine whether there has been at
least a 15-percent increase in imports of subject merchandise. On the
basis of this comparison, the Department found that there were no massive
imports with respect to the mandatory respondents and the companies in the
"all others" category. For further details, see the Department's Final
Determination of Critical Circumstances memorandum from Gary Taverman to
Bernard T. Carreau, (March 21, 2002). Thus, the Department found no basis
for determining that critical circumstance exist with respect to the
mandatory respondents or the companies in the "all others" category.

Comment 4: Value-based cost allocation methodology

From the outset of this investigation, a central issue to the case
concerned the appropriate method for allocating the joint production costs
to the various lumber products produced. All respondents submitted data
sets that allocated production costs on a per unit volume (i.e., per
thousand board feet (MBF)) basis, which is consistent with their normal
books and records. Four of the six respondents submitted an additional
data set which allocated production costs using a value-based method. The
petitioners have argued throughout the investigation that the joint lumber
production costs should be allocated using a volume-based method. For the
preliminary determination, the Department based its COP and CV
computations on the volume-based cost allocation data sets submitted by
each of the respondents.

The respondents in this case disagree on the appropriate method for
allocating production costs to specific products. According to both
Abitibi and Tembec,(31) an approach that allocates costs to individual
products based on relative sales value would create more distortions than
it would eliminate. Specifically, Abitibi argues that the problem with
joint costs is that any allocation method is arbitrary.(32) Abitibi argues
that the problem with value-based cost allocations is that they require
absolute relative values for products (i.e., stable relationships between
prices). However, the company notes that softwood lumber prices fluctuate
greatly. Abitibi contends that the value-based method substitutes one
problematic method, the comparison of average costs to individual product
prices, with another, the comparison of average values to individual
prices.(33) Abitibi argues that such allocations ignore the reality of
declining values over the course of the POI and replace one distortion,
the comparison of average joint-product costs to prices for individual
products of widely varying values, with another, the assumption of
constant relative values.(34) Therefore, these respondents advocate that
the Department should continue to use a volume-based method for allocating
production costs, but that it should alter the cost test.(35) See general
comment 5, fair comparisons in the application of the sales below cost
test.

Three of the respondents (Canfor, Slocan, and West Fraser) and an
interested party (Idaho Timber(36)) contend that a value-based cost
allocation method is not only the appropriate method for calculating
product-specific costs, but also that it is consistent with Department
precedent. These respondents point out that lumber should be accounted for
as a joint product because multiple products are processed simultaneously
from the same log, by common manufacturing processes, through the sawmill
stage of production.(37) As a result, the conversion of logs into lumber
results in a host of products, with some higher in value than others.(38)
Therefore, in their view, unless joint costs are allocated among the joint
products in a way that recognizes the underlying differences in their
revenue-producing power, the cost test will fail to generate meaningful
results.(39) In support of their position, they cite the CIT decision in
Chemical Products(40) where the court stated "it is not reasonable to
allocate factors of production between barium, carbonate and HSG on a
quantity basis if the value of one product is significantly greater than
the other."(41) In addition, these respondents point to Thai Pineapple(42)
and PVA from Taiwan,(43) where the Department rejected a volume-based
average cost method used in the normal books and records of the
respondents.(44) In Thai Pineapple, they argue, the court upheld the value-
based methodology, stating that "although the raw material was purchased
as a whole, for a set price per unit of weight, the parts of the pineapple
differ in their usefulness and value." Further, consistent with the Thai
Pineapple and PVA from Taiwan cases, the respondents in this case
recognize the need to avoid circularity in applying a value-based cost
allocation method.(45) Therefore, these respondents note that using lumber
prices from sources prior to the period of investigation, when prices are
not allegedly dumped, avoids the issue of using allegedly dumped prices in
the evaluation of whether dumping occurred.(46)

These three respondents note that lumber prices vary significantly
depending upon the type (dimension, board, stud, etc.), grade, dimension
and length of the final product.(47) As such, these respondents maintain
that a volume-based allocation of the lumber joint production costs
ignores the vastly different revenue-producing powers of the joint
products at issue and results in large profits accruing to the higher-
value products and significant losses for the lower-value products(48)
(See general comment 6, CV profit). Accordingly, these respondents contend
that the volume-based allocation methods are only valid when products are
physically similar and selling prices of the joint products are
approximately the same.(49) In this respect, these respondents maintain
that the allocation of costs based on a physical measure fails because the
market potential of the various joint products produced from a log are
dissimilar and the net realizable value(50) of the various lumber products
is substantially different. 

With respect to the Department's reliance in the preliminary
determination on the Court of Appeals for the Federal Circuit (CAFC)
IPSCO(51) decision and the normal books and records argument, these
respondents contend they are misplaced for two reasons. First, the
respondents consider IPSCO to be unrelated to this case because the
products in that case were not joint products, but products produced
sequentially that yielded two or more grades of a single product and were
intended to result in identical products.(52) Accordingly, the IPSCO
decision is inapposite to this case both because the issue in that case
was the use of selling prices as a value-based allocation method for
homogeneous products and the case did not address the use of value-based
allocation methods for non-homogeneous joint products.(53) In the instant
case, these respondents maintain that different portions of a log have
significantly different physical characteristics and are used to produce
distinct lumber products, meaning that the raw material input is not
homogeneous and the end-products do not have identical physical
characteristics.(54) Second, they reject the argument that the
respondents' normal books and records, which use a volume-based allocation
method, should be relied upon because the aggregated inventory group costs
(i.e., average cost per MBF) calculated in the respondents' normal books
and records are not representative of the 10-characteristic control number-
specific costs required by the Department.(55) Furthermore, these
respondents discount the point that they do not use the value-based method
in their books and records, stating that the companies do concentrate on
relative values for management purposes and that the average cost figures
from their accounting systems do not provide economically meaningful
numbers.(56) Therefore, these respondents maintain that a value-based cost
allocation method is the best alternative because it allocates cost based
upon the relative sales value of the end products and eliminates the
distortive peaks and valleys in the profits or loss per product created by
the use of a volume-based allocation method. 

The petitioners reject any price-based reallocation of the respondents'
costs and argue that the Department should continue to use the submitted
volume-based actual costs for the final determination. The petitioners
state that section 773(f)(1)(A) of the Act requires the Department to
calculate costs based on the costs contained within the respondent's
normal books and records provided that those costs (1) "are in accordance
with generally accepted accounting principles of the exporting country,"
and (2) "reasonably reflect the costs associated with the production and
sale of the subject merchandise."

The petitioners continue that section 773(f)(1)(A) of the Act further
requires that the Department not consider an exporter or producer's cost
allocations if the allocations were not used historically by the
exporter/producer. According to the petitioners, record evidence clearly
demonstrates that none of the respondents uses a value-based cost
allocation method in its normal books and records. As a result, there is
no reason to believe that the volume-based actual costs reported to the
Department and contained in the respondents' normal books and records do
not accurately and reasonably reflect the cost of production of the
subject merchandise. Further, the petitioners differ with the respondents
as to the applicability of IPSCO, stating that, in this investigation, the
manufacturing and production processes - which employ the same processes,
material inputs, labor, and overhead in producing various grades and
dimensions of lumber within a given species - are identical. The
petitioners note that the lumber products at issue, while distinguishable,
are not so different as to be completely distinct categories of products
as was the case in PVA from Taiwan and Thai Pineapple. The petitioners
hold that it is reasonable to use a volume-based cost allocation because
there are virtually no differences in cost per MBF due to grade, length,
width, and thickness of lumber produced from a given species. 

In addition, the petitioners reject the use of pricing data from the POI
to allocate costs in this case because of the circularity argument
addressed in IPSCO. In that case, the CAFC decided that the price of
subject merchandise, which was produced using the identical inputs and
production methods, should not become the basis for determining a cost of
a product used for measuring the fairness of the selling price of the
subject merchandise. To do so, according to the CAFC, could contravene the
express requirements of the Act, which set forth the cost of production as
an independent standard for fair value. In the instant case, the
petitioners also object to using any historical pricing data prior to the
POI because they claim the Canadian softwood industry has operated in an
environment of distorted prices for many years prior to the investigation.
The petitioners conclude that a value-based cost allocation method is not
used by the respondents in their normal books and records, does not
reasonably reflect the actual costs incurred to produce the subject
merchandise and is inconsistent with the Department's past practice, as
upheld in IPSCO. 

Department's Position: Due to the diversity of the industry, the range of
wood grades found in any given log, the numerous permutations of physical
characteristics, and the fact that lumber production is the result of a
joint production process, the cost allocation issues raised by this case
are among the most complex the Department has ever considered. The
respondents themselves do not agree on the appropriate method to use to
allocate costs to lumber products.

After careful consideration of these factors, as they relate to the issue
at hand, we agree in part with the respondents who have argued for the
application of a value-based cost allocation. Specifically, we believe it
is appropriate to allocate wood and sawmill costs to particular grades of
lumber using a value-based measure. A volume-based allocation does not
recognize the fact that there are separately identifiable grades of wood
within a given log and that the producer factors their presence into the
cost it is willing to incur to obtain those logs. We have included sawmill
cost in our value-based allocation because the sawmill essentially
represents the split-off point(57) in the process where the grades are, in
effect, carved out.(58) However, we consider it inappropriate to allocate
the "downstream" processing costs (e.g., planing, kiln drying) to products
based on value since these costs are reasonably identifiable and are
closely associated with the volume of production. The downstream
processing also marks the point where management makes decisions on what
further processing steps to undertake, moving the issue outside of a joint-
product scenario. 

In determining the appropriate cost methods to use, the statute directs
the Department to look first to the books and records of a respondent.
Section 773(f)(1)(A) of the Act states that costs shall normally be
calculated based on the records of the exporter or producer of the
merchandise, if such records are kept in accordance with generally
accepted accounting principles (GAAP) of the exporting country and
reasonably reflect the costs associated with the production and sale of
the merchandise. While the respondents in this case have generally argued
that they do not maintain formal cost accounting systems, wherein
individual product costs are derived, to the extent that records are
maintained by each respondent they all calculate lumber costs per MBF
(i.e., using a volume-based cost allocation methodology), for either
costing or financial reporting purposes.(59) It was largely for this
reason that we applied a volume-based cost method at the preliminary
determination.

In evaluating the reasonableness of the reported costs, and a
respondent's normal books and records, we analyzed the costs by component
and by process (e.g., wood costs, sawmill costs, kiln drying costs,
planing costs, etc). As stated above, we believe that a volume-based cost
allocation for wood and sawmill costs distorts the actual cost of
individual products, because it does not account for the various grades of
wood in the logs and the resulting products produced by the sawmill. In
coming to our conclusion, we considered several factors, such as, that
grade differences pre-exist in the raw material and do not result from the
production process, and that the differences are so significant that the
end uses of the products differ considerably. As discussed below, we
concluded that it is reasonable to assume that a lumber producer considers
these factors when deciding on how much cost to incur to acquire the raw
material, logs. Therefore, we have determined that it is appropriate to
depart from the books and records (i.e., MBF measure) of the respondents
in this case. 

We recognize that a value-based cost allocation method can be problematic
in an antidumping context. The most obvious problem is the potential
circularity of the analysis, whereby prices are used to determine the
product-specific costs which in turn are either compared to those same
product-specific prices or are used to determine prices (i.e., through the
sales-below-cost test and constructed value). In an antidumping context,
the POI prices of subject merchandise to the United States are alleged to
be at unfair levels and, therefore, may not capture the appropriate value
differences between subject and non-subject products. Other market factors
may also create problems with using prices as a basis of allocation, such
as volatile market prices (as alleged here by Abitibi), temporary surges
in supply and demand, and specific market preferences for specific
products. In addition, the statute directs the Department to determine the
actual cost to produce the merchandise under consideration and establishes
that cost as a floor for the comparison prices. Thus, we believe that the
use of a value-based cost allocation method is appropriate in an
antidumping context in only very limited instances. However, we believe
that the facts of this case, as discussed in more detail below, support
the use of a value-based allocation method for certain cost elements. 

The decision on whether to allocate wood costs between lumber products
using a value- or volume-based cost allocation method comes down to
whether one believes wood is or is not homogeneous. To say wood is
homogeneous means that wood is wood regardless of the grade. If wood is
homogeneous, then all wood of a given species of log is the same and costs
the same amount per MBF. To say wood is not homogeneous means wood grades
occur within given logs, in reasonably well known quantities, which the
producer de-constructs into its component lumber products, much as a
slaughterhouse would de-construct a cow into its various meats. If wood is
not homogeneous, then portions of a log are inherently different, like a
steak is different from a hamburger or a pork roast differs from pork
ribs. The cost of the log would then be appropriately distributed to its
parts. We believe that the facts of this case support the conclusion that
the various wood grades within a log constitute different recognizable
cost elements, much like the slaughterhouse example, and that a value-
based cost allocation method is appropriate for log costs and sawmill
costs. As noted above, the differing wood grades within a log occur in
reasonably well known quantities which the producer disassembles into its
component parts. These differences pre-exist in the raw material and are
reflected in the cost of that material. The producer cannot saw a log
without obtaining each of the various grades of wood therein. Also, as
noted, different wood grades have significantly different end uses and
values. We note that the lumber industry recognizes the different grades
within a log through extensive books on lumber grading standards which are
published by lumber associations.

Sawmill costs pose a unique situation in costing lumber. While the output
from the sawmill operation represents the split-off point, the cost
incurred in the sawmill to produce various dimensions does not vary. Since
the sawing process does not vary between dimensions or grades, it can be
argued that volume of production is the most directly related cost driver
for the sawmill, which means that a cost per MBF would be used. Indeed, as
Tembec states in its case brief at page 48, "the sawmill makes no extra
cuts to make smaller pieces and the costs in the sawmill do not vary by
dimension." However, as stated above, we have determined that it is
appropriate to include the sawmill costs with the wood costs in performing
our value-based allocation because, as the split-off point, it is the
stage where the grades first become separated. 

However, our goal is to identify only the cost differences in wood
grades. We have therefore weight-averaged the lumber prices used in our
allocation, without regard to dimension or the characteristics that result
from the downstream processing (e.g., drying, planing, etc.). We adopted
this method in order to limit the value-based allocation to the factor for
which it is being applied, grade differences that exist in the wood.(60)
The other processes (and characteristics they create) are directly
associated with the volume of production input to the given process and
hence those directly identifiable costs are reasonably allocated over the
volume of production in MBF. 

We reviewed each of the respondents' value-based cost allocation methods
to evaluate their reasonableness and consistency of approach. West
Fraser's value-based method considered costs through the sawmill as joint
costs and, to allocate the joint costs, used three year average price data
from prior to the POI from the publication Random Lengths.(61) We noted
that West Fraser identified the identical or most similar Random Lengths
product with each West Fraser product. This resulted in a situation where,
in most cases, multiple West Fraser products were associated with one
Random Lengths product because of the limited number of products that are
reported by Random Lengths. Weyerhaeuser's value-based method considered
all costs through to the finished product stage as joint costs and, to
allocate costs, used its own historical market prices of finished
products. Slocan's value-based method considered all costs through to the
finished product stage as joint costs and, to allocate costs, used its own
average sales prices of individual products over a three-year period.
Canfor's value-based method considered all costs through to the finished
product stage as joint costs and used Random Lengths three-year average
data prior to the POI to allocate costs. We noted that Canfor identified
the identical or most similar Random Lengths product with each Canfor
product. In most cases, this resulted in multiple Canfor products being
associated with one Random Lengths product because of the limited number
of products that are reported by Random Lengths. Abitibi and Tembec did
not submit value-based allocations. 

We have declined to use the submitted alternative methods provided by
respondents because of specific problems with each of their methods. We
have also decided that, in adopting a value-based allocation for the final
determination, it should be applied consistently and for all respondents.
Specifically, West Fraser's and Canfor's methods relied on Random Lengths
prices which do not include all the grades of merchandise reported. This
deficiency required using surrogate grades for those not listed in the
publication, which defeats the intended purpose of using prices to
establish differences between grades. Canfor's and Slocan's methods treat
all production costs as joint costs, which we reject, since we have found
that for those processes occurring after the split-off point, it is more
appropriate to allocate them based on the volume of production, as
explained above. Weyerhaeuser's and Slocan's methods used historical sale
prices of individual end products to allocate costs, which in our opinion
creates artificial distinctions between products for physical
characteristics beyond wood grades. We note also that this method involves
allocation of certain costs which are not joint costs (e.g., kiln and
planer processes).

For the final determination, we developed a value-based cost allocation
methodology for joint wood and sawmill costs using the best data we had
reasonably available. We have used each respondent's reported home market
net sales prices, adjusted for freight and selling expenses, as the basis
for developing net realizable value allocation factors. This allocation
method first determines the NRVs of all sales reported for each CONNUM by
subtracting costs of production other than wood and sawmill costs (i.e.,
costs downstream from split-off point) from the net home market sales
prices. Second, the resulting positive NRVs are then weight-averaged, by
species and grade across CONNUMs using sales quantities. We note that, for
sales where the post split-off processing costs were greater than the net
price, we set the NRV to zero, rather than allowing a negative NRV. Third,
the species-grade specific NRVs are extended by the corresponding
production quantities and a total for each species is calculated. The
percentage of the relative value of each species-grade NRV to the total
for the species is determined. Fourth, the wood costs, sawmill costs and
by-product revenue fields reported on the cost database are extended by
production quantity and the totals by species are derived. The totals by
species are then allocated based on the relative value percentages of each
species-grade NRV. Finally, the resulting species-grade specific pools of
cost are then divided by the corresponding species-grade production
quantities to obtain species-grade specific per-unit costs.

In addressing the circularity issue of using the same home market sales
prices to allocate costs which in turn are then compared to those same
prices, we believe that for purposes of this investigation, an individual
respondent's reported home market sale prices provide a reasonable basis
from which to calculate a cost allocation factor. First, we are only
relying on the average prices of different wood grades, weighted by the
total quantity produced of each grade, to allocate the joint pool of costs
and are not using the total value of the home market sales prices to
allocate between merchandise under consideration and that not under
consideration. We note that there is no evidence on the record to suggest
that the relationship between the varying grades of softwood lumber
products is tainted, only the allegation that overall prices of lumber in
the United States are at below fair value levels and those in the home
market are below cost. Second, we are only using the prices in this case
to differentiate costs for one physical characteristic, i.e., grade, not
for all characteristics making up a control number. Third, we are only
allocating costs up through the split-off point, not costs in total.
Fourth, as a check on the appropriateness of the relationship of prices
across grades, we have compared prices published in Random Lengths for a
period prior to the POI to comparable prices for a sample of identical
grades on the record, and found no significant changes to the
relationships over time.(62) 

Finally, although respondents allege that prices have declined over the
POI, we note that we are using POI weighted-average prices only to
establish relative values between grades. Since the adjustment factors
rely on relative NRVs, a decline in prices for all lumber products does
not distort the resulting calculations. 

Finally, we believe our adopted method for the final is consistent with
past cases involving joint product allocation issues. We believe that the
facts in this case are similar to Thai Pineapple, in that pineapple is
disassembled into various parts (e.g., cylinder, core, shells, etc.)
having significant differences in composition. Just as the pineapple is
composed of various parts with significantly different uses (e.g.,
cylinder for canned fruit, shells and core for juice) and values, logs are
comprised of various parts (e.g., sapwood, heartwood, etc.) which result
in lumber of differing grades with significantly different uses and values.

We disagree with the petitioners' arguments that the CAFC ruling in IPSCO
precludes us in this case from applying a value-based cost method. IPSCO
involved the Department's use of an appropriate method for allocating
costs between two grades of steel pipe. There were no physical differences
between the inputs of the two grades of pipe, only quality differences in
the end product that resulted from the production process. We believe that
our adopted method in this case is in line with the reasoning in IPSCO;
that is, we have chosen not to allocate costs between minor quality or
dimensional differences where the processing costs are essentially
identical and differences result from processing errors. Moreover, we have
limited the application of the value-based allocation only to the wood
costs and sawmill costs to isolate differences pre-existing in the log. In
IPSCO, the differences in quality related to flaws in the production
process creating a non-prime product. Furthermore, in IPSCO, the same
materials, labor and overhead went into the manufacturing lot that yielded
both grades of pipe. We are being consistent in the instant case by
allocating costs of processes (i.e., drying, planing, etc.) with similar
fact patterns in a manner consistent with IPSCO. 

While we do not believe the facts in the instant case are analogous to
those presented in PVA from Taiwan in terms of the production process
involved, we disagree that this case differs because the joint products
are not sufficiently distinct. In this case, as in PVA from Taiwan, the
joint products differ significantly in nature and value. That the joint
products are within one class or kind of merchandise is immaterial.

We find that this case is also distinguishable from past agricultural
cases such as mushrooms, salmon, and tomatoes. See Notice of Final
Determination of Sales at Less Than Fair Value: Certain Preserved
Mushrooms from India 63 FR 72246, 72248, 72254 (December 31, 1998); Notice
of Final Determination of Sales at Less Than Fair Value: Fresh Atlantic
Salmon From Chile 63 FR, 31411, 31413 (June 9, 1998); Notice of Final
Determination of Sales at Less Than Fair Value: Greenhouse Tomatoes from
Canada 67 FR, 8781, referencing "Issues and Decision Memorandum" from
Richard W. Moreland, Deputy Assistant Secretary, Import Administration, to
Faryar Shirzad, Assistant Secretary for Import Administration, dated
February 26, 2002, comments 5 and 6. Each of these cases involved
production processes utilizing identical and homogeneous raw material
inputs and identical processing, resulting in finished products of
differing sizes, grades and quality. The Department calculated an average
cost for all similar products, regardless of the resulting size, grade,
and quality differences identified at the end of the process. The
differences in the size, grade, and quality of those products were due to
the processing. They did not involve the disassembly of a greater whole
into its parts. The only differences in the resulting end products were
size, grade, and quality differences found through a quality
inspection.(63)

Comment 5: Fair comparisons in the application of the sales below cost test

In the preliminary determination, the Department calculated a cost, on a
thousand board foot basis, for each element of lumber production (e.g.,
wood, sawmill, drying, planning). Our calculations reflected the cost
methodology found in the respondents' normal books and records. The
individual product costs were differentiated only to the extent they
passed through given processes; all products received the same cost for
wood (by species), sawmill, drying, planing, etc., provided they went
through the particular process. The Department chose not to use the
alternative value-based cost allocation methods submitted by four of the
six respondents.(64) 

The respondents' comments concerning the application of the sales-below-
cost test are basically split between two opinions: a suggestion to
compare one weighted-average cost to one weighted-average price, or to
perform the normal sales-below-cost test, but allocate the costs
proportionally between products based on value. Abitibi, Slocan,
Weyerhaeuser and Tembec are of the opinion that the sales-below-cost test
should be performed on an overall weight-averaged basis. West Fraser and
Canfor believe that the costs should be re-allocated based on prices. 

Specifically, the respondents in agreement with Abitibi assert that
average joint costs should be compared to average prices for all joint
products included in those costs. They maintain that for the preliminary
determination the Department compared weighted-average joint costs (for
groups of jointly produced lumber products that differed in grade and
dimensions) to the individual prices for each of these different products.
They argue that the sales-below-cost test for the preliminary
determination failed to fulfill its intended purpose - that of measuring
whether prices permit the recovery of all costs - because the prices and
costs did not match. These respondents argue further that the costs of any
joint product are incurred for the resulting joint products as a whole
and, therefore, the recovery of all such costs can be tested only at the
level of the joint product. Thus, they contend that a single total average
cost for all joint products must be compared to the weighted-average price
of all the sales of products within that joint product category. Slocan
points out that, in a joint product situation, where "below-average"
products are inevitably produced as a consequence of common inputs and
manufacturing processes, there are obvious reasons for considering sales
of low-quality products to have been sold in the ordinary course of trade
when they are sold below average cost. In the same line of reasoning,
Tembec argues that a determination as to whether costs are being recovered
must be made on the basis of whether the average price obtained for all
products sharing all of the same production processes exceeds the average
cost of those products. Tembec maintains there is no other way to achieve
the goal of consistency, nor to make fair comparisons. 

Specifically, these respondents argue that the Department should compare
each average joint cost for each grouping of joint products to the average
price of all joint products, using its broad statutory authority to use
averaging where necessary, per section 777A(a)(1) of the Act, and use
weighted-average prices for comparison under section 773(b)(2)(C)(ii) of
the Act. They suggest that if the average price is above the average joint
cost, prices recover costs, the substantial quantities test is met and all
home market sales of those products should be included in fair value
comparisons. Conversely, they suggest that if the average price is less
than the average joint cost, then substantial quantities of below cost
sales exist, and the Department should disregard all the individual below
cost sales.(65) Similarly, Weyerhaeuser argues that the SAA at 832 does
not limit the sales-below-cost test using weighted-average-price-to-costs
only to cases involving highly perishable agricultural products.
Weyerhaeuser and the BCLTC assert that softwood lumber producers are
forced, due to the varied nature of the raw material input, to sell a full
range of products (some below cost and some above cost) in an effort to
recover total costs. They contend it is the nature of the product to make
a certain level of below-cost sales a normal and necessary business
practice and, likewise, make the 20-percent substantial quantities test
inapplicable. In addition, Abitibi argues that the 20-percent test should
not be applied in this case because it is typical for more than 20 percent
of the products produced (i.e., those sales consisting of low end
merchandise) to be sold below cost in the ordinary course of business in
the lumber industry.(66) Finally, Weyerhaeuser does not believe the
Department is required to eliminate below-cost sales in the calculation of
normal value. Weyerhaeuser cites section 773(b)(1)(B) and the Department's
regulations at section 351.406(a) as support. Weyerhaeuser states that the
language of these provisions clearly establishes that the Department need
not disregard such sales if doing so would yield unfair comparisons or
irrational results. 

Advocating an alternative approach, West Fraser and Canfor argue that to
correct the parties' concerns about the results of the cost test, the
Department must allocate cost to products using the prices of the
products. They argue that the Department's use of average costs in the
sales-below-cost test distorted the results of the test by causing nearly
all of home market sales of low-end lumber to be below-cost sales. They
contend that the Department's cost test in the preliminary determination
led to the unrealistic conclusion that no Canadian producer subject to
this investigation regularly sold lower grade lumber in the ordinary
course of trade during the POI. West Fraser and Canfor argue for a
complete reallocation of production costs to individual products based on
a measure of the value of individual products. 

The petitioners advise the Department to continue to perform the sales-
below-cost test in the exact same manner as was done for the preliminary
determination, rejecting the respondents' arguments to the contrary. They
reject respondent claims that they did not report control number- specific
costs with which to compare control number-specific net prices for
purposes of the sales-below-cost test. The petitioners maintain that costs
reported by the respondents are the actual costs incurred by the companies
to produce the products under the volume-based method, the costs reported
in the normal course of business, consistent with GAAP, and have been
verified. According to the petitioners, the nature of the softwood lumber
industry is such that control numbers having the same actual cost is not
unusual because actual processing costs associated with various different
products do not differ. 

The petitioners characterize the respondents' interpretation of the
substantial quantities provision of the sales-below-cost test as being
without merit and in direct contradiction to the statute. The petitioners
state that the plain language of the statute requires that only when the
volume of below-cost sales represents less than 20-percent of the volume
of sales under consideration for the determination of normal value can a
finding be made that sales below cost were not made in substantial
quantities, citing section 773(b)(2)(C) of the Act. The petitioners state
that the weighted-average alternative, even when relevant, does not
provide support for a comparison of an average cost to an average of
prices for multiple products. 

The petitioners argue that the respondents' pleas to compare average
prices to average costs are inappropriate for several reasons. The
petitioners argue that the Department has rarely compared average prices
to average costs of production and, when it has done so, it was only when
examining highly perishable products.(67) The petitioners quote the SAA at
832, which states, "the cost test generally will be performed on no wider
than a model-specific basis." The petitioners hold that the cost test is
designed to determine if individual sales of a product were made below the
actual cost of that product, not to determine whether, on average and over
time, the average costs were recovered. The petitioners respond that
comparing weighted-average prices to average costs would mask dumping
through overly broad averages. The petitioners state that the weight-
averaging provision of section 773(b)(2)(C) only applies to highly
perishable agricultural products, where products must be sold before
spoilage. In these cases, according to the petitioners, the Department
averaged prices over time and not across products. The petitioners state
that lumber is not a highly perishable product and that lumber producers
are not compelled to sell their lumber because of rapid spoilage.(68)
Finally, the petitioners argue that, even if the Department were to agree
with the respondents, it could only apply an accurate "average-to-average"
cost test if it were to weight-average the prices of all products that
share the same production costs. Given that the Department limited the
reporting requirements, this method would not be possible based on the
current record.

The petitioners state that there is no legal or logical requirement that
the prices compared by the Department to submitted costs be at the same
level of specificity as those costs. The petitioners continue that, in
fact, the Department's normal cost test routinely compares each and every
individual sales price within a given control number to the weighted-
average cost reported for that control number. Additionally, the
petitioners argue that it would be inappropriate for the Department to
define control numbers one way for the sales-below-cost test and another
way for the margin calculation. The petitioners state that control numbers
must be defined consistently (i.e., identically) for the sales-below-cost
test and the price-to-price comparison process, respectively.

The petitioners urge the Department to reject the respondents' suggestion
that sales-below-cost be treated as sales made in the ordinary course of
trade and that they be included in the universe of sales available for
price-to-price comparisons. The petitioners state that the discretion
afforded by the statute in disregarding sales which fail the sales-below-
cost test has never been exercised and no compelling reason exists to do
so in this case. The petitioners disavow the respondents' claim that
Canadian softwood lumber producers are compelled to sell below cost,
suggesting that allowing the respondents' request would provide the
respondents with a license to dump. 

Department's Position: For the final determination, we believe it is
appropriate to continue to compare the product-specific cost for each
product represented by a control number to the individual sales that
belong to that control number. Thus, we performed the sales-below-cost
test in the same manner as in the preliminary determination. 

The Department's standard practice with respect to determining whether to
disregard home-market sales made at less than their COP is to examine, in
accordance with sections 773(b)(1)(A) and (B) of the Act, whether such
sales were made (1) within an extended period of time in substantial
quantities, and (2) at prices which did not permit the recovery of all
costs within a reasonable period of time. Pursuant to section 773(b)(1),
where less than 20 percent of the respondent's sales of a given product
are at prices less than the COP, we do not disregard any below-cost sales
of that product, because we determine that in such instances the below-
cost sales were not made in "substantial quantities." Where 20 percent or
more of a respondent's sales of a given product are at prices less than
the COP, we regard those below-cost sales of that product as being made in
"substantial quantities," in accordance with section 773(b)(1)(A) of the
Act. In such cases, we also determine whether such sales were made at
prices which would not permit recovery of all costs within a reasonable
period of time in accordance with section 773(b)(1)(B) of the Act.(69) If
this criterion is also met, we disregard the below-cost sales. The
Department has only applied section 773(b)(2)(C)(ii) of the Act, where we
compare a respondent's weighted-average per-unit price of a given product
to the respective weighted-average COP, in cases involving highly
perishable products.(70) Even then, we did not average prices or COPs
across products. Lumber is not highly perishable like flowers, where
product may be sold below cost because of spoilage concerns.

Concerning the respondents' comments that the costs and prices used in
the preliminary determination were not comparable because average joint
costs were compared to product-specific prices, we believe that our
adopted cost method for the final determination results in costs that
accurately reflect the actual cost of producing the lumber products in a
given control number.(71) Therefore, we agree, in part, with West Fraser
and Canfor that, to the extent there were any problems with the results of
the cost test at the preliminary determination, the proper way to address
them was through an accurate calculation of the costs. However, while we
take the model match (product definition) criteria into account in
determining the appropriate method for reporting cost, this does not mean
that in every case we can or must calculate a unique cost for every unique
product (i.e., CONNUM) identified by our product definition criteria. Nor
does it mean that if we accept or adopt a cost method that yields the same
cost for two products, we must consider those two products to be a single
product (i.e., CONNUM).(72) 

We disagree that the cost test should be performed on a basis other than
a model-specific basis, in accordance with section 773(b)(2)(C) of the Act
and the SAA. The SAA directs that "the cost test will generally be
performed on a no wider than model specific basis."(73) We note that the
model match criteria developed at the outset of a proceeding directs the
model specificity, not the level of detail in which cost differences can
be captured.(74) We note that in the preamble to its regulations,(75) the
Department stated that its practice is "to calculate costs consistent with
the model matching criteria it develops at the outset of an investigation
or review, after having received the views of the interested parties. The
product categories developed in such fashion generally account for
significant differences in actual costs affecting price. The Department
intends to continue this practice because it prevents any manipulation of
the cost analysis through changes in internal product classifications."
Furthermore, the Department stated in the preamble that, "where a
particular model is sold at prices below the cost of production during one
month of the period of investigation or review (and where such sales are
in substantial quantities and are not at prices that would permit cost
recovery), the Department may disregard these sales in its determination
of normal value."(76) In past cases, the Department has routinely
performed the cost test on a model-specific basis.(77) 

The theory espoused by the respondents, that for a joint product such as
lumber, as long as total sales revenue exceeds total costs, costs are
being recovered, fails to satisfy the model specificity requirement. We
disagree with the respondents' suggestion that it would be appropriate to
conduct the sales-below-cost test on a basis of comparing total weighted-
average prices across products to total weighted-average costs across
products. The fact that lumber results from a joint production process
does not mean that it would be appropriate to deviate from our normal cost
test methodology. The method suggested has never been the Department's
practice because of the substantial risk of masking potential dumping
margins through averaging product groups and losing any type of
specificity in our comparisons. Moreover, this analysis, even if
performed, would not result in meaningful data for the recovery of cost
provision of section 773(b)(1)(B) because it would be limited to home
market prices and would not include the effect of sales of products made
to other countries. The only way to determine whether total sales revenue
recover total joint costs is to look in total at all production and sales
activity, for all products, for all markets world-wide. As such, the
respondents' proposed method would be meaningless in determining whether
sales in only one market, for only a subset of all products produced from
the joint production process, recovered costs. 

The respondents argue that the nature of the lumber business compels
Canadian lumber companies to sell their lower grade products at less than
the cost of production and, therefore, these sales should be exempt from
the substantial quantities provision. Likewise, Weyerhaeuser argues that
its alternative approach to the cost test recognizes that softwood lumber
producers inherently have sales both below and above cost, and would
appropriately disregard only those sales that represent a net below-cost
recovery for the company. We disagree with this approach, and we also
disagree with Weyerhaeuser's argument that if the Department continues to
disregard below-cost sales in the calculation of normal value, it should
similarly disregard above-cost sales. We find no legal basis or logical
reason to abandon our normal practice of applying the substantial
quantities test in this case. The SAA at 833 states that "{t}he
Administration intends that Commerce will disregard sales when the
conditions of the law are met. However, in some cases, below-cost sales
may be used to determine normal value if those sales are of obsolete or
end-of-model year merchandise." We have not found circumstances in this
case which would lead us to conclude that there are specific factors which
would justify including below-cost sales in the universe of sales used for
normal value. First, as noted above, lumber does not have any of the same
characteristics as the categories of merchandise that the SAA contemplates
as exceptions to the general rule (i.e., obsolete or highly perishable).
Second, our revised cost method directly addresses the issue of low grade
wood products. Moreover, given that our cost approach in this case results
in the actual cost of the lumber products, it is reasonable to expect
lumber producers to sell their products above these actual costs. We
therefore disagree with respondents that the facts and circumstances of
this case warrant deviation from our normal practice. Accordingly, we have
continued to apply the cost test on a model-specific basis. 

Therefore, for the foregoing reasons, we have followed our normal
practice in determining when to disregard sales-below-cost in the
calculation of normal value because they are outside the ordinary course
of trade. See section 771(15) of the Act. 


Comment 6: Constructed value profit

The respondents take issue with the Department's calculation of CV
profit. Specifically, they contend that (1) the inclusion in the CV profit
calculation of only "above-cost" sales resulted in a methodology that
ensured that dumping margins would be found on lower-value products, and
(2) the Department's methodology is contrary to the recent CAFC decision
in SKF USA, Inc. v. United States, 263 F.3d 1369 (Fed. Cir. 2001)(SKF II),
where the CAFC rejected the Department's multiple definitions of "foreign
like product." The respondents have suggested alternative methodologies
for calculating CV profit. Their arguments and suggested alternative
methodologies are discussed below, along with the views expressed by the
petitioners.

(1) Use of "above-cost" sales in the calculation of CV profit

Slocan, Tembec, Weyerhaeuser, and the BCLTC contend that, by calculating
an average CV profit based only on sales determined to be "above-cost,"
the Department applied an unreasonably high profit to all products. This,
according to the parties, unfairly generated dumping margins.(78)
According to these parties, low value products are necessarily sold below
cost and do not often generate profits. By omitting sales of low-value
products from the profit calculation, the Department calculated a profit
based on the sales of only high-value products, but then applied this
profit rate as a component of constructed value for low-value products, as
well. As a result, the U.S. sales prices for all products must be as
profitable as the high value products sold in the home market in order to
avoid a dumping margin. 

(2) The Department's methodology is contrary to the CAFC's decision in
SKF II 

Abitibi, Slocan, Tembec, West Fraser, Weyerhaeuser, and BCLTC also argue
that the Department defined "foreign like product" differently when
calculating CV profit than it did when making price-to-price comparisons,
and that the different definitions constitute a violation of the law. The
parties insist that in SKF II the CAFC recently rejected the Department's
multiple definitions of "foreign like product." In the instant
investigation, these parties point out that, for the purpose of making
price-to-price comparisons between the subject merchandise and the foreign
like product, the Department restricted its comparisons to merchandise
that was identical in terms of grade, thickness, width, and length. In
other words, the parties claim that for purposes of price-to-price
comparisons, the Department defined the foreign like product on a more
narrow, control number (CONNUM) specific, basis. However, when calculating
CV profit, the parties say that the Department defined the foreign like
product as all above-cost home market sales, regardless of CONNUM, and on
that basis calculated a single CV profit. The parties argue that in SKF II
the Court rejected a similar methodology employed by the Department in the
Antifriction Bearings case. 

The parties state that section 771(16) of the Act specifically defines
"foreign like product" to govern all references to the term in the
antidumping law. West Fraser argues that nothing in the definition
indicates that the term may have different meanings in different
subsections, or that it may have multiple definitions based on context.
According to West Fraser, the Supreme Court has established that the
repeated use of a technical term in a statute implies that it carries the
same definition.(79) As a result, West Fraser argues, the Department does
not have the authority to use multiple definitions of the same term in its
determination. 

In Antifriction Bearings, the Department treated "families" of bearings
as the foreign like product when determining normal value, but aggregated
the families into larger groups when defining the foreign like product for
the CV profit calculation. The parties contend that, in its decision, the
Court stated that section 771(16) of the Act was obviously designed to
require that the Department use the same definition in calculating normal
value when based on home market sales as well as, when based on
constructed value. The parties argue that, according to the Court, it was
clear that Congress intended the term "foreign like product" to have the
same meaning in each section or subsection of the Act, and intended that
the Department would define the term consistently.(80) Because the
Department did not provide reasons for its inconsistency in Antifriction
Bearings, the CAFC remanded the case to the Department to justify the
multiple definitions. The commenting parties in this case argue that for
the final determination the Department follow the SKF II ruling and
consistently define the foreign like product to ensure a fair calculation.

Proposed alternative methodologies

Several parties argue that, to be consistent with SKF II, the Department
should redefine the foreign like product for purposes of calculating CV
profit, and should define "foreign like product" in the same manner as was
done for price-to-price comparisons, i.e., the Department would have to
calculate CV profit on a CONNUM-specific basis. Alternatively, Slocan
contends that if the Department decides it is appropriate to compare sales
of subject merchandise to home market sales of similar products, it should
then define the foreign like product as all sales of the foreign like
product that are comparable (as similars) to a given CONNUM of the subject
merchandise. Slocan states that this methodology would provide the
Department with a larger set of sales with which to compute CV profit.(81)

Slocan, Weyerhaeuser, and the BCLTC argue that, as an option, the
Department could use the same aggregate CV profit calculation from the
preliminary determination, but incorporate below cost sales, because those
sales were made in the ordinary course of trade and, as such, those sales
must be included to calculate a representative and fair CV profit. Section
773(b)(1) gives the Department the discretion to include below-cost sales
by stating that the Department may disregard sales below the cost of
production, not that the Department must disregard below-cost sales.(82)
The parties insist that, given the nature of their industry, including
below-cost sales would be appropriate. The BCLTC explains that, since
sales of lower quality products are "ordinarily" made at prices below
average cost, they are, therefore, made in the "ordinary course of
trade."(83)

On the other hand, should the Department choose to disregard sales below
cost, the parties argue that the Department should calculate CV profit
under either of the two methodologies outlined in section 773(e)(2)(B)(i)
and (iii) of the Act. Abitibi, Slocan, West Fraser and the BCLTC claim
that section 773(e)(2)(B)(i) allows the Department to base CV profit on
merchandise sold in the home market that is in the same general category
of products as the subject merchandise without regard to whether that
merchandise was sold in the ordinary course of trade. Although the Act
does not define "in the same general category of products" as the subject
merchandise, the parties note that the SAA states that the "same general
category . . . encompasses a category of merchandise broader than the
foreign like product."(84) The parties argue that in this case, where the
foreign like product should be redefined as the specific CONNUM, the same
general category of merchandise as envisioned by the SAA would be broader
than the CONNUM. In order to apply that rationale, the parties argue that
the Department should use their entire home market sales databases for
purposes of calculating CV profit. According to the parties, this is the
best alternative, because aggregating the CONNUM-specific data allows the
Department to use verified information as the basis for the category of
merchandise that is broader than the foreign like product. As another
consideration, Abitibi and Slocan suggest that, rather than calculating
one CV profit for all products in the home market database, the Department
could define the "same general category of merchandise" as all products in
the same grade, same species or species mix, or all products sharing the
same average cost of production, and calculate a separate CV profit for
each. Slocan argues that a narrower definition of the "same general
category of merchandise" will achieve more accurate results.

Another proposal offered by Slocan, Tembec, and Weyerhaeuser is that the
Department could determine profit under section 773(e)(2)(B)(i) by using
the consolidated financial statements of the individual companies, which
would represent profits in the same general category of products as the
subject merchandise.(85) Weyerhaeuser and Tembec also argue that the
Department could use published publicly available data, such as data from
Statistics Canada or PricewaterhouseCoopers, regarding the financial
results for the Canadian lumber industry. If the Department decides to
calculate CV profit "based on any other reasonable method," as described
in section 773(e)(2)(B), Tembec and West Fraser assert that the Department
must remember that the "amount allowed for profit may not exceed the
amount normally realized by exporters or producers . . . in connection
with the sale, for consumption in the foreign country, of merchandise that
is in the same general category of products as the subject merchandise."
West Fraser argues that the Department should calculate a profit cap based
on other respondents' home market sales data. 

Finally, Abitibi, Slocan, Tembec, West Fraser, and the BCLTC note that,
in Floral Trade Council v. United States, the CIT found that the term
"profits" does not imply that the Department must calculate a positive CV
profit.(86) As a result, the parties argue that if the Department finds
that individual companies, CONNUMs, grades, species, etc., had losses
(i.e., negative profits), the Department must include a profit rate of
zero in its profit calculation. 

By doing so, the Department can calculate a profit rate that reflects the
full range of a lumber producer/exporter's products, not just the high-
value products.

West Fraser disagreed with certain parties' suggestion that the
Department use financial statements or other industry profit information
to calculate CV profit. Instead, West Fraser argues that the Department
should rely on the respondents' actual verified home market sales of
products within the same general category as the subject merchandise.(87)
West Fraser reiterates the arguments set forth in its case brief that the
Department must calculate CV profit under section 773(e)(2)(B)(i) and
(iii) of the Act, as well as the need to calculate a profit cap based on
other respondents' home market sales data. 

The petitioners' response

The petitioners argue that, in accordance with section 773(e)(2)(A) of
the Act, the Department's normal practice for calculating CV profit is to
use the aggregate home market sales, because the term "foreign like
product" does not require that the products are identical or similar. The
petitioners interpret section 771 of the Act as providing the Department
discretion in determining which of the definitions of "foreign like
product" is most appropriate given the circumstances of each case. Thus,
in cases where CV is used, the Department may aggregate sales of products
that are of the same general class or kind as the subject merchandise. The
petitioners contend that aggregation is necessary in order to maintain the
statute's preference for determining CV on the basis of actual data from
the respondents in a case. In furtherance of this objective, if the
definition of "foreign like product" required an identical product, then
only in rare cases could the Department apply section 773(b)(2)(A).
However, as the petitioners note, to address peculiar or odd
circumstances, the Department has maintained this practice through
numerous revisions of its regulations. The petitioners also note that the
CIT has upheld the Department's practice of aggregation of home market
sales for calculating CV profit. The CIT has also upheld the Department's
broad definition of "foreign like product" under section 771(16) based on
the circumstances of each case, as a "reasonable interpretation of the
statute that was not in conflict with the legislative history of the
URAA." See RHP Bearing Ltd. v. United States, 83 F.Supp. 2d 1322 (Ct.
Int'l Trade 1999)(RHP); and SKF USA v. United States, 188 F. Supp 2d 1315
(Ct. Int'l Trade 2000).

Although the CIT upheld the Department's practice of calculating CV
profit based on an aggregate of home market sales, the petitioners cite a
recent decision in which the CAFC does not overturn the Department's
standard practice with regard to CV profit, either in its reasoning or its
result.(88) According to the petitioners' interpretation of SKF II, the
decision does not address the substantive merits of the Department's
practice, nor does it consider arguments put forward by the Department in
numerous determinations which the lower courts have endorsed.(89) The
petitioners also state that the CAFC rejected a series of arguments that
questioned the Department's authority to use aggregates. The petitioners
state that the CAFC has recognized that the Department can provide
clarification of its rationale for defining "foreign like product"
differently, as it did in SKF II. The petitioners also contend that the
CAFC notes that the Supreme Court permits construing the same term
differently in the same statute. Similarly, the petitioners argue that the
CIT has recognized that a statutory provision need not be interpreted in
the same way in two different contexts.(90) The petitioners contend that
the decision in SFK II does not require the Department to deviate from its
practice of calculating CV profit and price-based NV using the same
definition of "foreign like product."

Department's Position: We agree with the petitioners and have continued
to calculate CV profit based on an aggregate of home market sales of the
foreign like product made in the ordinary course of trade. This method is
consistent with past Department practice, is in accordance with the
antidumping law, and is in accordance with past court decisions. Section
773(e)(2)(A) of the Act directs us to include in our CV calculation the
actual amounts incurred and realized by the specific exporter or producer
being examined in the investigation for selling, general and
administrative expenses, and profits, in connection with the production
and sale of a foreign like product, in the ordinary course of trade, for
consumption in the foreign country. Thus, the preferred method for
computing CV profit is to use actual profit and selling, general and
administrative expenses incurred on sales of the foreign like product.(91)

We calculated CV profit by first calculating the total revenue and
expenses for all home market sales of the merchandise made within the
ordinary course of trade based on the results of the sales-below-cost test
for each respondent. Next, we calculated the profit percentage based on
the total revenue less total expenses. Finally, we calculated the CV
profit by multiplying the applicable profit rate by the per-unit COP. This
calculation reflects the actual experience of each respondent for home
market sales of the foreign like product made in the ordinary course of
trade. We have only used in our profit calculation the sales revenue and
expenses from those sales that are within the ordinary course of trade
(i.e., after excluding certain below-cost sales as outside of the ordinary
course of trade).(92)

We disagree with the respondents' argument to include in the CV profit
computation home market sales made below the cost of production. We
disagree that the lumber industry warrants special treatment in this
regard because, by the nature of the industry, those sales are still made
in the ordinary course of trade. We calculated CONNUM-specific costs and
compared them to CONNUM-specific home market sales prices. Sales found to
have been made below their respective costs of production in substantial
quantities within an extended period of time and at prices insufficient to
recover costs within a reasonable period of time are outside the ordinary
course of trade. The URAA amended the definition of sales outside the
"ordinary course of trade" to include sales below cost.(93) See, also,
Antifriction Bearings.(94) 

We disagree with the respondents' interpretation of the term "foreign
like product." In accordance with the definition under section 771(16) of
the Act, "foreign like product" is not limited to the product which is
identical in physical characteristics to the subject merchandise or even
to the products that are similar to the subject merchandise. Merchandise
of the "same general class or kind" as the subject merchandise will
qualify as the "foreign like product" (section 771(16)(C) of the Act) in
cases where either the identical or similar merchandise is not
available.(95) There is no indication that, by referring to "a foreign
like product" in section 773(e)(2)(A) of the Act, Congress intended that
profit be calculated only upon the basis of merchandise that was used in
price-to-price comparisons.(96) Accordingly, we disagree with the parties
arguing that the Department must define foreign like product for CV profit
calculation purposes as something narrower than all home market sales of
the "foreign like product," made in the ordinary course of trade. 

The SAA establishes a general rule or preferred methodology for
calculating the amounts for SG&A and profits in the CV calculation.(97)
For the preferred methodology to be applicable, there must be sales of a
foreign like product in the ordinary course of trade (i.e., sales made at
prices above cost). However, the statute and SAA also establish when
normal value is to be based upon CV, stating that "{o}nly if there are no
above cost sales in the ordinary course of trade in the foreign market
under consideration will Commerce resort to constructed value."(98) Thus,
if the Department were required to interpret and apply the term "foreign
like product" in precisely the same manner in the CV profit context as in
the price context, there would be no sales of the foreign like product
upon which to base the CV profit calculation. Accordingly, the preferred
method of calculating CV profit established by Congress would become an
inoperative provision of the statute. 

In our view, the price-to-price and CV profit determinations are not made
in isolation. The need to resort to CV arises in limited and specific
circumstances, such as where there are no sales of the foreign like
product in the ordinary course of trade. Thus, in each case for each
producer or exporter, the Department has already gone through the
hierarchy established in section 771(16) by attempting to identify sales
of identical merchandise and similar merchandise. Where the Department
must use CV to represent normal value, the Department either found no
sales of identical or similar products for price comparisons, or found
such sales to be outside the ordinary course of trade (i.e., below the
cost of production) under section 773(b). 

Furthermore, as the petitioners have noted, in RHP the CIT affirmed the
Department's calculation of CV profit using the profit of the class or
kind of merchandise, which encompassed all foreign like products under
consideration, because the use of such data matched the criteria of
section 771(16)(C) of the Act (i.e., the same general class or kind of
merchandise).(99) We believe a method based on varied groupings of foreign
like products, each defined by a minimum set of matching criteria shared
with a particular model of the subject merchandise, would add an
additional layer of complexity and uncertainty to antidumping proceedings
without generating more accurate results. Thus, for the final
determination, we have calculated CV profit using the methodology as that
used in the preliminary determination in accordance with section
773(e)(2)(A) of the Act.

Comment 7: Product Matching

In its preliminary determination, the Department attempted to match to
sales of similar merchandise when identical products were disregarded as
below-cost before resorting to constructed value, consistent with the
ruling by the U.S. Court of Appeals for the Federal Circuit in Cemex S.A.
v. United States, 133 F.3d 897 (Fed. Cir. 1998) (Cemex). The six
respondents and the BCLTC all argued in their case briefs that the
Department should amend the methodology used in its preliminary
determination and revise the criteria used for calculating the difference
in merchandise (difmer) adjustment.

Specifically, these parties argue that, because "the Department permitted
similar comparisons only where 1) it could compute a cost-based difmer
between the U.S. product and similar home market product, and 2) the cost
difference related to matching characteristics toward the end of the
product matching hierarchy," comparisons to similar products were
incorrectly made to only a very small portion of any company's sales.(100)
In other words, even where the Department was provided with, for example,
cost differences for moisture content, because this characteristic was
several steps higher in the matching hierarchy many sales were compared to
constructed value (CV) when the Department could have matched to sales of
a similar product had it skipped certain characteristics (i.e., in this
case: thickness, width and length) to find a match.(101)

The parties contend that, under section 771(16)(B) and (C) of the Act,
the Department "does not have the discretion to skip similar products and
use constructed value" when a similar home market product can be
identified as "either 'approximately equal in commercial value to,' or may
be 'reasonably compared' with the U.S. product.(102) Therefore, the
Department should revise its methodology and expand its use of similar
products for the final determination.

Additionally, the parties contend that even though section 771(16) of the
Act permits identical/similar comparisons, and mandates that similar
comparisons are permissible only when a difmer adjustment is made, there
is no requisite that a difmer adjustment be made on the basis of cost.
Therefore, the Department's requirement to make similar comparisons before
comparisons to CV is not overridden by a lack of cost-based difmers.(103)
Weyerhaeuser argued that "{t}he antidumping statute directs the Department
to calculate normal value based on 'the price at which the foreign like
product is first sold' in the exporting country in usual commercial
quantities and in the ordinary course of trade."(104) Therefore,
Weyerhaeuser argues that "there is no reason . . . why lumber of the same
grade and species, but of somewhat different dimension (e.g., width and
length), should not be regarded as 'similar' and a logical choice for
matching purposes, if matched and appropriately adjusted for
differences."(105) 

Moreover, some of the parties state that the Department cannot avoid its
statutory obligation to use similar comparisons merely because doing so is
complex. On the contrary, these parties argue that the WTO has recently
stated that an adjustment is required to maintain price comparability and
ensure a fair comparison between normal value and export price, and the
WTO does "not agree with Argentina's view that Article 2.4. . . . {sic}
permits an investigating authority to adjust only for the most important
of the physical differences that affect price compatibility, even if
making the remaining adjustments would have been, as the parties agree,
complex."(106)

The petitioners argue the Department should find that it is not obliged,
either legally or factually, to match to similar products as was decided
in Cemex, and should instead calculate normal value on the basis of
constructed value whenever an identical match does not exist in a home
market database. Because all of the parties involved in the investigation
agreed to limit the sales and cost information reported to the Department,
the petitioners insist that the Department does not have access to the
universe of information it would have in a "typical" investigation.
Furthermore, the petitioners argue that the Department determined in its
investigation of Greenhouse Tomatoes from Canada that Cemex does not
mandate the reporting of similars if sufficient difmer information is
unavailable.(107)

The petitioners argue further that the Department has previously
determined in its investigation of Antifriction Bearings from the Federal
Republic of Germany, in which it limited the number of reportable sales,
that the Department has the authority to calculate normal value based on
constructed value where identical product comparisons are not available.
The petitioners maintain that the "{r}espondents acquiesced to the use of
constructed value in place of similar product comparisons in return for
the substantial easing of the onerous burden of reporting all products,
which the Department otherwise would have had to analyze to determine the
most similar matches."(108) Because the "analysis of the most similar
matches requires a highly-detailed, rational and fact-based approach if
margins are to be calculated accurately" in the limited amount of time
available, the Department "should compare only identical products and use
constructed value where no home market sales of a given foreign like
product remain after application of the cost test."(109) 

The six respondents and the BCLTC responded to the petitioners' argument
by stating that Antifriction Bearings from the Federal Republic of Germany
does not eclipse Cemex as it occurred several years beforehand. The
parties reiterated that "{n}o discussion of somehow waiving the statutory
requirement of going to similars before constructed value ever occurred
during discussions of limiting the reporting requirements" and, therefore,
matching to similars before constructed value is required.(110) West
Fraser notes that "the Department has used similar comparisons in
streamlined reporting cases in the past," in such proceedings as Hot-
Rolled Steel from France.(111) Furthermore, Abitibi argues that the
agreement to limit the reporting requirements was accepted "at the urging
of the Petitioner among others, {seeking} to eliminate from reporting a
few insignificant product categories and species high in the product
hierarchy. No agreement to limit production comparisons to identicals was
even discussed, and none can reasonably be inferred."(112) Although the
petitioners argue that matching to similars would be extraordinarily
complicated, the respondents state that the Department had already
established a hierarchical list of product characteristics for use in the
preliminary determination, rendering this argument moot. The parties argue
that "the degree of complexity or difficulty involved in product matching
is irrelevant as a matter of law, which explains why petitioner's argument
is devoid of any reference to the statute, or for that matter, any legal
authority at all."(113) Additionally, Weyerhaeuser restated its argument
that the Federal Circuit affirmed in Koyo Seiko Co. v. United States that
it is satisfactory for the Department to choose a 'reasonable' selection
as the foreign like product.

Abitibi also argued that "{i}t defies rationality in this industry to
determine, as the Department effectively did {in its preliminary
determination}, that the 'normal value' of each different grade,
thickness, width and length lumber product should be the same, or that if
a single average joint cost is used for all products, that each different
grade, dimension and length product should be expected to earn the same
profit."(114) Because, according to Abitibi, the Department's constructed
value methodology is ultimately distortive and unfair, resulting in high
margins, the petitioners hope to match non-identicals to CV rather than to
similars. Abitibi and West Fraser argue that they have reported sales of
all of their subject merchandise, regardless of whether they met the
Department's reporting requirements, and maintain that the Department has
available to it adequate information to make similar product
comparisons.(115) 

Abitibi also refutes the petitioners' argument that "similar comparisons
cannot be used if adequate DIFMER data are unavailable."(116) Abitibi
argues that the petitioners' argument is rendered null and void by virtue
of the fact that the Department has already demonstrated that record
information is useable for comparison purposes, given that the Department
made similar product comparisons in the preliminary determination.

In their rebuttal brief, the petitioners again make the argument that
"{t}he CAFC's Cemex decision is not universally binding, and the
Department need not follow that decision in the Final Determination
here."(117) They argue that where all sales of a certain product were
found to have been made below cost, the CAFC's decision does not require
the Department to make similar comparisons. Specifically, the petitioners
argue that because the Department does not have available to it a complete
list of sales to consider, it should not feel compelled to follow the
Cemex decision. 

The petitioners contend that the respondents have sought special
treatment in this investigation by requesting that the Department limit
the reporting requirements, while still taking into consideration similar
matches. The petitioners argue that the facts of Cemex differ
significantly enough that its application is no longer required in this
investigation. However, in the alternative, the petitioners argue that
should the Department decide to match to similars, it should do so
consistently with the "fair comparison" analysis used in the preliminary
determination. 

Department's Position: As we explained in the Preliminary Determination,
all parties to this proceeding agreed at the outset of the investigation
that the sheer number of different products sold by the respondents would
significantly complicate the investigation. With a view to easing this
administrative burden, the Department's questionnaire initially instructed
respondents 

to limit the reporting of U.S. and home market sales to identical
products sold in both markets. In defining identical products, the
Department instructed respondents to consider the following physical
characteristics, which were identified after consideration of comments
from interested parties: (1) product category (e.g., dimensional lumber,
timbers, boards); (2) species (e.g., Western SPF, Western Red Cedar), (3)
grade, (4) moisture content, (5) thickness, (6) width, (7) 

length, (8) surface finish, (9) end trimming, (10) further processing
(e.g., edged, drilled, notched). Subsequently, the six mandatory
respondents jointly submitted a letter proposing further narrowing of
product reporting requirements. Specifically, the proposal was to limit
reporting to dimension lumber of certain species (Western SPF, Eastern
SPF, Douglas Fir/Western Larch, Western Hemlock/Amabilis Fir, and Western
Red Cedar); the sole exception to this rule was that decking and timber
would be reported for Western Red Cedar products. The petitioners endorsed
the joint proposal and it was adopted by the Department.

Although the Department established limited reporting requirements for
this investigation, this did not preclude comparisons of U.S. sales to
similar home market sales where possible, before relying on CV as the
basis for normal value. This is consistent with the practice implemented
under Policy Bulletin 98.1, Basis for Normal Value When Foreign Market
Sales Are Below Cost (February 23, 1998), where the Department stated that
it "will use constructed value as the basis for normal value only when
there are no above-cost sales that are otherwise suitable for comparison."
Therefore, consistent with the Cemex decision, the Department did not
automatically resort to constructed value, in lieu of comparison market
sales, as the basis for normal value, where sales of merchandise identical
to that sold in the United States were disregarded as below cost.

Because all six of the mandatory respondents had stated that the
Department must attempt to compare U.S. sales to home market sales of
similar products before resorting to constructed value we requested for
the preliminary determination that each respondent submit a complete home
market sales list, including products that might be used as similar
comparison models, subject to the reporting limitations outlined in the
Department's June 26, 2001 letter.(118) On September 14, 2001, we received
timely responses from all six companies, and developed a product hierarchy
taking into account the expressed views of the interested parties.

While some exceptions are noted, all parties state that they generally
agree with the Department's model match hierarchy. For instance, West
Fraser states that "West Fraser agrees that the model matching criteria in
the Department's questionnaire are the appropriate criteria for
identifying most similar merchandise. West Fraser also agrees that the
model match criteria are in the appropriate order of importance." See West
Fraser's August 16, 2001 letter to the Department. Canfor stated that it
believes "that the current model matching criteria set forth in the
Department's questionnaire are generally appropriate as a model match
hierarchy, and are listed in the appropriate order of importance." See
Canfor's August 16, 2001 letter to the Department. The petitioners stated
that they "generally agree with the order in which the matching criteria
appear in the Questionnaire." See the petitioners' August 16, 2001 letter
to the Department.

On August 16, 2001, all six respondents and the petitioner submitted
responses regarding species. The petitioner, as well as five of the
respondents, excluding Abitibi, stated that the Department should not
match products across species. Abitibi stated that "while significant
physical and value differences exist among species," it was not in a
position to comment because it does not produce any species except SPF."
See Abitibi's August 16, 2001 letter to the Department.

With regard to grade, five of the six respondents believe that grades
should be grouped into categories. (Canfor did not comment.) Abitibi,
Slocan, Tembec, and West Fraser all offer company-specific model match
hierarchies. All rely on the NLGA grading handbook to derive the groups.
For instance, Tembec states, "NLGA groups the lumber products that the
Department has asked respondents to report into several general
classifications. See NLGA, Standard Grading Rules for Canadian Lumber
(2000). Within each classification are several grades that indicate the
quality of the product graded." See Tembec's August 16, 2001 letter to the
Department. Weyerhaeuser did not provide a model match hierarchy, but
stated that "absent value-based merchandise adjustments, it would not be
appropriate to make similar comparisons between fundamentally dissimilar
types, such as ordinary dimension lumber, studs, stress rated (MSR or MEL)
lumber, and factory lumber." See Weyerhaeuser's August 16, 2001 letter to
the Department. In addition, all of the five respondents who commented
stated that matching across grade codes would be inappropriate. For
example, Tembec stated that "the Department should compare products
primarily within grade classifications." See Tembec's August 16, 2001
letter to the Department. The petitioners stated that matching within
categories, as well as across categories, would be inappropriate. 

Within the moisture content category, three of the respondents --
Abitibi, Slocan, and West Fraser - offered model match hierarchies. The
other three respondents -- Tembec, Weyerhaeuser and Canfor -- did not
offer a model match hierarchy for moisture content. Abitibi, Slocan and
West Fraser all suggested matching kiln-wet lumber to green lumber before
dry lumber. Abitibi stated that "because {green lumber} does not meet the
dry lumber specification, kiln-wet is most commercially priced and
comparable to green lumber." Abitibi goes on to state that "green and
dried lumber can be compared with a cost-based difmer, as the physical
difference -- drying -- is captured in the reported cost of drying. There
is, however, no cost difference reflecting the physical difference at
issue {comparing kiln-wet and green lumber}, so a value-based difmer would
have to be made." See Abitibi's August 16, 2001 letter to the Department.
Tembec did not suggest a matching hierarchy; however, it, as well, stated
that a value-based difmer would be needed to compare kiln-wet and green
products.

With regard to dimensional differences, four of the six respondents
suggested that length be placed into bands and compared to other lengths
within the band before being compared to lengths in other bands. Three of
those companies, Abitibi, Slocan and West Fraser, suggested the following
bands: less than 16', 16 - less than 22', 22' and above. Canfor suggested
the following bands: 8' - 12', 14' - 20', greater than 20'. Furthermore,
West Fraser states that "there tend to be significant breaks in the
commercial value of softwood lumber products of different lengths at two
points: 16-foot lengths and 22-foot lengths." See West Fraser's August 16,
2001 letter to the Department. Meanwhile, Canfor stated that "dimension
lumber is sold in lengths ranging from 8 to 26 feet, or even higher in
some instances. Given the significant differences in application, cost,
and value, among the different lengths sold, Canfor believes it is
appropriate to establish groups, or families, of lengths for matching
purposes." See Canfor's August 16, 2001 letter to the Department.

There was less agreement with regard to other dimensional differences.
The Department asked on August 9, 2001 that parties "explain whether the
thickness and width criteria should be combined into a single criterion,
rather than considered separately." Canfor and Weyerhaeuser made no
comments to this question, while Slocan stated that these categories
should be separated. West Fraser and Tembec stated that these categories
"could" be combined, whereas Abitibi stated that thickness and width
"should" be combined.

In the case of surface finish and end trim, there are only two
categories. Therefore, it is not necessary to create a matching hierarchy.
For example, Slocan did not comment on these issues, stating that "Slocan
notes that surface finish and end trim have only two characteristics each,
so there is no need to consider weighting criteria for these products."
See Slocan's August 16, 2001 letter to the Department.

In reference to further processing, five of the respondents offered no
matching hierarchy: in the case of Slocan, further processing is not
applicable; Tembec has only one category of further processing; and
Abitibi and West Fraser have only two categories of further processing.
While Abitibi and West Fraser believe that the Department should match
across these two categories, it is not necessary for these companies to
create a matching hierarchy. Weyerhaeuser did not comment on the issue.
Canfor has four categories of further processing and stated the following
in this regard: "the two types of fascia products should be matched first
to one another and then to regular dimension lumber." See Canfor's August
16, 2001 letter to the Department.

For the final determination, based upon our analysis of the parties'
comments, we concluded that is was not appropriate to match across species
or product category. With regard to grades, we assigned each NLGA-grade
equivalent a numeric code as well as a group number. Group numbers were
determined using the NLGA grading book, e.g., for example, studs are
categorized as an NLGA grouping and, therefore, given a specific group
number. See the company-specific analysis memoranda for the NLGA-
equivalent grades and groups for each company. We then attempted to match
within each grade group but did not match across grade groups. 

For moisture content, we first attempted to match kiln-wet lumber to
green lumber, as suggested by those respondents who offered opinions. In
addition, based upon these submissions, as well as the Department's
analysis, width and thickness were numbered sequentially and matched to
similar products. Length was classified into the following length bands:
less than 16', 16 - less than 22', 22' and above. We first attempted to
match within each length band, and matched across length bands when a
similar match was not available within the band. For the dimension
categories, when two equal matches were available, both matches were
selected and averaged, e.g., an 8' board would be compared to the weighted
average of a 6' and a 10' board, which are identical in every other
respect.

Finally, we have not changed the matching methodology used in the
preliminary determination with regard to surface finishing, end trim and
further processing.

Comment 8: Value-based difference in merchandise adjustments

The six respondents and the BCLTC argue that the Department should amend
its methodology and revise the criteria used in the preliminary
determination for calculating the difmer adjustment. For example, Abitibi
argues that where "it is not possible to compute a cost-based difmer
because the Department has only average joint costs for groups of joint
products, then the statute and regulations require the calculation and
application of value based difmers."(119) The respondents argue that the
CAFC addressed this issue in U.H.F.C. Co. v. United States (U.H.F.C.)(120)
and that this ruling similarly requires the use of value-based difmers in
the instant investigation. In U.H.F.C., the CAFC rejected the Department's
decision to use difmers valued at zero and not to calculate value-based
difmers. Weyerhaeuser also cites to the Department's investigations of
Nepheline Syenite from Canada and Polyvinyl Alcohol from Taiwan as
instances in which the Department acknowledged that it is appropriate to
calculate difmers based on value.(121) 

Abitibi asserted that the Department reasoned that various sources for
creating value-based difmers ". . . could not be used, because for some
sources, it {the Department} contended it could not apply an ordinary
course of trade test, and for other sources, because it contended the
pricing data could be tainted by dumping."(122) The respondents argue that
the Department had not examined all of the potential sources for value
data and cannot use its failure to do so as an excuse for refusing to
apply a value-based difmer.(123) The respondents also argue that the
ordinary course of trade test has no relevance in this context because the
Department's objective is to quantify the differences in value, and not to
determine if sales were made below COP.(124) 

The respondents argue that it is the Department's responsibility to
inform them of the data needed to calculate value-based difmers. The
respondents assert that ". . . Random Lengths data are available for many
product comparisons, and the Department's Preliminary Determination
provided no reason why such data cannot be used in computing at least some
difmers."(125) The respondents also assert that the Department should
reject all U.S. pricing data and should consider using "overall, non-
market specific pricing data," allowing the Department to compare prices
between markets.(126) Finally, the respondents argue that similar
comparisons with a difmer will result in a more accurate determination. 

Abitibi suggests that the Department use Abitibi's ". . . submitted
annual average historical prices for 1999 across all markets, by CONNUM"
and ". . . develop a product matching hierarchy and concordance."(127)
Furthermore, the Department should utilize its concordance package to
match to the most similar product and calculate a percentage difmer based
on net price differentials. In conclusion, the Department should apply
"this percentage DIFMER to the home market sales price net of all movement
charges . . . in computing the amount of DIFMER to add to the home market
price for similar merchandise in order to arrive at normal value" and "not
compare products where the value based DIFMER is greater that {sic} 20
percent."(128) 

Weyerhaeuser argues that the Department should "calculate average prices
on a CONNUM-specific basis based upon home market price data already on
the record."(129) By calculating an adjustment based solely on home market
prices, the Department could prevent the results from being skewed by
potentially dumped merchandise in the U.S. market. Weyerhaeuser argues
that this methodology is "similar to that used by the Department in the
level-of-trade analysis, which neither the Department nor reviewing courts
have found to be distortive."(130)

Finally, certain parties assert that the Department must compare to
similar products even in the absence of a difmer adjustment. Specifically,
West Fraser argues that if the Department continues to use cost-based
difmers in the final determination, it must compare to sales of similar
products, even if the difmer is zero, claiming that there is nothing in
the statute or regulations that requires the Department to adjust for
price effects caused by differences in merchandise if those differences do
not exist.(131) West Fraser notes that in a review of Certain Cut-to-
Length Steel from Finland, 62 FR 18468, 18473 (April 15, 1997), the
Department assigned a difmer of zero to merchandise with the same cost as
that of the U.S. product to compare similar products and the company
argues that the Department should do the same here.

Likewise, Slocan argues that a difmer adjustment can be zero. The company
believes that a zero difmer only means that the comparison is simpler than
usual, not requiring the additional step of adding or subtracting the
difmer. Slocan suggests that as the difmer approaches zero, the chance for
distortion diminishes, resulting in a more appropriate comparison, and
argues that "it is not unusual for statutorily mandated adjustment{s} to
be zero."(132) For example, Slocan asserts that the Department frequently
averages selling expenses which are captured in the circumstance-of-sale
adjustment and, as a result of the averaging, there is no adjustment
between markets. Additionally, it argues that, while it is rare for sales
quantities to be identical between the U.S. and the comparison markets, it
is even more rare that the Department would make an adjustment for those
differences.

Slocan states that because "{t}imber is sold on an average basis and
producers have no feasible way to account for fiber moving through their
mills but on an average, volume basis,"(133) this does not mean these
"average costs are 'not real,' or that there should be some hard-and-fast
rule against using them for a difference-in-merchandise adjustment."(134)
While Slocan would prefer that the Department allocate costs according to
value, or make value-based difmer calculations in order to account for the
average costs, Slocan argues that the Department must either make a value-
based difmer adjustment or apply a cost-based zero difmer.

Finally, Slocan argues that U.H.F.C. Co. v. United States does not
prohibit the employment of zero difmers. Rather, Slocan claims, the
"propriety of a zero difmer will depend on the facts and circumstances of
a particular case; . . . when products differ from each other greatly in
value and there are not small incremental gradations from product to
product, application of a zero difmer is likely to be improper."(135)
However, in the instant investigation, Slocan believes that the ability to
make a "more fine-tuned" similars search, due to incrementally increasing
lengths, widths and thicknesses, means that the chance of an inappropriate
comparison between products with matching costs is greatly reduced. Slocan
believes that the zero difmer will result in a more fair comparison than
comparing CONNUMs without home-market above-cost sales to CV, as was done
in the preliminary determination.(136)

Abitibi objects to a zero difmer. It contends that each of the interested
parties agreed that the product matching characteristics concern physical
differences that affect the sales price of softwood lumber.(137) Given
that the product characteristics each affect the price, there is no
factual basis for assigning a value of zero to the difmer.(138) If there
are no cost differences, the Department must calculate a value-based
difmer.

The petitioners submit that the Department should continue to calculate
difmers using volume-based costs. The petitioners deem "compelling" the
Department's reasons for rejecting a value-based difmer adjustment for the
preliminary determination, wherein the Department had stated that the use
of a value-based difmer adjustment was inappropriate because the record
lacked comprehensive, reliable price information, the price information
available would not permit the exclusion of sales outside the ordinary
course of trade, and it would be inappropriate to use U.S. prices when the
fairness of these prices is the subject of the antidumping
investigation.(139)

The petitioners also argue that the Department's practice demonstrates a
clear preference for difmers calculated from volume-based costs. They
assert that the only time the Department calculated a value-based difmer,
in Nepheline Syenite from Canada, it did so because "it did not have
sufficient time to gather cost information and because the difmer
adjustment had a small impact on the overall margin."(140) Moreover, the
petitioners state, in the instant investigation "{t}he costs on the record
are the actual, product-specific costs recorded in the companies' books
and records, and should not be disregarded. As a practical matter, such
information . . . was verified in this case."(141) The petitioners again
make their argument that ". . . the Department {correctly} concluded that,
because it was not appropriate to match products that do not have
identical grade, thickness, width, and length, it would match non-
identical merchandise only where it was able to quantify a cost-based
difmer for processes such as end-trimming."(142) 

The petitioners argue that the only way to calculate a value-based difmer
would be to remove "all circumstance of sale differences between the
prices being used to derive the value-based difmer,"(143) but that such a
methodology would not work in this case because the information placed on
the record for calculating value-based difmers is not usable for that
purpose. According to the petitioners, the record information is either
"based on the same U.S. pricing data at issue in the investigation," is
"not comprehensive enough to identify all of the differences among the
entire range of products," or raises the concern that "the Department
cannot be certain that all of the sales covered by the data were made in
the ordinary course of trade."(144) The petitioners assert that "{a}t the
most basic level, it is circular and illogical to adjust for the
difference between the prices of two products in trying to determine the
difference between the prices of the two products."(145) The petitioners
further assert that prices in Random Lengths ". . . are based on prices
for Canadian products, which are distorted due to dumping and
subsidization."(146) Finally, even if the Department used non-POI prices
to calculate a difmer, the petitioners reassert their argument that
"{u}nless one removes all circumstance of sale differences between the
prices being used to derive the 'value-based' difmer (as the Department is
required to do for margin calculation purposes), one is necessarily faced
with a price difference which is based, at least in part, if not entirely,
on differences in those circumstances of sale."(147) Therefore, the
petitioners argue, it would be inappropriate for the Department to
calculate value-based difmers in the final determination.

In its rebuttal brief, Slocan argues that ". . . {t}he fact that no cost-
based DIFMER can be computed using average joint costs means only that
value-based DIFMERS must be used."(148) Likewise, Canfor argues that "the
absence of meaningful differences in variable costs for products of
different grades, dimensions, and lengths is solely due to the
Department's failure to allocate joint costs to individual lumber products
using an appropriate methodology."(149) Using value-based difmers would,
according to Canfor, prevent the Department from making unreasonable
matches which might skew the Department's margin analysis.

Department's Position: As the parties have noted, this case involves
among the most complex product comparisons the Department has faced. Where
we do not have identical home market sales within the ordinary course of
trade, we have attempted to base normal value on sales of the most similar
product and we have attempted to adjust for such physical differences
where we have adequate information to do so. Section 773(a)(6)(C)(ii) of
the Act provides for an adjustment to normal value for differences in the
physical characteristics of the products being compared. The statute
grants the Department discretion to determine a suitable method to
calculate a difmer adjustment and does not restrict the Department's
selection of an appropriate methodology to any particular approach. See,
e.g., NTN Bearing Corp. of Am. v. United States, Slip Op. 2002-07 (CIT,
January 24, 2002) at 130. 

As explained in the Preliminary Determination and in Policy Bulletin
92.2: Differences in Merchandise; 20% Rule (July 29, 1992), the Department
has "rarely been able to determine the direct price effect of a difference
in merchandise." As a result, difmer "adjustments are based almost
exclusively on the cost of the physical difference." The Department
ordinarily calculates its difmer adjustment on the basis of differences in
the variable costs of manufacturing between products given that, in the
typical antidumping investigation, the Department has found that such data
approximates the effect that differences in physical characteristics have
on product prices.(150)

Nevertheless, in addressing comments to its proposed regulations in 1997,
the Department specifically retained language preserving, as an option,
the use of market value in measuring a difmer.(151) We acknowledge that
there may be circumstances in which a difmer based on market value may be
appropriate. Specifically in this case, where products have differences in
dimension (i.e., length, width or thickness) we recognize that these
physical differences could result in differences in market value. However,
we have concluded in this case that there is no information on the record
by which we can calculate a difmer adjustment to account for differences
in dimension based either on cost or value. 

We disagree with certain respondents' suggestions on how to quantify a
value-based difmer adjustment in this case. First, we note that the Random
Lengths data do not cover all of the products for which an adjustment
would be required. Second, as we stated in the Preliminary Determination,
we do not believe it would be appropriate to use the respondents' prices
as a basis for calculating a difmer adjustment where there were home
market sales outside the ordinary course of trade during the POI for
certain products involved here. To do so would adjust normal values back
to prices already determined to be outside the ordinary course of trade,
the whole reason why we would be disregarding such prices and comparing to
a similar product. Therefore, no value-based difmer adjustment could be
calculated for many of the comparisons based on POI sales.

In the Preliminary Determination, the Department did not calculate difmer
adjustments for grade or dimension differences because there were no cost-
based difmers for these differences. This had the effect of limiting our
use of difmers to similar matches among the surface finishing, end trim
and further processing characteristics. Although the Department could have
calculated cost-based difmers for moisture content, it did not skip across
the dimensional characteristics of thickness, width and length in the
hierarchy of matching characteristics to reach it.

In the Final Determination, as a consequence of our having made a value-
based cost allocation for wood and sawmill costs (see Comment 4), the
Department is now able to make a difmer adjustment for differences in
grade. As a result, the only physical differences remaining for which a
difmer adjustment was potentially necessary were differences in
dimension.(152) Regarding dimensions, however, we have determined that no
difmer adjustment is appropriate, given that there is no basis for
calculating a difmer for dimensions based on value or cost. There are no
cost-based differences with which to calculate a difmer for dimensional
differences. Also, for the reasons discussed above, we have not used a
value-based difmer. However, in this case, to the extent that we compared
products having different dimensions, those differences were generally
small. Furthermore, as Abitibi argued, the record shows that lumber prices
for different products fluctuated in relation to each other over the
course of the POI.(153) Consequently, there appears to be little, if any,
difference in home market prices that is attributable to differences in
dimensions of the products compared, especially where those dimensional
differences were minor. 

As a result of the Department's revised methodology, we have made many
more comparisons to similar products than in the Preliminary
Determination. In an effort to match sales of similar merchandise before
resorting to constructed value, and consistent with Cemex, the Department
has made no adjustment for differences in dimension among similar
products. We agree with West Fraser and Slocan that such an approach is
appropriate in these circumstances.(154) 

Further, this investigation is distinguishable from the circumstances of
the U.H.F.C. case, where there was only a single difference, i.e., glue
strength, between the products. In the instant investigation, there are
several differences in physical characteristics, such as grade, width,
length, thickness, and moisture content, and we would be unable to
quantify how much of the difference in value between products is
attributable to any one of these physical characteristics. As a result, we
have determined that we have no comparable basis on which to adjust for
physical differences between products based upon market value, as
suggested by the respondents.

This investigation is also distinguishable from the facts in Nepheline
Syenite. In that case, there was evidence on the record, submitted by the
domestic party and the respondent, that physical differences existed and
that the market value of each grade could vary based on these differences.
However, in that case, unlike in this investigation, there was "sufficient
evidence to support the appropriateness of using market value."(155) 

Therefore, for all the reasons discussed above, we have not made a value-
based difmer adjustment for the final determination.

Comment 9: Whether SLA export taxes should be deducted from U.S. price 

In calculating EP and CEP for the preliminary determination, the
Department deducted from the U.S. price export taxes levied by the
Government of Canada pursuant to the SLA on respondents' exports of
softwood lumber to the United States. Abitibi, Tembec, West Fraser, and
Weyerhaeuser argue that the antidumping statute clearly dictates that such
taxes, intended to offset a perceived countervailable subsidy, should not
be deducted from U.S. price. 

For support, the four parties cite to section 772(c)(2)(B) of the Act,
which exempts export taxes, duties, or other charges described in section
771(6)(C) from being deducted from U.S. price. Section 771(6)(C) further
explains that the exemption applies to "export taxes, duties, or other
charges levied on the export of merchandise to the United States
specifically intended to offset the countervailable subsidy received."

According to the four parties, this exemption applies to the SLA tax
because the United States has repeatedly recognized that the SLA was
intended to offset "perceived" countervailable subsidies on softwood
lumber. Abitibi and West Fraser note that the United States Trade
Representative (USTR), the negotiator of the SLA, stated that the
agreement was intended to provide a "satisfactory resolution" to Canadian
Government policies regarding softwood lumber exports to the United
States.(156) Abitibi and Weyerhaeuser further argue that the United States
indicated that the SLA was implemented to address Canadian imports of
softwood lumber, "previously found to be subsidized."(157) Both West
Fraser and Abitibi also note that the United States specifically stated
that "{t}he Lumber Agreement is designed to offset in part provincial
government timber pricing practices through a tariff-rate quota system
that slows the flow of exports to the United States."(158) 

Although the SLA tax offsets the impact of Canadian programs rather than
a quantified amount of benefit, Abitibi and West Fraser argue that the Act
itself does not limit the export tax exemption to taxes offsetting the
amount of benefit received rather than the effects of government programs.
Furthermore, both parties contend that if Congress intended to limit the
exemption, it would have done so. Citing section 704(b) and (c) of the
Act, Abitibi and West Fraser note that Congress distinguished between
types of offsets in the sections regarding suspension agreements. However,
because the export tax exemption is not restrictive, the two parties
argue, it clearly covers both types of offsets. In addition, Abitibi,
Tembec, and Weyerhaeuser note that the SLA tax applies only to exports of
one product to the United States. It is clearly not a user fee or general
government tax that would not qualify for the exemption. 

Abitibi observes that, in the parallel CVD investigation, the Department
preliminarily determined that the policies of the Government of Canada
constitute countervailable subsidies.(159) Thus, by the United States' own
admission, the SLA tax is an export tax intended to offset countervailable
subsidies. Weyerhaeuser notes that in Certain Cotton Yarn Products from
Brazil, the Department offset the net countervailable subsidy rate by
Industrial Products Tax payments (which were intended to offset subsidies)
to the extent that the tax payments equaled countervailable subsidy
amounts for imports during the period of review.(160) According to
Weyerhaeuser, the SLA tax is similar to a tax imposed by a suspension
agreement for the explicit purpose of countervailing an alleged subsidy
and, as a result, the Department should not deduct the SLA tax in
calculating EP or CEP.

Finally, both Abitibi and Tembec argue that, by deducting the SLA tax
from U.S. price, the Department is not giving the Canadian
producers/exporters credit for increases to U.S. price made to decrease
dumping or offset countervailable subsidies. Both parties note that
neither AD nor CVD duties are treated as costs in calculating EP or CEP.
Furthermore, Abitibi notes that by deducting the SLA tax, the Department
is admitting that the SLA taxes are included in the U.S. price because
section 772(c)(2)(B) of the Act only permits the Department to deduct
export taxes if the taxes are included in the U.S. price. Therefore,
Abitibi contends that the Department's methodology proves that it agrees
that the SLA tax caused respondent companies to increase prices. According
to Abitibi, those companies should not be penalized for attempting to
decrease dumping or offset countervailable subsidies in the sense that, by
deducting the increase to U.S. prices (in the form of the SLA tax), the
Department is, in effect, forcing the respondents to pay the tax again in
the form of dumping duties. 

The petitioners argue that in the preliminary determination the
Department appropriately deducted the SLA export fees from U.S. price
because the fees do not fall under the exemption described in section
771(6)(C) of the Act; therefore, the Department should keep the same
methodology for the final determination.

The petitioners note that the SLA export fees were not imposed under the
countervailing duty statute; therefore, as a legal matter, there was no
countervailable subsidy under consideration for the export fees to offset.
In addition, the petitioners argue that, according to its own language,
the SLA was specifically intended to discourage shipments to the United
States above a certain threshold in order to prevent material injury to
the U.S. lumber industry(161) and, as such, the export fees are not an ad
valorem tax, but a tax on sales above a certain volume. As a result, the
language and mechanism of the SLA make it clear that the export fees were
intended to discourage shipments above a certain threshold and not
"specifically intended to offset the countervailable subsidy received," as
is required in section 771(6)(C) of the Act.

Finally, the petitioners point out that the SLA was not negotiated under
section 704(b) or (c) of the Act. Therefore, it is not a suspension
agreement, and the Department need not treat the SLA export fees as it
would treat taxes levied under a suspension agreement.

Department's Position: We agree with the petitioners. Section 771(6)(C)
stipulates that, in order to qualify for the export tax exemption, the tax
must be "specifically intended to offset the countervailable subsidy
received." According to the language of the SLA, the agreement was
"intended to ensure that there is no material injury or threat thereof to
an industry in the United States from imports of softwood lumber from
Canada."(162) The SLA does not mention a countervailable subsidy, nor was
it negotiated under the countervailing duty or suspension agreement
sections of the Act. Furthermore, we agree with the petitioners that the
SLA tax is not comparable to a countervailing duty because, unlike a
countervailing duty, it was only applied to exports above a certain
threshold.(163) The SLA limited, to 14.7 billion board feet,(164) the
amount of softwood lumber that could enter the United States fee-free.
Canadian lumber exports to the United States in excess of 14.7 billion
board feet were subjected to a graduated export fee that was collected by
the Canadian Government. Therefore, no tax at all was imposed on the
majority of subject merchandise. That being the case, the export taxes
imposed by the SLA do not meet the definition in section 771(6)(C) of the
Act; thus, they are ineligible for the exemption described in section
772(c)(2)(B) of the Act. For the final determination we continue to deduct
SLA taxes from the starting price in order to calculate EP and CEP.

Comment 10: Treatment of trim blocks/trim ends

The petitioners argue that, because trim blocks are subject merchandise,
as identified in the scope of this investigation, and are not by-products
of lumber production, the revenue from the sales of trim blocks should not
be included in Abitibi's or Slocan's cost of production as a by-product
offset. According to the petitioners, the sales of trim blocks should have
been reported in the respondents' sales databases. The petitioners contend
that the Department should apply facts available to account for the
missing sales and exclude all revenues earned on sales of trim blocks from
Abitibi's and Slocan's by-product revenues.

The respondents claim that, in a letter to the Department dated October
1, 2001, the petitioners stated that trim blocks were not subject
merchandise and now it is too late in the proceeding for the petitioners
to change their stance on the treatment of trim blocks. Abitibi and Slocan
point out that they treat sales of trim blocks as by-product revenue in
their normal books and records. 

Abitibi, in its rebuttal to the petitioner's comments, asserts that there
is no basis for the use of facts available because Abitibi complied with
the Department's reporting instructions regarding trim blocks. Abitibi
notes that the petitioners did not suggest, prior to the issuance of
supplemental questionnaires, that such reporting was deficient.
Contrarily, the petitioners, in comments submitted to the Department
regarding Canfor's treatment of trim ends, suggested that Canfor follow
Abitibi's treatment of revenues generated from the sale of trim ends. If
the Department's instructions to Abitibi were erroneous, Abitibi argues
that the Department must open the administrative record to permit Abitibi
to correct its data.(165) 

Furthermore, Slocan argues that since no trim blocks were sold in the
United States, and it believes that all home market sales of trim ends
would be below the cost of production, all of its sales of trim ends would
be potentially immaterial in the Department's price-to-price analysis.
Slocan speculates that including trim ends in the sales database will only
serve to reduce the cost for prime merchandise in this investigation in
the home market. 

The respondents point out that its treatment of the revenues generated by
trim blocks as by-products rather than subject merchandise for reporting
purposes causes production costs to be overstated because no costs have
been allocated to trim blocks.

Department's Position: We agree with Abitibi and Slocan that, in this
instance, it is appropriate to treat the sales of trim ends as by-product
revenue. Section 773(f)(1)(A) of the Act requires the Department to use
the producer's normal accounting records if they are kept in accordance
with GAAP of the producing country and they reasonably reflect the cost to
produce the merchandise under consideration. In the current case, because
trim blocks are treated as by-products in the respondents' normal books
and records and because such treatment does not appear unreasonable, we
found that no adjustment was necessary for the final determination.
Furthermore, in their original questionnaire responses, both Abitibi and
Slocan treated trim blocks as by-products rather than sales of subject
merchandise. This treatment is in accordance with both the respondents'
normal books and records. In supplemental questionnaires issued to the
respondents, the Department never requested that the respondents include
the sales and costs of trim ends in the reported databases, and, as the
respondents point out, the petitioners reversal of its position regarding
trim ends from its October 1, 2001 letter occurred too late in this
proceeding to allow the Department time to consider different treatment.
Since the Department did not request either respondent to change its
reporting for trim ends in our supplemental questionnaires as is required
by section 782(d) of the Act, we cannot utilize facts available since it
not possible to characterize respondents' actions as any of those under
section 776(a) of the Act.

Comment 11: By-product revenue offset

Canfor, Tembec, and West Fraser argue that the Department incorrectly
decreased its reported by-product revenue offset at the preliminary
determination. Both Canfor and West Fraser assert that the record
demonstrates that the prices received on wood chip sales from affiliated
parties in British Colombia (B.C.) were at arm's-length prices, when
compared to unaffiliated wood chip prices, and no adjustment should be
made for the final determination. Tembec argues that its by-product
revenue offset related to affiliated parities should be based on Tembec's
arm's-length market transactions with unaffiliated third parties. 

In Canfor's view, for the preliminary determination, the Department
improperly compared the net revenue recorded by Canfor's Alberta mills to
net revenues recorded by its B.C. mills. According to Canfor, this
comparison was not appropriate due to the effect of certain intra-company
transactions between its two Alberta mills and the nature of a proprietary
contractual relationship. Canfor notes, however, that an accurate
comparison is possible between the revenue received at the B.C. and
Alberta mills after the elimination of the effect of the Alberta mills
intra-company transactions. Canfor claims that after the eliminations, the
base price of wood chips sold by the B.C. and Alberta mills are in the
same range. Accordingly, this demonstrates that Canfor's affiliated wood
chip sales were arm's-length transactions. In addition, Canfor contends
that the record evidence shows that wood chip sales by Canfor's B.C.
mills, Lakeland and The Pas, to its affiliated B.C. pulp mills were made
at arm's-length prices, when compared to prices the affiliated pulp mills
paid to unaffiliated suppliers. 

According to West Fraser, it demonstrated at verification that the prices
it obtained from its affiliated pulp mills for sales of wood chips,
sawdust and shavings during the POI were at market values. West Fraser
asserts that verified information shows that it did not enlarge its by-
product offset by inflating the prices it received for sales of residual
by-products above market values. 

Further, West Fraser maintains that chip prices vary significantly by
region and that any comparison in the aggregate is meaningless. West
Fraser contends that it explained at verification that chip prices vary
significantly between British Columbia and Alberta and that they therefore
should not be compared directly. 

According to Tembec, its wood chips were sold to other divisions within
the company for a price that was not equal to the market price of wood
chips and that the sales revenue should be adjusted to the market price of
wood chips. Tembec advocates the use of purchase prices from the pulp and
paper mills for wood chips as the market value because its eastern
sawmills do not have transactions with unaffiliated buyers. In the west,
Tembec advocates using the sales price of wood chips to unaffiliates by
the western sawmills. Tembec cites Pure Magnesium as a case where the
Department used prices received from unaffiliated parties to establish
market prices.(166)

Further, Tembec objects to the petitioners' characterization of its minor
correction to woodchip sales revenue and volume submitted at verification.
Tembec claims that the petitioners base their criticism on the mistaken
assumption that the correction to the reported value of Tembec's external
chip sales is related to the correction to the reported volume. Tembec
reports that the two corrections are independent of each other and are not
interrelated. Thus Tembec maintains that the minor correction to the
reported value of Tembec's unaffiliated chip sales in British Columbia was
occasioned solely by the need to report the full amount paid for chips,
whose volume was already reported.

The petitioners argue that the Department must continue to adjust Canfor,
Tembec and West Fraser's by-product revenue offset for the final
determination. It is the Department's practice, according to the
petitioners, to consider affiliated party transactions to be unreliable as
the nature of affiliation allows for price manipulation. In that regard,
the petitioners assert, it is the Department's practice to ensure that
affiliated revenue amounts included in by-product offsets are stated at
arm's-length terms. Further, the petitioners assert that section 773(f)(2)
of the Act authorizes the Department to disregard transactions between
affiliates in the "market under consideration." In the petitioners' view,
these respondents attempt to divide its analysis of prices between
affiliated and unaffiliated prices along provincial boundaries (i.e., B.C.
and Alberta). However, the Department's practice is to evaluate these
types of transaction on a countrywide basis. Thus, the petitioners assert,
the Department should reject mill-specific or regional arguments.

The petitioners further contend that it is the Department's preference
when evaluating affiliated party transactions to first base the analysis
of the transactions between affiliated and unaffiliated parties by
focusing on the transactions between the entity or division producing
merchandise under investigation. Thus, in this case, the Department should
not resort to evaluating purchases of wood chips by respondents' pulp
mills from affiliated and unaffiliated parties because the respondents'
have information available to enable a valid comparison between their wood
chip sales to both affiliated and unaffiliated parties from their
sawmills. The petitioners contend that the Department stated in Pure
Magnesium from Israel that when considering inputs, focusing on purchases
would be preferred.(167)

Specifically, with respect to Canfor, the petitioners contend that they
have not provided any evidence suggesting that the market value of wood
chips is understated at its Alberta mills. According to the petitioners,
the Department should rely upon the company's books and records and reject
Canfor's arguments that due to intra-company transactions and contractual
agreements the market value of wood chips is understated at its Alberta
mills. The petitioners assert that although the agreements do effect both
Alberta mills, due to the nature of the transactions, combining the
revenues and quantities of both mills results in weighted-average per-unit
unaffiliated wood chip sales that were reflective of a fair market value.
Accordingly, the petitioners assert that for the final results, the
Department should adjust Canfor's by-product revenue consistent with the
preliminary determination. 

With regard to West Fraser, the petitioners disagree with its claim that
it demonstrated and supported the arm's-length nature of its prices. The
petitioners maintain that the Department verified that West Fraser's sales
of by-products to affiliated parties were not made at arm's-length prices.
According to the petitioners, West Fraser points to only pieces of the
whole picture to divert attention from the fact that overall the prices
paid for wood chips by affiliated parties did not approximate market
values. Further, the petitioners maintain that West Fraser's chip sales
revenues appear to include certain expenses that should not be part of the
by-product revenue offset. Accordingly, the petitioners assert, the
Department should make an additional downward adjustment to West Fraser's
reported chip revenues to exclude these expenses.

Concerning Tembec, the petitioners argue that the Department should
reject its attempt to significantly overstate the company's by-product
revenue for sales of chips to affiliated parties and base the revenue
amount on actual sales prices between mills. The petitioners argue that a
single by-product offset adjustment should be used for all control numbers
since Tembec has offered no logical rationale for reporting separate
adjustments for Ontario, Quebec and B.C. The petitioners continue that if
the Department incorrectly calculates Ontario, Quebec and B.C. specific by-
product revenue offsets, the Department should not rely on the purchases
of wood chips by Tembec pulp and paper mills in Ontario and Quebec because
it does not reflect the value of wood chips only (i.e., freight is
included.). The petitioners advocate the use of facts available since they
conclude no valid market price exists on the record for Ontario and
Quebec. 

Further, the petitioners state that the "minor revision" of Tembec's
British B.C. wood chip revenue presented at verification was not minor,
nor reasonable, and should be rejected by the Department because, when
analyzed together, these corrections result in an unreasonable per unit
sales price for chips when compared with Tembec's data on the record prior
to verification. 

Department's Position: We agree with the petitioners that, under section
773(f)(2) of the Act, the Department may disregard transactions between
affiliated parties if they do not fairly reflect the amount usually
charged in the market under consideration. When a respondent sells the
same by-product to affiliated and unaffiliated parties at different
prices, the Department considers the prices received from unaffiliated
parties by the respondent to be at arm's-length and to represent market
prices. See Pure Magnesium from Israel. 

We disagree with the petitioners' claims that it is the Department's
practice to evaluate affiliated party transactions only on a country-wide
basis. In this case, record evidence shows that chip prices vary
significantly by certain regions in Canada and that a comparison in the
aggregate is not reflective of the inherent realities of the market under
consideration. At each companies' verification, we obtained information
that demonstrated that wood costs vary significantly by region due to
different stumpage and harvesting costs, and that the wood chip market
logically tends to follow the log market. In addition, the existence of
local pulp mills also effect the price of wood chips. Supply and demand
factors also tend to cause wide variances in regional wood chip markets,
whereby one region could be a net importer of chips and another region a
net exporter due to oversupply. Consequently, a meaningful comparison that
recognizes these differences must be done on a regionally consistent basis.

Specific to Canfor, the verified information shows that the fair market
value that Canfor's mills obtain for sales of wood chips to unaffiliated
purchasers is clearly distorted due to its contractual agreements.(168)
Since Canfor did not have any sales of wood chips to unaffiliated parties
in B.C., we have compared Canfor's sales of wood chips to affiliated
parties in B.C. to the weighted-average market price of the other
respondents' wood chip sales in B.C. Based on this comparison we find that
Canfor's sales of wood chips to affiliated parties in B.C. during the POI
were made at arm's-length prices and no adjustment is necessary for the
final determination. 

With respect to West Fraser, for purposes of the final determination, we
have compared West Fraser's sales of wood chips to affiliated and
unaffiliated parties separately for Alberta and British Columbia. Based on
this comparison we find that West Fraser's sales of wood chips to
affiliated parties in Alberta during the POI were made at arm's-length
prices. We also find, however, that West Fraser's sales of wood chips to
affiliated parties in British Columbia during the POI were not made at
arm's-length prices. Thus, for sales of wood chips in British Columbia, we
used the average sales price for wood chips received from unaffiliated
parties to value the sales to affiliated parties and adjusted West
Fraser's by-product offset for the final determination.

In addition, we disagree with the petitioners' assertion that West
Fraser's chip sales revenues included certain expenses that should not be
part of the by-product offset amount. At verification, we obtained
information that demonstrated that these expenses were in fact not
included in West Fraser's chip sales revenue. Therefore, for purposes of
the final determination, we find no basis on which to conclude that West
Fraser's chip sales revenues warrant further adjustment.

With respect to Tembec, the facts of this case differ slightly in that
the wood chip transactions are between divisions of the same legal entity.
Our practice with regards to transactions between divisions within the
same legal entity is to use the actual cost of the input.(169) Due the
fact that wood chips are a by-product of the production of softwood
lumber, there is no separately identifiable cost associated with the wood
chips that are transferred between Tembec divisions. 

Therefore, we analyzed the wood chip sales transactions between Tembec's
sawmills and its internal divisions to evaluate whether the internally set
transfer prices are reasonable. 

Based on the comparison of Tembec's B.C. sawmills' internally set
transfer prices for wood chips to the B.C. sawmills' chip sales to
unaffiliated purchasers, we concluded that the internally set transfer
prices are not preferential. Accordingly, we relied on the B.C. transfer
prices for the final determination. For Tembec's Quebec and Ontario wood
chip sales we do not have usable market price data for Tembec. However,
since we have determined that its B.C. mills do not sell wood chips to
other Tembec divisions at preferential prices, we deem it reasonable to
conclude that their Ontario and Quebec saw mills did not receive
preferential prices for its internally transferred wood chips. Thus, we
relied on their internal transfer prices for the final determination. 

We disagree with the petitioners claim that the minor corrections
presented at verification for Tembec's B.C. quantity and value of sales of
wood chips were neither minor nor reasonable. The petitioners base their
criticism on the mistaken assumption that the correction to the reported
value of Tembec's external chip sales is related to the correction to the
reported volume. When the petitioners divided the correction to the wood
chip value by the correction to the wood chip quantity, the result was
aberrant. The two corrections, however, are independent of each other and
are not interrelated. The value correction related to an accounting
misclassification error where the reported original amount did not include
an amount from another facility. The quantity correction was related to a
clerical transcription error. The minor corrections to both the volume and
value of B.C. wood chip sales were verified by the Department.(170) 

Finally, we disagree with Canfor that the documentation provided at
verification demonstrated that the prices it received from its affiliates
for sales of wood chips reflected market prices. While we acknowledge that
the submitted documentation showed that affiliated pulp mills paid similar
prices to Canfor and to unaffiliated parties for purchases of wood chips,
we note that the comparisons were made on base prices (i.e., the price
does not include chip quality index and bonus adjustments) which are not
reflective of the actual price paid by Canfor pulp mills. For West Fraser
and Tembec we also disagree that the documentation presented at
verification demonstrated that the prices it received from its affiliates
for sales of wood chips reflected market prices. While we acknowledge that
the documentation submitted at verification showed that certain affiliated
pulp mills selected by these respondents paid similar prices to their
sawmills and to unaffiliated parties for purchases of wood chips, we note
that the comparisons provided by each respondent were selectively provided
by the companies and not based on a sample chosen by the Department. These
comparisons represented only a portion of the total wood chip purchases by
both Tembec and West Fraser's pulp mills and there is no record evidence
to determine what the results might be if all mills were included. 

Comment 12: Treatment of negative margins

The six respondents, as well as the American Consumers for Affordable
Homes (ACAH), the BCLTC, OFIA/OLMA, argue that the Department should
discontinue its practice of "zeroing out" negative dumping margins in the
calculation of the overall weighted-average dumping margin.

First, these parties allege that in calculating the respondents'
preliminary dumping margins the Department inappropriately disregarded
negative margin sales, and that this unfairly and inaccurately inflated
the calculated margins. The respondents argue that the CIT has ruled that
antidumping laws do not mandate that the Department zero negative
margins.(171) Several parties cite to Bowe Passat Reinigungs-Und
Waschereitechnik GMBH v. United States, 926 F. Supp. 1138, 1149-50 (1996)
(Bowe Passat). In this decision, the CIT stated that zeroing introduces a
"statistical bias" in the calculation of dumping margins and may preclude
a "fair comparison."(172) Although the CIT actually upheld the
Department's zeroing practice in Bowe Passat, the parties argue that the
CIT "observed that the practice conflicts with the principles of fair
comparison and was permissible only because it came within the range of
the Department's discretion."(173) The parties also argue that because the
statute "was silent on the issue of zeroing,"(174) the CIT deferred to the
Department's application of the statute.

The parties also argue that the Department's practice of zeroing violates
U.S. and international laws and regulations.(175) The parties contend that
when the CIT ruled in Bowe Passat that antidumping laws do not require
zeroing, the Department's regulations contained almost identical language
to that now stated at sections 771(35)(A) and (B) of the Act. The parties
argue that "if the court or, for that matter, the Department, had thought
that this language mandated the use of zeroing, they would have so
stated."(176) According to the parties, sections 771(35)(A) and (B) of the
Act do not state that the "aggregate dumping margin should not include
negative margins, nor does the language direct the Department to assign a
zero margin to products sold where the U.S. price exceeds normal
value."(177) Furthermore, the parties assert that, while the Department
has employed zeroing in past cases, it has the discretion to change its
methodology in a particular investigation, without taking the additional
step of deciding to eliminate the practice in all future investigations,
as long as it provides a reasoned analysis.(178)

Rather, the parties contend, sections 771(35)(A) and (B) of the Act
explicitly direct the Department to ensure that a "fair comparison" will
be made between export price and normal value,(179) and while the statute
does not specifically address the issue of zeroing, the parties state that
"the WTO has found the practice violates Articles 2.4 and 2.4.2 of the
Antidumping Agreement, provisions incorporated in U.S. law, and the CIT
found that it is contrary to making fair comparisons, now also a provision
of U.S. law."(180) In particular, the parties note that the World Trade
Organization (WTO) Appellate Body (Appellate Body) has ruled in a case
involving the European Community (E.C.)(181) that the practice of zeroing
in determining dumping margins does not allow a "fair comparison" to be
made between the export price and normal value in accordance with Articles
2.4 and 2.4.2 of the Antidumping Agreement, and is inconsistent with the
international obligations of WTO Members. See the Appellate Body's report,
Antidumping Duties on Imports of Cotton-Type Bed Linens from India,
WT/DS141/AB/R (March 1, 2001), (Bed Linens).(182)

According to the parties, the zeroing methodology used by the Department
in the preliminary determination was identical to the E.C.'s zeroing
methodology as rejected by the Appellate Body in Bed Linens.(183) Although
the parties concede that the WTO precedent in Bed Linens is not in itself
binding, they argue that "it is an authoritative interpretation of the
Antidumping Agreement language"(184) and that the Department has "a legal
obligation, based on U.S. law, to interpret the antidumping statute so as
not to violate U.S. international legal obligations under article 2.4.2 of
the WTO Antidumping Agreement."(185) The parties also argue that the
Department must adhere to the "Charming Betsy Doctrine," which requires
that U.S. laws must be interpreted so as to avoid conflict or violation of
existing international obligations.(186) Therefore, the parties argue that
the Department must "abandon the zeroing practice, meet its statutory
obligation for fair comparison, and bring the United States into
conformity with its international trade obligations under the WTO."(187) 

The petitioners argue that the Department must not deviate from its
practice of zeroing out sales with negative dumping margins, claiming that
zeroing is required by the statute and that WTO decisions such as Bed
Linens are not binding on the Department and, therefore, have no effect on
U.S. law or practice.(188) The petitioners also argue that the application
of the Bed Linens decision would be contrary to U.S. law and, therefore,
cannot be applied by the Department in this investigation. The petitioners
contend that the SAA "specifically prohibits the use of Dispute Settlement
Body and Appellate Body reports as legal precedent on which the Department
may rely to change its practices and procedures."(189) In addition, the
petitioners argue that the Department has stated in several cases that Bed
Linens applies only to the European Communities, not to the United States.
According to the petitioners, Bed Linens is also inapplicable to this
investigation because the European Community and the United States
antidumping systems are dissimilar. The petitioners contend that "since
WTO decisions that involve the United States are not binding in U.S. law,
it is nonsensical to suggest that a decision that does not involve the
United States . . . is binding on the Department."(190) 

The petitioners argue that the Act requires that the Department use
zeroing in calculating weighted-average dumping margins. The petitioners
argue that the Department:

is bound by law to aggregate those dumping margins where normal value
exceeds the U.S. price. Because the dumping margin must reflect the amount
by which normal value exceeds U.S. price, it may not reflect the amount by
which normal value is less than U.S. price. Hence, the Department is
prohibited by the statute from considering a negative dumping margin.(191) 

The petitioners also contend that the Department confirmed in a recent
investigation that zeroing is required by U.S. law.(192) 

With regard to U.S. international legal obligations, the petitioners
contend that the parties' citations to the Charming Betsy Doctrine are
misplaced because "the doctrine cannot apply when there is a clear
contradiction between a U.S. statute and an international legal
obligation. In such a case, the U.S. law always prevails."(193) The
petitioners further argue that the parties' citations to Charming Betsy
are "incorrect because opinions of international tribunals are not
international legal obligations binding in U.S. courts."(194) Furthermore,
the petitioners contend that Charming Betsy was decided under a theory of
federal common law that was eliminated by the Supreme Court.(195) The
petitioners argue that the Department has determined that it cannot change
its practice based on Bed Linens, and has stated that "statutory
requirements (mandating zeroing) take precedence over any potentially
conflicting obligations under the Uruguay Round Agreements."(196)

Department's Position: We disagree with the respondents and have not
changed our methodology with respect to the calculation of the weighted-
average dumping margin for the final determination. As we have discussed
in prior cases, our methodology is consistent with our statutory
obligations under the Act for two reasons. See, e.g., Final Determination
of Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat
Products from the Netherlands, 66 FR 50408 (October 3, 2001), and
accompanying Issues and Decision Memorandum, at Comment 1. 

First, sales that did not fall below normal value are included in the
weighted-average margin calculation as sales with no dumping margin. The
value of such sales was included in the denominator of the weighted-
average margin calculation along with the value of dumped sales. We did
not, however, allow sales that did not fall below normal value to cancel
out dumping found on other sales. Second, the Act requires that the
Department employ this methodology. Section 771(35)(A) of the Act defines
"dumping margin" as "the amount by which the normal value exceeds the
export price or constructed export price of the subject merchandise."
Section 771(35)(B) of the Act defines "weighted-average dumping margin" as
"the percentage determined by dividing the aggregate dumping margins
determined for a specific exporter or producer by the aggregate export
prices and constructed export prices of such exporter or producer." These
sections, taken together, direct the Department to aggregate all
individual dumping margins, each of which is determined by the amount by
which normal value exceeds export price or constructed export price, and
to divide this amount by the value of all sales. The directive to
determine the "aggregate dumping margins" in section 771(35)(B) makes
clear that the singular "dumping margin" in section 771(35)(A) applies on
a comparison-specific level, and does not itself apply on an aggregate
basis. At no stage in this process is the amount by which EP or CEP
exceeds normal value on certain sales permitted to cancel out the dumping
margins found on other sales. This does not mean, however, that sales that
did not fall below normal value are ignored in calculating the weighted-
average rate. It is important to note that the weighted-average margin
reflects any "non-dumped" merchandise examined during the investigation;
the value of such sales was included in the denominator used to calculate
the dumping rate, while no dumping amount for "non-dumped" merchandise was
included in the numerator. Thus, a greater amount of "non-dumped"
merchandise results in a lower weighted-average margin. 

This is, furthermore, a reasonable means of establishing duty deposits in
investigations and assessing duties in reviews. In an investigation, such
as the present case, the deposit rate calculated must reflect the fact
that the Customs Service is not in a position to know which entries of
merchandise entered after the imposition of a dumping order are dumped,
and which are not. By spreading the estimated liability for dumped sales
across all investigated sales, the weighted-average dumping margin allows
the Customs Service to apply this rate to all merchandise entered after an
order goes into effect.

Notwithstanding the parties' references to the CIT's comments in Bowe
Passat that zeroing may preclude a "fair comparison," we note that the CIT
upheld the Department's zeroing practice as being within the Department's
statutory discretion in calculating dumping margins.(197) Although the CIT
ruling in Bowe Passat was made in conjunction with a pre-URAA case, the
Department has consistently applied its zeroing practice since the URAA
amendments to the Act, and will continue to do so for the final
determination in this case.(198)

Finally, with respect to the parties' WTO-specific arguments, we believe
U.S. law is consistent with our WTO obligations. Moreover, the Bed Lines
decision concerned a dispute between the European Union and India. We have
no obligation under U.S. law to act on this decision.

Comment 13: Exclusion of Maritime Provinces

The governments of the Canadian provinces of New Brunswick, Nova Scotia,
Prince Edward Island and Newfoundland, as well as the Maritime Lumber
Bureau of Canada and the softwood lumber producers situated in these
provinces (collectively, the Maritimes) request that the Department
exclude softwood lumber produced in the Maritime provinces from its final
determination in this proceeding. They argue "{t}he unique circumstances
of the Maritime provinces . . . clearly {distinguish} Maritime producers
from the lumber producers in the rest of Canada."(199) 

The Maritimes cite to the Department's concurrent countervailing duty
investigation, in which it exempted the Maritime provinces. The Department
found that the position of the Maritime provinces has not changed over the
course of history and determined that "the circumstances behind the
original exemption of the Maritimes from the 1986 Memorandum of
Understanding have not changed over the last 15 years."(200) The Maritimes
argue that there has been no evidence placed on the record supporting the
position of the petitioners that dumping, as related to softwood lumber
produced in the Maritime provinces, may occur. In addition, the Maritimes
argue that the Department should not postulate a dumping finding on the
basis that it is investigating a commodity product, as the petitioners
have suggested. In fact, the Maritimes state that the petitioners'
contentions of subsidization and minimum cut obligations have not been
directed at the Maritime provinces in this investigation. Additionally,
they argue that the petitioners' public comments regarding the
Department's preliminary determination "constitute legally binding
admissions that the Department's dumping finding has no applicability to
the Maritime provinces."(201) 

The Maritimes argue that this situation is analogous to that of the
antidumping and countervailing duty investigations of Certain Pasta from
Italy. In those investigations, the Department excluded organic pasta from
the investigation because the cultivation practices for this product were
unique when compared to the cultivation practices associated with other
subject merchandise and because the merchandise was accompanied by a
certificate issued by a credible authority.(202) The Maritimes argue that
because "the forest regimes of the Maritime Provinces differ so
significantly from those of its sister Provinces that no subsidy
allegations were lodged against the Maritime lumber producers," and
because "imports must be accompanied by a duly issued Certificate of
Origin issued by the Maritime Lumber Bureau," the Department should accord
"the same special consideration as was provided to organic pasta producers
in the Pasta from Italy cases."(203) 

The petitioners counter that the request by the Maritimes to be excluded
from the investigation (and any resulting order) should be rejected by the
Department. The petitioners argue that the only way a party can be
excluded from an investigation is if there is "either a finding of no
dumping on the part of the investigated exporter or producer, or a finding
that the product is not covered by the scope of the investigation or
order."(204) Because the Maritimes satisfy neither caveat, their request
ultimately becomes a request to be excluded based on geographical
location. 

The petitioners add in their rebuttal comments that this proceeding is
not analogous to that of Pasta from Italy because, in that investigation,
the petitioners agreed to the exclusion of organic pasta from the scope of
the investigation, a situation which does not exist in this proceeding.
Furthermore, the petitioners state that "{t}he Department has no authority
to exclude an exporter or producer operating in an exporting country from
antidumping liability until after that exporter or producer has been
investigated and found to have a zero or de minimis dumping margin."(205)
Additionally, the petitioners argue that a lack of a subsidy allegation in
the concurrent investigation is not a basis to exclude a producer in an
antidumping investigation. Therefore, the petitioners believe, for the
reasons referenced above, lumber produced by the Maritimes should continue
to be included in the Department's determination. 

Abitibi argues that the Maritime producers provide no legal basis for
their reasoning that they should be excluded from the antidumping duty
investigation, and none exists. Accordingly, "Abitibi also joins in the
rebuttal comments being filed by the Government of Quebec, contending that
all provinces should be treated equally in this proceeding."(206) 

Department's Position: We determined that the Maritime provinces must be
included in this investigation for the following three reasons. First, the
purpose of the present investigation is not to determine whether subsidies
exist, but rather to ascertain if subject merchandise is being sold below
fair market value or cost of production.(207) Second, the subject
investigation is an antidumping investigation and considers all subject
merchandise from the country under investigation, which, in the present
investigation, is certain softwood lumber products from Canada.(208)
Third, because the subject merchandise of this investigation is certain
softwood lumber products from Canada, this definition includes all subject
merchandise, regardless of source, as long as it originates from the
subject country. Thus, the investigation considers all subject merchandise
exported from Canada to the United States. Any subject products,
regardless of the Canadian province from which they originate, are subject
merchandise originating in Canada and are subject to our investigation. 

Furthermore, we note that the Maritime Provinces' reliance on the
argument that their exclusion from the accompanying CVD investigation
should prevail in the AD investigation is misplaced. Although the
Maritimes cite to Certain Pasta from Italy as precedent for excluding them
from the current investigation, that case does not provide such a
precedent. In Pasta, the Department excluded organic pasta, a type of
pasta, from the scope of the investigation because all parties agreed that
the merchandise was required to meet unique standards for cultivation,
processing, storage and transportation and were accompanied with a
certificate issued by an inspection and certification authority insuring
compliance with organic farming techniques.(209) In the instant
investigation, Maritimes producers are requesting exclusion by reason of
their exclusion from the parallel CVD investigation, not because softwood
lumber produced in the Maritimes is outside the scope of the antidumping
investigation. Because there is no basis to exclude the Maritimes
producers from this investigation, we continue to include the Maritimes
producers in the "all others" rate for the final determination.

Company-Specific Issues 

Issues Specific to Abitibi

Comment 14: Whether Scierie Saguenay Ltee. should be collapsed into the
Abitibi Group

Abitibi argues that the Department should not have collapsed Scierie
Saguenay Ltee. (SSL) into the Abitibi Group because such a collapse is not
supported by federal common law, the antidumping statute, or the
Department's own collapse standards.

According to Abitibi, federal law "recognizes the separate legal
existence of distinct legal entities, provided those entities themselves
do so."(210) For support, Abitibi cites two cases where the courts have
determined that actual domination over a subsidiary, rather than the
ability to exercise control, must be shown in order to recognize a parent
and a subsidiary as one entity.(211) Furthermore, Abitibi argues that
"Bestfoods establishes that the Department must determine that it is
appropriate under federal common law to pierce the corporate veil, i.e.,
disregard the corporate form, before it can subject SSL to Abitibi's
deposit rate."(212) 

Though the Department has justified overriding federal common law in the
past by arguing that the Department must defend the purposes of the
antidumping law, Abitibi contends that the D.C. Circuit has ruled that it
is a "'fundamental principle that federal agencies must obey all federal
laws, not just those they administer . . . .'"(213) According to Abitibi,
in its collapse decision the Department failed to demonstrate that Abitibi
and SSL did not act as separate legal entities, nor did it show that
activities underlying Abitibi's dumping margin were in any way relevant to
SSL. Abitibi contends that, "as in Nextwave and Bestfoods, absent express
statutory authority, or the consent of the companies, the Department may
not override federal law regarding the separate legal existence of
companies."(214) Furthermore, Abitibi notes that, insomuch as the
collapsing regulation does not reflect federal common law principles
regarding the separate legal existence of distinct corporations, the
Department's regulation is invalid.

Abitibi goes on to argue that the Department's own antidumping statute
prevents collapsing companies in this situation. Abitibi notes that the
Act requires the Department to examine actual data and practices during a
period of investigation. Accordingly, before collapsing the two companies,
the Department must also consider whether a parent corporation actually
influenced a subsidiary.(215) For support, Abitibi cites two cases(216)
where the Department collapsed related companies, but the CIT found that,
despite ownership interests, shared board members, and intertwined
operations, the potential influence of the parent over the subsidiary was
not enough to find that there was a strong possibility of price
manipulation. Abitibi argues that the Department did not have any evidence
that Abitibi exerted actual influence over SSL during the POI. The
Department's decision was based entirely on the potential for future
manipulation of prices or production; however, the Act does not permit the
Department to calculate current margins based on future behavior. In
certain cases the Act and regulations do require the Department to
consider future behavior(217) but, Abitibi notes, in these cases they also
warn against a determination based entirely on supposition.(218)
Furthermore, section 771(28) of the Act does not explicitly allow the
Department to examine future behavior when defining "producer or
exporter." As a result, Abitibi contends that the Department may not
punish SSL by collapsing Abitibi and SSL based only on the ambiguous
possibility that the two may manipulate prices or production at some
future time. Abitibi notes that, if the two companies were to manipulate
their relationship in the future, the Department could collapse the two in
an administrative review. Citing Bomont Industry v. United States, 718 F.
Supp. 958, 962 (Ct. Int'l Trade 1989), Abitibi argues that the "statute is
remedial not punitive."(219) 

To determine if there is significant potential for manipulation of prices
or production due to an affiliation, in accordance with section
351.401(f)(2) of the Department's regulations, Abitibi argues (as
described above) that the Department must consider the actual influence of
the parent on the subsidiary. According to Abitibi, the evidence on the
record demonstrates that the relationship between the two companies does
not establish actual influence over SSL for four reasons. First, Abitibi
notes that it does not have control over SSL because its interest is
limited to 50 percent. Second, Abitibi's lumber operation is approximately
50 times SSL's, making it very difficult, for example, for Abitibi to
shift a significant amount of production to SSL. Third, Abitibi also notes
that, on November 15, 2001, Mr. Louis Marie Bouchard, Vice President,
Woodlands and Sawmills, for Abitibi resigned as an officer and director of
SSL;(220) thus, the Department can no longer conclude that the common
board member of the two companies signifies future potential of
manipulation. And, fourth, Abitibi notes that the operations of the two
companies are not intertwined. They make sales and production decisions
separately, sell their own lumber, and hold their own provincial timber
licenses. Neither company can transfer its provincial license or logs to
the other. Because they are not legally allowed to shift production
between themselves, Abitibi contends that there is no significant
potential for manipulation.(221) 

In their rebuttal brief, the petitioners argue that the Department had
the legal authority and the necessary evidence to collapse Abitibi and SSL
for the preliminary determination and should continue to do so for the
final determination. According to the petitioners, under the antidumping
law, section 771(33) of the Act and section 351.401(f) of the Department's
regulations, the Department has the authority to treat legally separate
entities as a single entity. The petitioners argue that the Department is
neither restricted by, nor need consider, corporate law when making a
decision to collapse two affiliated parties.(222) As a result, the
judicial opinions regarding corporate law, cited in Abitibi's case brief,
should carry no weight in the Department's analysis of the collapse issue.

Furthermore, in response to Abitibi's argument that the CIT prohibits the
Department from collapsing two companies based on anything less than
actual influence, the petitioners note that the CIT decisions cited by
Abitibi were prior to the Department's current regulations concerning
collapsing. In the cases cited by Abitibi, the CIT recognized that when
the Department uses a standard of "possible manipulation" to collapse two
companies, it may need to present evidence of actual manipulation.
However, the Department has subsequently rejected the standard of
"possible manipulation," in favor of a standard of "potential
manipulation." According to the petitioners, the standard of "potential
manipulation" was specifically intended to allow the Department to examine
the potential for future manipulation.(223) Therefore, the decisions by
the CIT and the Department's current regulations do not, in any way, limit
the Department's ability to consider the potential for future manipulation
of prices and/or production.

Finally, the petitioners contend that the Department appropriately
analyzed the evidence on the record and correctly determined that there is
a significant potential for Abitibi to manipulate SSL's pricing or
production decisions. Specifically, the petitioners note that Abitibi and
SSL are affiliated under the definition in section 771(33) of the Act
because:

   (1) both companies produce very similar or identical products in
       facilities that would not require substantial retooling; 

   (2) until November 2001, an Abitibi vice-president was also an officer
       and director of SSL (although the official no longer retains a 
       position with SSL, the petitioners point out that Abitibi still 
       holds an additional seat on SSL's board of directors);

   (3) SSL used the planing and packing services of an Abitibi mill 
       during the POI.; and

   (4) Abitibi is the sole customer for sales of SSL's wood chips.


Furthermore, the petitioners argue that, as a 50-percent shareholder in
SSL, even absent the other indications of a potential for manipulation,
Abitibi has the power to exercise control over SSL in the future because
SSL is a "small company dependent upon Abitibi's purchasing power."(224)
As a result, the Department should continue to collapse SSL and Abitibi in
its final determination.

Department's Position: We agree with the petitioners. In the Department's
July 18, 2001,(225) memorandum, we determined to collapse SSL with Abitibi
because of four findings made for the POI. First, Saguenay and Abitibi
produced softwood lumber products falling within the scope of this
investigation. Second, Abitibi owned 50 percent of Saguenay's outstanding
shares. Third, Saguenay and Abitibi shared common management through Mr.
Louis Marie Bouchard, who served as a senior vice-president of Abitibi's
Woodlands and Sawmills divisions, and as a vice president and member of
the board of directors at Saguenay, and fourth, Saguenay's operations are
intertwined with those of Abitibi. Based on these factors, we found that
there exists a significant potential for manipulation of Saguenay's prices
or production by Abitibi, in accordance with section 351.401(f)(1) of the
Department's regulations. 

Since the Department's determination to collapse Saguenay with Abitibi,
the Department received no new information on the record of this
investigation, or during the verification of Abitibi's responses, to
warrant a change in the Department's position to collapse the two
companies. The fact that, after the POI, Mr. Bouchard resigned from his
post as a vice president and member of the board of directors at Saguenay
does not in itself preclude Abitibi from electing one of its officers to
Saguenay's board of directors since Abitibi, by virtue of its 50-percent
ownership interest, indeed appoints two of the four members on Saguenay's
board of directors. Therefore, for the reasons outlined in the
Department's July 18, 2001, memorandum, and the fact that no new evidence
was presented on the record to warrant a change in the Department's
position, the Department continues, for purposes of this final
determination, to find that there exists a significant potential for
manipulation of Saguenay's prices and production by Abitibi, in accordance
with section 351.401(f)(1) of the Department's regulations.(226) 

Comment 15: Financial expense ratio

Abitibi asserts that for the purposes of the final determination the
Department should rely on its corrected financial expense data submitted
prior to verification. Abitibi corrected its financial expense data to
include the actual interest expenses incurred rather than the interest
expenses reflected on its pro-forma financial statements. According to
Abitibi, the pro-forma financial statements were intended to reflect the
position of Donohue Inc. and Abitibi as if they had combined on January 1,
2000, rather than on April 18, 2000, the date of their actual combination.
As a result, the interest expense on the funds borrowed by Abitibi related
to the acquisition of Donohue shown on the pro-forma financial statements
was increased to reflect the expense that would have been incurred had the
acquisition taken place on January 1 rather than reflecting the actual
interest expense incurred from April 18 when the funds were, in fact,
borrowed.

Abitibi asserts that because the interest expenses shown on the pro-forma
financial statements are not the actual interest expenses incurred, they
should not be used by the Department to compute COP and CV. Instead, the
actual interest expenses incurred and verified by the Department should be
used.(227) In addition, Abitibi argues that because it submitted this
corrected data prior to verification, it should not be rejected as new
factual information.

Abitibi contends that the Department should also correct the denominator
used to calculate its financial expense ratio to include depreciation
expenses. Because this correction, presented as a minor error at
verification, was verified by the Department, is minor in nature, and did
not involve the submission of new factual information because it is taken
directly from Abitibi's pro-forma financial statements, Abitibi argues
that it should be accepted by the Department.(228) Abitibi points out that
the cost of goods sold amount shown on its pro-forma financial statement
reflects only the actual cost of goods sold by Donohue and Abitibi during
the calender year 2000. Abitibi contends that, unlike interest expenses,
the cost of goods sold was not adjusted for the pro-forma financial
statements because there were no new production expenses directly related
to the acquisition.

Finally, Abitibi asserts that the Department's traditional methodology of
allocating financial expenses in proportion to cost of goods sold is
distortive to Abitibi in the instant case. Therefore, the Department
should allocate Abitibi's financial expenses to its lumber products
relative to the assets used in lumber production or, alternatively, to the
depreciation expenses of those lumber assets. Abitibi asserts that because
neither the antidumping statute nor the Department's regulations specifies
a methodology by which the Department is to allocate financial expenses,
the Department must use a methodology of allocating financial expenses
that is reasonable and is based on the facts in the case.(229) As such,
the Department must consider other factors, other than cost of goods sold,
in allocating financial expenses in cases where the financing requirements
of different business segments within a respondent company are not
proportionate to the cost of sales. In the instant case, Abitibi argues
that, unlike the other respondents in the case, its dominant pulp, paper,
and newsprint segments have heavy capital requirements in comparison to
its lumber segment. However, the lumber segment, as compared to the pulp,
paper, and newsprint segments, is a high turnover, low value-added
operation. As a result, the allocation of financial expenses based on cost
of goods sold is distortive. 

The petitioners contend that the Department should not rely on Abitibi's
revised financial expense ratio, presented at verification, for purposes
of the final determination for the following reasons. First, Abitibi's
revised financial expense ratio is based on new factual information(230)
and the change cannot be considered minor. Second, the revised financial
expense ratio is not consistent with Abitibi's normal books and records in
that Abitibi relied upon the pro-forma financial statements in preparing
its response, but does not rely on the pro-forma financial statements to
calculate its financial expense ratio.(231)

In response to Abitibi's comments, the petitioners argue that Abitibi
wrongly assumed that it could revise its financial expense ratio
calculation by removing imputed interest expense from the numerator
without revising the corresponding cost of goods sold, the denominator
used to calculate the ratio. The petitioners allege that a number of
items, including depreciation, would cause the pro-forma cost of goods
sold amount to change if the Donohue acquisition date changed from January
1 to April 18. Presuming that Donohue's assets were restated to fair
market value upon acquisition, the petitioners assert that the pro-forma
financial statements would have reflected the revalued assets as of
January 1, 2000 and the resulting imputed depreciation expense on those
assets. As a result, the depreciation expenses as shown on the pro-forma
financial statements would have been greater than the actual amount of
depreciation expenses incurred. Because Abitibi did not include a
corresponding adjustment to its cost of goods sold, the petitioners claim
that Abitibi's revised financial expense ratio is unreliable. Therefore,
the Department should reject the revised ratio for purposes of the final
determination. 

The petitioners also address Abitibi's arguments regarding the allocation
of financial expenses based on total cost of goods sold. The Department's
long standing practice, assert the petitioners, is based on the
fungibility of money principle. Finance costs are linked to the entire
expenses of a company, not just assets, and cost of goods sold is the most
accurate measure of where money has been applied. The petitioners contend
that the Department has in the past rejected numerous allocation schemes
for attributing financial expenses.(232) Therefore, the Department should
follow its approach used in the preliminary determination of allocating
Abitibi's financial expenses over its cost of goods sold. 

Department's Position: We agree with Abitibi that the Department should
rely on the corrected financial expense data submitted prior to
verification. Under section 773(b)(3)(B) and section 773(e)(2)(A) of the
Act, the Department is directed to calculate selling, general and
administrative costs, including financial expenses, based upon the actual
experience of the company. At verification, we determined that the
interest expenses included in the revised ratio calculation were the
actual amounts incurred and recorded in the company's December 31 2000,
audited financial statements. In contrast, the amounts included in the
financial expense ratio calculation prior to the revision were based on
Abitibi's December 31, 2000, unaudited pro-forma financial statements.

As noted in the cost verification report,(233) Abitibi's pro-forma
financial statements(234) assume that the acquisition of Donohue occurred
as of January 1, 2000, rather than the actual acquisition date of April
18, 2000. During verification we found that the pro-forma statements
included imputed interest expenses that were not actually incurred by
Abitibi. Therefore, in accordance with the statute and the Department's
practice of excluding imputed interest expenses from the financial expense
ratio calculation, we have calculated a financial expense ratio based on
the actual interest expense incurred and recorded in Abitibi's December
31, 2000, audited financial statements.(235) We disagree with the
petitioners' assertion that the revised financial expense ratio
constituted new information. Abitibi submitted the information prior to
verification within the time limits stipulated by 19 CFR 351.301(b)(1) and
there is, therefore, no basis on which to conclude that it is untimely new
information.

Further, we agree with Abitibi that the Department should revise the
denominator used to calculate its financial expense ratio to include
depreciation. In calculating the financial expense ratio, it is the
Department's practice to ensure that the denominator of the ratio
approximates as closely as possible the same body of expenses to which it
will be applied.(236) As Abitibi has included depreciation expense in its
reported total cost of manufacturing, it therefore follows that it must be
included in the denominator used to calculate the ratio to ensure that the
two amounts are on an equal basis. In addition, we disagree with the
petitioners' assertion that Abitibi failed to remove imputed expenses such
as depreciation from its cost of goods sold denominator, rendering its
revised financial expense ratio unreliable. At verification, we determined
that the amount of COGS as presented on the company's pro-forma financial
statements were the actual expenses recorded on the company's books and
records.

Finally, we disagree with Abitibi that the Department should depart from
its established practice of calculating the financial expense ratio based
on the financial expenses and cost of goods sold from the parent company's
audited consolidated financial statements (i.e., based on the concept that
money is fungible).(237) Because there is no bright-line definition in the
Act of what a financial expense is or how the financial expense rate
should be calculated, the Department has developed a consistent and
predictable practice for calculating and allocating financial expenses.
This method is to calculate the rate as the percentage of net interest
expense over cost of sales, based on the consolidated financial statements
of the respondent's parent company. Further, the record of this
investigation does not support the conclusion that the Department's
methodology distorts the allocation of Abitibi's financial expenses.
Setting aside Abitibi's assumptions that the debt of the company only
relates to assets belonging to the pulp and paper activities, the
Department's method addresses Abitibi's concern that those activities are
more capital intensive. Specifically, those activities would have a higher
depreciation expense on their equipment and assets. Thus, when the
consolidated financial expense rate is applied to the cost of
manufacturing of lumber products, less interest will be applied because
the total cost of manufacturing for lumber products includes a lower
depreciation expense. In view of the above factors, we have used the
verified cost of goods sold including depreciation submitted as part of
Abitibi's revised financial expense ratio calculation to allocate the
company's net financial expenses.

Comment 16: G&A expense ratio 

Abitibi argues that the Department should exclude the value of certain
stock option redemptions from Abitibi's G&A expenses, the numerator of its
G&A expense ratio, for the following reasons. First, the expenses incurred
for redeeming the stock options granted prior to the POI are unrelated to
the cost of producing merchandise under investigation during the POI. The
respondent cites SRAMs from Taiwan,(238) stating that this case is
different than SRAMs from Taiwan in that the options granted in the
instant case were in connection with the employees' performance prior to
the POI, whereas in SRAMs from Taiwan, the stock paid to employees was
treated as a product expense in the year the stock was awarded.

Abitibi also contends that the redemptions, in accordance with Canadian
GAAP, were classified as extraordinary expenses (rather than treated as
period expenses) and should therefore not be treated as period expenses
for the final determination. In support of its position, Abitibi cites to
section 773(f)(1) of the Act. Abitibi asserts that the antidumping statute
provides for the use of Canadian GAAP, not U.S. GAAP, and in no prior
cases has the Department determined Canadian GAAP to be unreasonable.
According to Abitibi, the instant case is also distinguishable from SRAMs
from Taiwan in that it involves awards of stock options rather than a
distribution of shares. Abitibi asserts that in SRAMs from Taiwan the
respondent was providing shares to employees while in the instant case,
the company was buying them back and, as the Department has consistently
held, company stock repurchases are not production or refinancing
costs.(239) 

Finally, Abitibi argues that the Department is treating Abitibi
differently than the other respondents in this case. It is only because
Abitibi's shares are registered in the United States that its financial
statements disclosed this information. Abitibi asserts that unless the
Department gathers the same information from the other respondents, it
cannot apply a policy of treating stock redemption options as G&A expense
to Abitibi and not the other respondents.

With respect to goodwill, Abitibi contends that the Department should not
include its amortized portion incurred in the POI as an expense in
computing the cost of production. Abitibi asserts that the accounting
authorities in both Canada and the United States have recently changed
their positions regarding the amortization of goodwill and no longer
permit goodwill to be amortized. Abitibi cites Canadian Accounting
Standards Board, Accounting Standards, Section 3062.23 (August 2001) and
United States Financial Accounting Standards Board Statement No. 142,
Accounting for Goodwill and Intangible Assets (June 2001). Abitibi
contends that while goodwill amortization was permitted in Canada during
the POI, the antidumping statute does not permit the Department to rely on
accounting principles determined to be unsound nor is its purpose served
by using accounting rules in this investigation that will be inapplicable
in any future administrative reviews. Additionally, the statute's language
(See sections 773(b)(3)(A) and (B) and 773(e)(1) and (2)(A) of the Act)
does not permit the inclusion of goodwill in computing the cost of
production because it is not a production cost.(240) 

Abitibi suggests, as an alternative, that the Department should follow
its past practice of including in COP only goodwill pertaining to assets
used in the production of subject merchandise. In the preliminary
determination, Abitibi contends, the Department erred in treating goodwill
amortization as a general expense because goodwill does not benefit the
company as a whole.(241) Abitibi states that most of its acquisitions over
the years have involved assets related to operations other than lumber;
therefore, the goodwill arising from these transactions are not related to
producing the merchandise under investigation and do not benefit the
company as a whole. Therefore, the Department, in accordance with sections
773(b)(3)(A) and (B) and 773(e)(1) and (2)(A) of the Act, should add only
those goodwill expenses allocable to lumber to the cost of production.
Abitibi cites Aramid Fiber from the Netherlands,(242) stating that the
Department ruled that it was appropriate to isolate those components of
goodwill that pertained to assets used in the production of subject
merchandise.

Abitibi also argues that in the preliminary determination, the Department
should not have adjusted its goodwill expenses to reflect a pre-tax
amount. Abitibi claims that the pro-forma financial statements on which
Abitibi's G&A ratio was based erroneously noted that goodwill amortization
was "net of taxes" when it should have read "net of nil taxes."

Finally, Abitibi contends that if the Department determines to include
Abitibi's entire goodwill amortization as a G&A expense, the actual amount
of goodwill amortized should be included, not the imputed goodwill
amortization reflected on Abitibi's pro forma financial statements.
Finally, Abitibi asserts that, similar to the financial expense ratio, the
Department should revise the denominator (i.e., cost of goods sold) in
Abitibi's G&A ratio calculation to include depreciation expenses.

The petitioners assert that the Department should continue to revise
Abitibi's reported G&A expense ratio to include the expenses related to
the redemption of stock options. Because these expenses represent
additional employee compensation costs related to the POI, the petitioners
contend that they should be included in Abitibi's cost of production in
accordance with the Department's practice.(243)

Further, the petitioners assert that Abitibi wrongly claims that the
expenses related to the employee stock options do not relate to the POI
since they were granted to employees prior to the POI. The petitioners
argue that Abitibi's own accounting policy recognizes these costs at the
exercise date rather than at the time stock options are issued. Because
the stock options were exercised and recognized by Abitibi during the POI,
these costs should be included in Abitibi's G&A expense ratio calculation.
The petitioners also refute Abitibi's claim that the instant case is
distinguishable from SRAMs from Taiwan in that Abitibi's stock options
merely give employees the right to buy stock in the future, have no value
at time of issue, and are intended to give the employees an equity stake
in the company. Rather, the costs in question relate to compensation costs
paid to employees as a result of the early settlement of the options. The
petitioners assert that these costs are precisely the type of employee
compensation costs the Department includes in the cost of production even
though a foreign company's GAAP records these expenses as an adjustment to
retained earnings.(244) In fact, the Department, according to the
petitioners, has found that following Canadian GAAP in this instance is
distortive. Furthermore, argue the petitioners, this stock option benefit
is routinely provided to Abitibi's employees, thereby refuting Abitibi's
claim that these expenses did not occur in the ordinary course of
business. In addition, the instant case is different from Stainless Steel
Bar from Japan because the instant case relates to the redemption of
Donohue stock options, not treasury stock.

Finally, the petitioners agree with Abitibi that the Department is
treating Abitibi differently from the other respondents in this case.
Therefore, the Department should gather more information regarding the
redemption of stock options from all respondents in all cases. The
petitioners note that the Department has already gathered such information
from all respondents to this investigation as employee stock option costs
are reflected in the various companies' financial statements.

With respect to G&A expenses, the petitioners contend that the Department
should reject Abitibi's revised calculation of its G&A expense ratio. The
revised calculation excludes imputed goodwill expenses shown on Abitibi's
pro forma financial statements but does not change Abitibi's cost of goods
sold (see, comment 15 above for further discussion regarding Abitibi's
cost of goods sold). The petitioners allege that the revised calculation
is not based on Abitibi's normal books and records (i.e., pro-forma
financial statements). See section 773(f)(1)(A) of the Act.

Furthermore, petitioners assert that the Department should reject
Abitibi's claim that goodwill be removed from its G&A expenses as a result
of the changes for accounting of goodwill under U.S. and Canadian GAAP.
The petitioners argue that this change occurred well after the POI and
that the basis for Abitibi's reported costs were its December 31, 2000
audited financial statements. Additionally, the change in the accounting
treatment of goodwill does not mean that goodwill expenses will no longer
be recognized on financial statements. The petitioners also argue that the
goodwill expenses incurred by Abitibi relate to Abitibi's wholly-
integrated operations, not just its lumber operations. The petitioners
refute Abitibi's reference to Aramid Fibers from the Netherlands stating
that in the instant case goodwill relates to the company's operations as a
whole whereas, in Aramid Fibers from the Netherlands, goodwill related
primarily to the write-down of fixed assets.(245) In that case, the Court
affirmed that information on the goodwill expenses was sufficient to
determine that the expenses related to a particular operation and were not
only residual goodwill. 

Department's Position: We agree with the petitioners that the Department
should continue to include expenses related to the redemption of stock
options in Abitibi's reported G&A expense ratio. We acknowledge that
Abitibi's treatment of these costs is in accordance with Canadian GAAP.
However, we find that this treatment is contrary to the requirements of
section 773(f)(1)(A) of the Act, as it does not reasonably reflect the
respondent's cost of production, which includes an amount for G&A. The
redemptions in question resulted because of the merger between the two
companies. In short, the costs associated with the early exercising of
these options was part of the cost of the merger. As such, they related to
the operations of the combined company as a whole and are properly
recognized as a G&A expense.

As a result of Abitibi's acquisition of Donohue, the company settled
outstanding stock options during fiscal year 2000. This resulted in
Abitibi's recognizing as a current expense the redemption of stock
options. In view of these facts, we disagree with Abitibi's assertion that
the options were related to a service period prior to the POI and thus
have no relation to the production costs for the POI. Thus, for purposes
of the final determination, we have continued to include the expenses
related to the redemption of stock options in Abitibi's G&A ratio
calculation.

Finally, we disagree with Abitibi's assertion that the Department should
gather information regarding stock options from other respondents in this
investigation in order to ensure fair treatment. The record of this
investigation does not support the conclusion that any other respondent
incurred similar costs during the POI and there is thus no basis on which
to conclude that Abitibi has received unfair treatment.

With respect to goodwill, we disagree with Abitibi that the Department
should not treat its amortization expense as a cost of production.
Goodwill is recognized when a company purchases another company for an
amount in excess of the acquired company's market value. As the
amortization of goodwill in this case reflects the current year's portion
of the decrease in value of the acquired assets, we find it reasonable to
include this cost in Abitibi's reported costs. Although we acknowledge
that accounting authorities in the U.S. and Canada have recently changed
their positions in regard to the amortization of goodwill, we note that
the Canadian GAAP in effect at the time that Abitibi published its fiscal
year 2000 financial statements required the amortization of goodwill.
Thus, as this treatment is in accordance with the contemporaneous GAAP of
the respondent and reasonably reflects production costs, we find no reason
to exclude Abitibi's goodwill amortization from the cost of production.

We also disagree with Abitibi's assertion that the Department erred in
treating its goodwill amortization as a general expense because it does
not benefit the company as a whole, and that the Department should add
only those goodwill expenses allocable to lumber to the cost of
production. First, we note that this would be an impossible task due to
the fact that the goodwill represents the intangible benefit of merging
the two companies. It does not relate to specific assets brought to the
merger by one of the parties. Second, the Department's general practice is
to consider goodwill as related to the general operations of the company
as a whole and not specifically identified with a particular division or
product line. Moreover, by allocating G&A based on the cost of sales, we
are only allocating a portion of the expense to the lumber activities. We
find Abitibi's reference to Aramid Fiber from the Netherlands to be
misplaced as in that case the goodwill in question actually consisted of
several elements including the write-down of fixed assets, the write-off
of obsolete inventory, the write-down of beginning inventory and debt
forgiveness, expenses that would not normally be allocated over the
substantial number of years common to goodwill amortization.(246) 

We agree with Abitibi's assertion that the Department should not have
adjusted its goodwill amortization to reflect a pre-tax amount. At
verification, we learned that the actual amount of goodwill amortization
shown in the company's financial statements was in fact a before-tax
amount (see cost verification report at 31). We also agree with Abitibi
that the actual goodwill amortization from the company's audited financial
statements, and not the imputed amount of goodwill amortization from the
pro-forma financial statements should be included in the G&A expenses.
This treatment is in accordance with section 773(b)(3)(B) and section
773(e)(2)(A) of the Act, which direct the Department to calculate selling,
general and administrative costs based upon the actual experience of the
company. Thus, for purposes of the final determination, we have included
the actual goodwill amortization from Abitibi's fiscal year 2000 financial
statements in the calculation of the G&A expense ratio.

Finally, we agree with Abitibi that the Department should revise the
denominator used to calculate its G&A expense ratio to include
depreciation. In calculating the G&A expense ratio, it is the Department's
practice to ensure that the denominator of the ratio approximates as
closely as possible the same body of expenses to which it will be applied.
See, e.g., LNPPs from Germany. As Abitibi has included depreciation
expense in its reported total cost of manufacturing, it therefore follows
that it must be included in the denominator of the G&A expense ratio to
ensure that the two amounts are on an equal basis.

Issues Specific to Canfor

Comment 17: Canfor, Lakeland, and The Pas' product reporting

The petitioners argue that Canfor, Lakeland and The Pas failed to report
sales of dog-eared fence pickets, trim blocks, fascia, economy stud lumber
and spruce, and the failure to properly report these products should
result in the use of adverse facts available for the final determination.
According to the petitioners, Canfor, Lakeland and The Pas should have
reported these products if there were sales of identical products and were
of 2x2 or greater dimension lumber. Although Canfor requested that dog-
eared fence pickets and combtex fascia be excluded from the scope of the
investigation, the Department did not exempt Canfor from reporting these
products. 

The petitioners assert that the total quantity of these unreported sales
could be significant, citing the difference between the quantity of sales
listed in the database and what was reported in Canfor's submissions.(247)
The petitioners further argue that Canfor has not acted to the best of its
ability to cooperate with the Department's request for information.(248)

According to the petitioners, the Department found at verification that
Canfor and Lakeland failed to report a considerable volume of dog-eared
studs. Furthermore, the petitioners claim that Canfor had submitted to the
Department that it had POI sales to the United States of a certain
quantity of reportable fascia and of trim blocks, but that Canfor under-
reported sales of these products in its U.S. sales list. Moreover, the
petitioners assert that it also appears that Canfor improperly excluded
economy stud lumber and spruce dimension lumber from the U.S. database. As
adverse facts available, the petitioners propose that the Department
assign to the presumed volume of missing products the highest calculated
margin of any Canfor sale. Finally, the petitioners contend that Canfor
did not report sales of a product called "Clearwood," and that some of
this further-manufactured product should have been reported. 

Canfor argues that it properly reported, as did its affiliates, Lakeland
and The Pas, all sales of lumber to the United States as defined in the
Department's product reporting criteria and as further specified in the
Department's simplified reporting requirements and, therefore, no adverse
inferences are warranted.(249) Canfor contends that, rather than comparing
the quantity reported in the U.S. database to the quantity reported in
Canfor's sales reconciliation submission of 

October 30, 2001, the petitioners incorrectly compared the quantity in
the database to the quantity of U.S. lumber sales from its original
section A submission of June 22, 2001.(250)

Canfor maintains that it "clearly and properly accounted for the total
quantity and value of softwood lumber sold in the United States and Canada
during the POI, and the Department was able to reconcile these figures to
Canfor's audited financial books and records."(251) Canfor points to the
fact that the Department reviewed and tested at verification the quantity
of Canfor's U.S. sales as provided in the reconciliation package, and also
tested Canfor's reported database for completeness by examining underlying
source documents for sales that had not been reported. 

Canfor argues that it did not report dog-eared fence pickets in
accordance with the petitioners May 11 and June 8, 2001, submissions to
the Department, which contained express statements that the product was
not covered by the antidumping petition.(252) According to Canfor, the
fence pickets it sold during the POI meet the criteria identified by the
petitioners, and the petitioners' did not specify in either submission
that the exclusion of dog-eared fence pickets was based on thickness.(253)
Canfor also argues that dog-eared fence pickets, regardless of HTSUS
classification, were a subset of two categories of products preliminarily
excluded by the Department from the scope of the parallel countervailing
duty (CVD) investigation: Group A included "fence pickets" and Group B
included dog-eared fence pickets, no more than 1" thick, (nor more than 4"
wide), six feet or less in length, with the dog-eared cut measuring at
least 3/4 inches.(254)

In the preliminary antidumping determination, Canfor contends, the
Department revised its treatment of fence pickets by collapsing the two
product definitions with regard to fence pickets into a single, expandable
definition under product Group B, stating that the product should be one
inch or less in actual thickness.(255) Canfor argues that it was not until
the publication of the preliminary determination that the Department
indicated that dog-eared fence pickets that were greater than one inch in
thickness were intended to be included in the scope of the investigation
regardless of tariff classification. Although the Department defined
dimension lumber as "lumber from nominal 2" or 38mm to, but not including
nominal 5" or 114mm, in thickness,"(256) Canfor asserts that the cover
letter to the Department's questionnaire clarified that "certain lumber
products could meet this broad definition, but also meet the more specific
definition of other lumber products."(257) According to Canfor, the
petitioners further confuse the issue by referring to Canfor's dog-eared
fence pickets as dog-eared studs. Canfor argues that "the fact that the
original product was given a stud grade does not demonstrate that the
further processed fence pickets should still be considered dimension
lumber" and "it appears that the purpose of the six-foot length
requirement was to ensure that the merchandise would in fact be fence
pickets, not studs."(258) 

Canfor argues that it fully disclosed in its section A response a
complete listing of all lumber products produced by the company, the
specifications of the products, and whether or not sales were being
reported. Canfor contends that this list indicated that dog-eared fencing
of two inches in nominal thickness was not being reported.(259) Canfor
argues that at no time did the petitioners object to Canfor's exclusion of
dog-eared fence pickets from its databases, and the Department's
supplemental questionnaires never requested Canfor to revise its reporting
to include these products or to provide further information regarding the
nature of its dog-eared fence picket sales. Furthermore, Canfor argues
that the quantity of fence pickets at issue is trivial, and would have no
impact on the dumping margin calculation by the Department.

Canfor further argues that the petitioners' claim that Canfor and The Pas
failed to accurately report trim blocks, fascia, economy stud lumber,
spruce dimension lumber and Clearwood are not true. First, the company
determined that all of its trim blocks in the U.S. were transferred to
Canfor U.S.A., which the Department had excused Canfor from reporting for
the preliminary determination. In the home market, Canfor contends that
Canfor and The Pas transferred to internal finger-jointing operations the
majority of trim blocks they produced, and that the small volume of trim
blocks sold by Canfor and The Pas to outside purchasers were properly
reported in Canfor's home market database when the Department requested
that respondents report sales of similar products for possible matching
purposes. Second, with respect to the quantity of fascia the petitioners
refer to as "missing," Canfor argues that this is actually the difference
between a preliminary figure drawn from its sales records that reflected
all sales of fascia to the United States, and the finalized figure
included in the database. According to Canfor, the finalized figure
excludes sales of fascia to Canfor U.S.A. and sales of fascia for which
there was no identical product sold in Canada, and that the Department
verified as accurate the total quantity and value reported by Canfor.

Next, Canfor contends that the spruce referred to by the Department is
Nordic Spruce, and was not reported because it was imported. The company
also maintains that it did not exclude sales of economy stud lumber, and
that all reportable sales of economy stud lumber are included in its U.S.
and home market databases. Finally, with regard to why it did not report
sales of "Clearwood," Canfor argues that during the POI, its U.S. sales of
this product were subsequently exported to China, and that it had no home
market sales of this product. 

Department's Position: We disagree with the petitioners. We note that the
petitioners base their argument regarding trim blocks, fascia, economy
stud lumber, spruce, and Clearwood, in part, on several statements in the
Completeness Section of the Department's January 30, 2002, Sales
Verification Report at page 24. In the procedures section, we stated that
"we also examined sample invoices of product codes that were excluded from
the databases provided to the Department, including dog-eared fence
pickets, fascia, treated lumber, spruce, radius end, truss components, bed
frame components, and economy stud lumber." What the report did not note,
however, was that we conducted this completeness test to ensure that
Canfor had properly excluded sales of the above-mentioned products that
were either imported, were less than two inches thick, or were outside the
Department's simplified reporting criteria. This test was also conducted
to ensure that Canfor had properly reported sales of the above-mentioned
products that were identical to reported U.S. sales, were 2x2 or greater
dimension lumber, and were two inches in thickness or greater. As a result
of this test, we verified that Clearwood was an experimental further-
manufactured product not sold in the home or U.S. markets, and, therefore
not subject to reporting. See the Sales Verification report at page 18 and
Exhibit C-24.

The only discrepancy we noted was in regard to dog-eared fence pickets of
two inches or greater thickness. No other discrepancies were mentioned in
the report because none were found. We verified that all of the other
products were correctly reported or excluded, as appropriate, from the
database. We also verified at great length the quantity and value of sales
reported by Canfor, Lakeland, and The Pas, and noted no discrepancies in
Canfor's reporting of products other than the aforementioned dog-eared
fence pickets. 

With regard to dog-eared fence pickets, we believe there is a degree of
ambiguity regarding whether or not the product was reportable, and
therefore find that no adverse inferences are warranted. We furthermore
disagree with the petitioners' assertion that Canfor has not acted to the
best of its ability to cooperate with the Department's requests for
information. Both the petitioners and the respondents have filed numerous
submissions with the Department regarding the reportability of certain
products, including dog-eared fence pickets. Canfor first raised the issue
of whether or not to report dog-eared fence pickets in its submission of
May 3, 2001, stating that dog-eared fencing should be excluded from "full
reporting."(260) 

The petitioners stated in their submission of May 11, 2001, that "the
Coalition also acknowledges that dog-eared fence pickets (dedicated and
used as fencing) are outside of the scope of the investigation, provided
that they are no more than six feet in length."(261) With regard to
another respondent, the petitioners' submission of June 8, 2001, requests
that the Department deny its exclusion request for dog-eared and other
fence pickets.(262) In Exhibit A-16 of its section A questionnaire
response of June 22, 2001, and also in the revised Exhibit A-16 of 

November 19, 2001, Canfor listed dog-eared fence pickets as a product not
being reported in the databases submitted to the Department.

On June 25, 2001, Canfor requested that the Department confirm that it is
excused from reporting fascia, furring strips, and trim blocks of
dimensional lumber sizes, but made no mention of dog-eared fence
pickets.(263) Canfor has accurately characterized the Department's
treatment of fence pickets in the scope exclusion of two categories of
products in the CVD preliminary determination of August 17, 2001, as well
as the subsequent October 30, 2001 memorandum clarifying the scope in the
antidumping and countervailing duty investigations, revising the
Department's product definitions with regard to fence pickets.

Given the lack of clarity surrounding the issue of whether dog-eared
fence pickets should have been reported, and the minuscule volume of the
product in question, we have determined not to make any adverse inferences
regarding the volume of Canfor's unreported dog-eared fence pickets.

Comment 18: Treatment of three U.S. sales 

The petitioners argue that the Department discovered that there were
three sales made with a transfer of quota in The Pas' home market database
that should have been reported in the U.S. database. If errors are
identified in sample transactions at verification, the petitioners argue
that it is the Department's practice to presume the untested data are also
error-ridden "absent satisfactory explanation and quantification on the
part of the respondent."(264) As adverse facts available, the petitioners
suggest that the Department assign the highest calculated margin to these
three sales. 

Canfor did not brief this issue. 

Department's Position: We disagree with the petitioners. It is the
Department's practice to correct minor errors found during the course of
verification.(265) Morever, the petitioners' reference to Stainless Coils
From Germany does not apply in this context because The Pas did explain
and quantify the nature of each of the three errors to the Department's
satisfaction, as was stated in the verification report. See the January
30, 2002 The Pas Verification Report at page 8; see also Exhibit P-16. The
Department's sales verification team thoroughly examined the relevant
quota transfer documentation for each of the three sales. For the final
determination, we moved the three sales to the U.S. database.

Comment 19: G&A expenses for Canfor, Lakeland, and The Pas

Canfor's overall G&A expense rate was calculated by weight-averaging the
G&A expense rates of the collapsed entities Canfor, Lakeland and The Pas.
Canfor argues that its portion of the G&A expense rate should be
calculated based on the expenses and cost of sales from its consolidated
financial statements rather than the unconsolidated financial statements
of its operating company, Canadian Forest Products Ltd. ("CFP"). While
acknowledging the Department's normal practice of calculating the G&A
expense rate based on a company's unconsolidated audited financial
statements, Canfor maintains that the facts of this case warrant the
Department to depart from its normal practice and accept a different
methodology for calculating the G&A expense rate. Canfor states that there
is no single unconsolidated financial statement that contains all the G&A
and selling expenses and cost of sales needed to calculate an accurate G&A
expense rate for merchandise under investigation. Specifically, Canfor
argues that CFP's unaudited internal financial statement, which is
prepared only for tax purposes, does not include the total cost of sales
for all lumber because of inter-company eliminations between itself and
Canfor's marketing company, Canfor Wood Products Marketing Ltd. ("CWPM
Ltd."). Canfor notes that although CFP manufactures and sells merchandise
under investigation, its U.S. sales are first purchased by CWPM Ltd. and
then re-sold to the final customer in the U.S. Therefore, due to inter-
company eliminations, the cost of sales for all U.S. sales are only
recorded on CWPM Ltd.'s unaudited financial statements. According to
Canfor, the facts argued above render the unconsolidated CFP financial
statement unsuitable for the calculation of the G&A expense rate.

Alternatively, Canfor asserts that if the Department finds it necessary
to use a G&A expense rate calculated based on its unconsolidated financial
statements the rate should be based on Canfor's suggested method. Canfor
argues that the methodology used by the Department to calculate its G&A
expense rate for the preliminary determination was flawed. Canfor states
that the Department failed to include the cost of sales recorded on CWPM
Ltd.'s financial statements in the denominator of the calculation of the
rate. In addition, Canfor argues that the G&A expenses were not allocated
over the appropriate cost of sales. Canfor contends that these errors
resulted in a significant overstatement of its G&A expense rate. 

Further, Canfor disagrees with the petitioners' arguments that it did not
properly identify the amount of G&A expenses incurred by CFP; that Canfor
improperly allocated expenses incurred by CFP to the entire consolidated
company; and, that Canfor improperly reduced the reported general expenses
by certain miscellaneous income items. First, Canfor maintains that record
evidence identifies in detail the amount of G&A expenses incurred. Second,
to comply with the Department's request to calculate an unconsolidated G&A
expense rate for the Wood Products business unit only, Canfor contends
that it was necessary to allocate segmented and non-segmented expenses
based on unconsolidated and consolidated cost of sales, respectively. The
segmented expenses relate to divisions handling the production and sale of
wood products and the non-segmented expenses relate to the entire
consolidated company. In Canfor's view the names of the divisions (i.e.,
corporate office, information services, business services, and research
and development) classified as non-segmented expenses confirm that the
activities are not limited to Wood Products alone. Lastly, Canfor argues
that it properly included in the G&A expense rate calculation income
earned for miscellaneous items related to proprietary information. Canfor
asserts that these income items were related to the general operations of
the company, and the associated expenses are included in the calculation.

With respect to The Pas' portion of the weighted-average G&A expense
rate, Canfor contends that it properly excluded B.C. capital taxes from
its G&A expenses. Canfor states that the tax is not an expense related to
the production of merchandise under investigation, thus it should not be
included in The Pas's G&A expenses. 

With respect to Lakeland's portion of the weighted-average G&A expense
rate, Canfor states that the amount included as an offset does not
represent income not permitted by the Canadian Government as suggested by
the petitioners. Canfor notes that the amount relates to certain
proprietary U.S. sales transactions.

The petitioners contend that Canfor's portion of the weighted-average G&A
expense rate, which was calculated based on its consolidated audited
financial statements, is distortive and inconsistent with the Department's
practice. The petitioners argue that including financial information
related to entities not involved in the production or sale of merchandise
under investigation distorts the amount of G&A expenses related to the
products under investigation. Thus, according to the petitioners, the
reported G&A expenses should be based on the expenses of CFP and CWPM
alone. In addition, the petitioners disagree with Canfor's argument that
the unconsolidated financial statements should not be used to calculate
the G&A expense because they are not audited. The petitioners state that
the amounts presented on the unconsolidated financial statements tie
directly to the consolidated audited financial statements. Thus, the
internal financial statements are components of the audited consolidated
financial statements. 

Further, the petitioners contend that Canfor's G&A expense rate, which
was calculated based on its unconsolidated financial statements, is
flawed. The petitioners argue that Canfor's unconsolidated G&A rate
calculation did not properly identify the amount of expenses incurred by
CFP and it inappropriately allocated CFP's G&A expenses to the entire
consolidated entity. According to the petitioners, because the Department
traced CFP's expenses to its tax return, those expenses relate solely to
CFP and Canfor should not be allowed to allocate those expenses based on
Canfor's consolidated COGS. In addition, the petitioners assert that
Canfor incorrectly reduced its submitted G&A expenses by income derived
from activities unrelated to the production or sales of merchandise under
investigation that are proprietary. The petitioners claim that the
Department only offsets production costs with income that is related to
the production of merchandise under investigation or related to the
general operations of the company and disallows reductions in G&A expenses
for unusual items.(266) Accordingly, the petitioners state that the
Department should disallow these proprietary income items as reductions to
G&A expenses. 

The petitioners contend that Lakeland incorrectly reduced its G&A
expenses by an income item related to proprietary information. See
proprietary discussion in the Memorandum from Taija Slaughter, Accountant
through Michael P. Martin to Neal M. Halper, Director, Office of
Accounting, March 21, 2002. 

Lastly, the petitioners assert that the minor correction presented by The
Pas shows that it incorrectly included B.C. corporation taxes in its G&A
expenses. According to the petitioners, the only tax that Canfor could be
referring to is the B.C. capital tax which relates to the corporate
capital, not its income. Accordingly, the petitioners assert that it is
the Department's practice to include this type of tax in a company's G&A
expense because it relates to the company as a whole.

Department's Position: We disagree with Canfor that the facts of the case
require us to depart from our general practice of calculating G&A expenses
based on a respondent company's unconsolidated financial statements. Our
practice is to calculate the general and administrative expense rate based
on a respondent company's unconsolidated operations plus a portion of G&A
expenses from the parent company. (267) Because there is no definition in
the Act of what a G&A expense is or how the G&A expense rate should be
calculated, the Department has developed a consistent and predictable
practice for calculating and allocating G&A expenses. This consistent and
predictable method is to calculate the rate based on the unconsolidated
financial statements of the respondent company including an allocated
portion of the parent company's G&A expenses, not based on a parent
company's consolidated financial statement. As a company's consolidated
financial statements often include companies with entirely different
corporate structures and in entirely different industries from that of the
respondent, we consider it preferable to remain at a company-wide level
that more closely represents the company and industry under investigation. 

The Department's normal and consistent methodology for calculating a
respondent's G&A expense ratio is reasonable is predictable and not
results-oriented. To allow a respondent to choose between the Department's
normal method and an alternative method would encourage respondents to
adopt a results-oriented approach. That is, parties will only point out
the other methods when it benefits them. Accordingly, we computed Canfor's
G&A expense rate in accordance with our normal practice based on CFP's and
CWPM Ltd's unconsolidated financial statements.

With respect to Canfor's alternative methodology for calculating its G&A
expense rate, we agree with the petitioners that it inappropriately
allocates G&A expenses incurred by CFP and CWPM Ltd. to the entire
consolidated entity. Using Canfor's methodology to calculate the rate
based on a segregation of expenses between "segmented" and "non-segmented"
expenses results in a divisional G&A expense rate, not the producing
company's company-wide rate. However, we do agree with Canfor that the
denominator used to calculate the G&A expense rate should include the cost
of sales of CWPM Ltd. because verified information demonstrates that the
cost to produce the merchandise under investigation that was sold to the
U.S. was eliminated from CFP's financial statements. Thus, for the final
determination, we revised Canfor's reported G&A expense rate by combining
the segmented and non-segmented expenses and dividing that result by the
cost of sales of CFP and CWPM Ltd., adjusted for amounts not included in
the COM. We note that for certain non-operating costs, we continued to
allocate those expenses using Canfor's consolidated cost of sales. 

Further, we disagree with the petitioners argument that certain income
items unrelated to the production or sale of merchandise under
investigation should be disallowed as an offset to Canfor's G&A expense
rate. Canfor's earned income was related to a gain on the sale of certain
fixed assets and certain royalty revenue that was related to its general
operations as a whole. In addition, the associated expenses were included
in the reported G&A expenses. Therefore, we have continued to allow the
income offset in Canfor's G&A expenses. 

However, we agree with the petitioners that the B.C. capital taxes should
be included in The Pas' G&A expenses and an income item related to certain
U.S. sales for Lakeland should be disallowed as an offset to G&A expenses.
Specifically, The Pas' payment of capital taxes is not an income tax.
Corporate services and payments to governments, other than income taxes,
are periodic expenses, general in nature, and are related to the company
as a whole. Lakeland's income offset is related to sales rather than the
production of merchandise under investigation. Thus, for the final
determination, we have included The Pas' capital tax expense and excluded
Lakeland's income offset. 

Comment 20: Canfor's packing cost

The petitioners argue that Canfor's packing costs were not verified at
either the sales or cost verifications, and therefore adverse facts
available should be applied to Canfor's packing costs. The petitioners
cite the sales verification report, which states that the sales team
considered the packing denominator to be unverified, and that Canfor
officials stated that they would review the packing denominator
calculation with the Department's accounting team during the cost
verification.(268) According to the petitioners, the cost verification
report did not address the packing denominator, and therefore "it is clear
that Canfor's reported packing costs could not be verified."(269) As
adverse facts available, the petitioners suggest that the Department
should deduct the highest reported packing amount from all U.S. sales, and
disallow any deduction for packing on all home market sales.

While Canfor concedes that the Department's cost verification report does
not specifically discuss packing, Canfor argues that the denominator used
in the packing cost calculation was in fact "specifically and separately
reviewed and verified" by the cost verification team, as can be seen in
the cost verification exhibits.(270) Canfor argues that the Department
should reject the petitioner's argument that the packing costs were not
verified, and should use Canfor's packing cost in the final determination.
Canfor contends there is no requirement that the verification report
specifically address each and every expense that was reviewed. Canfor also
argues that the total production quantities at the mills and at the
remanufacturers were verified extensively during verification, which is an
integral part of the verification of per-unit COM. Canfor contends that,
even if the cost verification team had not separately reviewed the packing
cost calculation, because Canfor used the total production quantities at
its mills and at the remanufacturers in the calculation of the per-unit
cost of manufacturing, "it is clear that the Department verified the
packing denominator as part of the verification of per-unit costs."(271)

Department's Position: We disagree with petitioners that the denominator
used in the packing cost calculation was not verified. We concede that the
cost verification report did not specifically state that the denominator
used in the packing cost calculation was verified. However, as noted by
Canfor, the denominator used in the packing cost calculation was the total
production quantities for all mills plus the quantity remanufactured. We
note that cost verification exhibit 3 shows the total quantity used as the
denominator in the packing expense calculation and throughout the cost
verification report we describe how we examined and tested these
production quantities. Therefore, no adjustment is warranted for packing
costs.

Issues Specific to Slocan

Comment 21: Futures contracts

Slocan argues that the Department disallowed "an integral part of
Slocan's U.S. selling activity" by treating profits earned on futures
contracts as investment revenue instead of as a selling adjustment.(272)
Specifically, Slocan argues that because the company uses the futures
market in an effort to protect itself from future downward price trends,
the Department was mistaken in believing that Slocan uses the market for
strictly speculative purposes. In support, Slocan stated that "since every
futures contract entered into by Slocan with the CME {the Chicago
Mercantile Exchange} carries with it the obligation to deliver the actual
lumber specified in the contract at the time and place specified, Slocan
at all times keeps track of the contracts in relation to its other selling
activity, in order to be sure of having the ability to deliver the
'underlying Physical' out of its own inventory." Slocan also cites to the
Department's verification report to support its argument. 

Slocan argues that the futures profits are more appropriately treated as
short-term investments and, consistent with the Department's practice,
should be treated as an offset to the company's financial expenses.
Additionally, Slocan argues that this situation is unique from previous
situations in which the Department has disallowed investment income on the
grounds that the income is not related to the operations of the company
because this income is not generated by investment; rather, this income
results from Slocan's regular lumber sales philosophy.

The petitioners argue that the information presented on the record
regarding Slocan's profits and losses is inaccurate. Specifically, the
petitioners argue that Slocan reported selling expenses associated with
the futures market for sales identified as "ex-pit settlement of SPF
lumber futures positions on the Chicago Mercantile Exchange," but also for
a very large number of sales that were not identified as such. The
petitioners argue that this is evidence that the information submitted on
the record of this proceeding is unreliable.

Additionally, the petitioners believe that "{t}he Department was correct
in its decision not to make an adjustment for futures profits."(273) The
petitioners go on to state that "the Department's regulations stipulate
that '{i}n calculating export price, constructed export price, and normal
value (where normal value is based on price), the Secretary will use a
price that is net of any price adjustment, as defined in 351.102(b), that
is reasonably attributable to the subject merchandise or the foreign like
product (whichever is applicable).'"(274) The petitioners argue that,
since it is not the ultimate customer who pays the futures profit, the
Department must examine prices actually charged to and paid by the
customer, the Department should not be making an adjustment for futures
profits in its final determination.

In response to Slocan's argument that the Department should treat the
profits earned from futures contracts as an offset to financial expenses,
the petitioners argue that "{t}he Department should not offset production
costs with adjustments that do not relate to production costs."(275) The
petitioners reiterate that these profits relate to the sale of merchandise
and not the production and reaffirm that an adjustment for the final
determination should not be made.

Department's Position: Slocan's sales on the Chicago Mercantile Exchange
(CME) can be divided into two categories: those that result in the
shipment of subject merchandise, and those that do not. Any sales of
subject merchandise that occurred during the POI as a result of a futures
contract have been included in Slocan's reported sales list. However, we
have not included in our analysis profits on the sale of a futures
contracts that did not result in the shipment of subject merchandise. Such
profit is realized from Slocan's position on the CME and as a producer of
softwood lumber, but not from its actual sale of subject merchandise.

We also have not applied these profits as an offset to Slocan's direct
selling expenses. Section 773(a)(6)(C)(iii) of the Act directs the
Department to make circumstance of sales adjustments only for direct
selling expenses and assumed expenses. Section 351.410(c) defines direct
selling expenses as "expenses . . . that result from and bear a direct
relationship to the particular sale in question." Accordingly, where no
sale of subject merchandise occurred, there can be no circumstance of sale
adjustment for direct selling expenses.

Slocan suggests that as an alternative, the Department apply the profits
as an offset to Slocan's financial expenses. In support of this argument,
Slocan disputes the Department's statement in its preliminary
determination calculation memo that these profits are "investment
revenues" by stating that Slocan is engaging in hedging rather then
speculative activity, and that sales on the futures market are integral
parts of the company's normal sales and distribution process. While we
agree that Slocan's lumber futures hedging activity is related to its core
business of selling lumber as opposed to speculative investment activity,
it is for this very reason that we disagree that the futures contracts are
related to Slocan's financing activity. As such, the futures profits
should not be used to offset the company's interest expense.

Comment 22: Unreported freight expenses

The petitioners argue that for a significant portion of its U.S. sales
Slocan erred in not reporting freight costs from its mills to its reload
centers. According to the petitioners, while Slocan initially argued that
these freight expenses were included in the total amount charged by the
out-bound freight carrier, Slocan contradicted this statement by not
reporting any freight expenses for several sales identified as shipments
through a reload center. Additionally, the petitioners argue that "{i}t is
clear from the verification report that Slocan made no attempt to explain
this contradiction, or to demonstrate to Department verifiers that, for
those reload center sales where it did report outbound freight, the
freight amount also included inbound freight expenses."(276)

The petitioners further argue that Slocan's failure to report these
freight expenses was magnified when it presented the Department with a
list of invoices related to sales for which Slocan had failed to report
freight expenses. The petitioners claim that this information in no way
corrects this discrepancy, as even after the presentation of its minor
corrections, there are still several invoices for which Slocan has not
reported freight expenses, and that the exclusion of these expenses from
Slocan's database prevents the Department from capturing all of Slocan's
'U.S. sales at their actual prices' in making its final
determination.(277) The petitioners suggest that, to account for these
missing data, the Department should apply, as partial adverse facts
available, the highest freight expense reported in the respective freight
field or, at least, apply partial facts available to reported sales made
through a reload center where there is a missing freight value.

Slocan argues that the missing freight costs were provided at
verification during the presentation of minor corrections and that the
petitioners' allegation is simply a misunderstanding. Specifically, Slocan
states that a "small number of items in fact had freight that had
mistakenly been unreported," but these observations were corrected in a
timely manner.(278) Slocan argues that the remaining observations, which
the petitioners allege are missing freight, were included in the 'Freight
into reloads' correction presented at verification.(279) Slocan stated
that these expenses were associated with merchandise that was shipped to a
reload center prior to the POI, but ultimately shipped to the customer
during the POI. However, Slocan was able to ascertain this information and
report the relevant expenses to the Department. Therefore, Slocan believes
the Department should reject petitioners' claims, and not apply facts
available.

Department's Position: The Department is accepting the information
correcting the missing freight costs as provided during the presentation
of minor corrections at the Slocan verification and incorporating it into
its final determination. As was stated in the Department's verification
report:

     For certain U.S. sales, due to misapplied freight payments 
     and payments not made during the POI, some Slocan sales were 
     erroneously reported with zero freight payments. Slocan 
     presented the Department with a table of values to be applied
     to those sales with missing freight adjustments. During the 
     course of our examination of sales traces, we verified the new
     freight values to establish their accuracy. See Exhibit 1.

The record contains all of the information needed to make our final
determination. The Department verified that certain sales identified as
delivered to the customer should not have had a freight expense associated
with them. The verifiers determined that Slocan's freight carrier never
billed Slocan for specific shipments; thus, these sales were delivered,
but without cost to Slocan. Therefore, the Department has determined that
all of the freight expenses incurred by Slocan for shipments of reportable
merchandise have been accounted for in the final determination.

Comment 23: Unreported comparison market freight rebates

The petitioners argue that the Department should apply facts available to
account for certain rebate programs that were not reported in Slocan's
questionnaire responses, but were ultimately discovered at verification.
The petitioners argue that Slocan's "misleading statements during the
course of the investigation" regarding its rail rebate program make it
impossible for the Department to reach an accurate determination.(280)
Therefore, the petitioners argue that the Department should apply to all
applicable sales, as adverse facts available, the highest freight rebate
amount reported by Slocan.

Slocan states that it overlooked the freight rebate program when
responding to the Department's questionnaires because "unlike the larger,
reported ones, {the information} is not maintained in Slocan's Lumber
Track system, from which the freight data were extracted."(281) Slocan
argues that it was against its interest to not report this "minor" rebate
program "which was simply overlooked in the massive information-gathering
exercise required by the questionnaires."(282) 

Department's Position: The Department determined at verification that
there were home market freight rebates missing from Slocan's sales
database. The verifiers obtained all of the information needed to account
for the missing rebates and we have incorporated this information into the
final determination.

Comment 24: Overstated freight rebates

The petitioners argue that the Department's verification report clearly
notes that Slocan "based {U.S. freight rebates} on accrued amounts {which}
differ from the actual amounts of rebates received."(283) Accordingly, the
petitioners argue, the Department should reduce by the factor calculated
by Slocan at verification the amount reported of all of the overstated
rebates.(284)

Slocan did not object to the petitioners' argument that U.S. freight
rebates should be adjusted from the reported accrued amounts to the actual
amounts "if it accords with the Department's standard practice."(285)

Department's Position: We agree with the petitioners. For the final
determination, we have adjusted the reported accrued amounts for freight
rebates to the actual amounts received. Therefore, we have reduced the
value reported for the rebates by the factor calculated at verification.

Comment 25: Donations

Slocan argues that the clerical errors in the preliminary determination,
which the Department acknowledged on January 11, 2002, should be corrected
in the Department's final determination. Specifically, Slocan argues that
the Department verified that Slocan's donations were not sales and should
be eliminated from consideration for the final determination.

With regard to transactions identified by Slocan as donations, the
petitioners argue that the Department should assign as the normal value
for that product Slocan's assessed values for tax purposes. Specifically,
the petitioners argue that since Slocan must pay a self-assessed tax on
donated merchandise, Slocan must first assess the appropriate value of the
merchandise. The petitioners argue that this value "must represent what
{Slocan} believes to be an accurate measure of their value, and would
therefore indicate that non-donations sales of the same products made at
other prices were not appropriately valued."(286) The petitioners believe
the Department "should draw the same conclusion with respect to the
assessed values Slocan had previously reported for other transactions it
claims were 'donations,' and for all non-donation sales of those same
CONNUMs."(287)

Department's Position: First, the Department stated, in a memorandum
responding to ministerial errors alleged in the preliminary determination,
that "it is our usual practice not to include zero-priced donations in our
antidumping analysis."(288) 

Accordingly, the Department agreed that a ministerial error existed in
the preliminary determination whereby it accidentally did not remove all
of the donations, but, for purposes of the final determination, we have
removed these transactions from our analysis. We do not agree with the
petitioners' argument that the value assigned by Slocan to the donated
merchandise, for taxation purposes, should be assigned as the actual value
of the merchandise sold by Slocan during the POI. Instead, in accordance
with section 773(a)(1)(B)(i) of the Act, and the results of our
verification, we have continued to base normal value on "the price at
which the foreign like product is first sold (or, in the absence of a
sale, offered for sale) for consumption in the exporting country, in the
usual commercial quantities and in the ordinary course of trade and, to
the extent practicable, at the same level of trade as the export price or
constructed export price." 

Comment 26: Cost differences for precision end trimmed products

Slocan points out that it was able to identify a cost difference for some
of its precision end trimmed (PET) products at the Quesnel sawmill. Slocan
argues that the Department should incorporate this cost difference in the
difference in merchandise calculation for PET and non-PET products. As a
result, Slocan contends that if the Department continues to use the
methodology followed in the Preliminary Determination, it will now be able
to compare PET and double end trimmed products. 

Department's Position: We agree with Slocan that it was able to identify
and submit the small cost difference associated with producing precision
end trimmed and non-precision end trimmed products. We have incorporated
this cost difference for the final determination. In addition, we agree
with Slocan that we can now match products that are similar except for
precision end trimming, if the situation arises. 

Comment 27: Mackenzie Ospika Division Lathe and Precut 

Slocan sends a small amount of lumber to its Mackenzie sawmill, Ospika
Division (MOS), for further processing. Only a small amount of the lumber
sent to the Ospika Division was produced by Slocan in its Mackenzie
sawmill. The majority of the lumber was purchased from third parties and
cannot be distinguished from the lumber produced by Slocan. These
processing operations, which entailed sorting and sometimes trimming the
lumber, were managed by and included on the books of Slocan's separate
MOS. Slocan argues that the lumber processed by MOS should be treated as
lumber purchased from a separate manufacturer and resold by Slocan;
therefore, the Department should not include any cost associated with this
resold lumber in the COP/CV database. Slocan states that the sales of this
processed lumber have been separately identified in the sales database
reported to the Department. 

The petitioners argue that the Department should allocate a portion of
MOS's costs, identified in Slocan's supplemental D response, to the
specific CONNUMs and include the amounts in the reported costs.

Department's Position: We agree with the petitioners and have included
MOS' costs in the weighted-average COP/CV database. MOS sold subject
merchandise during the POI. Accordingly, we included MOS' sales in our
analysis as well as its costs in the COP/CV database for the final
determination. 

Comment 28: Profits on log sales

The petitioners state that Slocan understated its wood costs by
deducting, from the cost of materials, revenues earned on log sales. The
petitioners argue that it is appropriate to exclude from wood costs the
costs of the logs not consumed in the production; however, it is not
appropriate to deduct the profits earned on the sale of those logs. The
petitioners assert that the Department should resort to facts available to
adjust Slocan's reported wood costs for the profit on log sales.

Slocan argues that the logs sold by its sawmills should be treated as by-
product revenue and should not be considered prime products and allocated
costs. Slocan states that its sawmills are adapted to a typical wood
profile from their timber supply areas and timber licenses. However, there
are times when logs from the timber supply do not meet the species or size
profile that allows the most efficient sawmill operation and, in those
cases, the logs are sold as a by-product of Slocan's general harvesting
from its tenures. Slocan asserts that the value of log sales is such a
small fraction of the overall cost of production and of the overall sales
value that it is clearly incidental to the normal operations of the
company. Slocan maintains that its intent is to harvest timber to supply
its sawmills, not to harvest timber in order to resell it, and, thus, the
treatment of log sales as by-product sales is appropriate. Slocan argues
that the petitioners are proposing a double counting of costs which should
not be allowed. As an example, Slocan points out under the petitioner's
methodology, if Slocan and another respondent in the dumping proceeding
sell logs to each other to align their respective log profiles with their
mill profiles, the seller's log would be valued at cost, while the same
log would be included in the purchaser's cost at the transfer price. 

Finally, Slocan argues that chips sales are analogous to log sales since
they are both wood fiber that cannot be used economically by the sawmills
to make lumber, and both are the inevitable result of harvest and milling
techniques. Slocan points out that wood chips are a far more important by-
product than log sales, and if log sales are considered a prime product
and allocated a portion of costs, then wood chips should also be
considered a prime product and allocated a portion of the reported costs. 

Department's Position: We agree with the petitioners that the profits
earned on log sales should not be included in the reported wood costs.
Logs are the raw material input in the lumber production process. The cost
of logs harvested should be used to determine the cost of the raw material
input into lumber production and the cost of the logs sold. The fact that
the company may sell some logs (or species of logs) for a profit does not
mean that the cost for the logs (or species of logs) consumed in the
production process is any different. As such, we consider it inappropriate
to reduce the cost of the logs input into lumber production by the profit
earned on sales of other logs. The sale of the logs is akin to a line of
business other than the manufacture and sale of finished lumber. This
situation is similar to Mushrooms from Indonesia, where the Department
excluded revenues and associated costs from sales of spawned compost and
casing soil (an input into mushroom production) from the calculation of
reported production cost, thus eliminating the possibility of understating
the production cost of the subject merchandise by including any profit
made on the sale of spawned compost and casing soil.(289) 

Furthermore, we disagree with Slocan's claim that the sale of logs is
analogous to the sale of wood chips. The logs that were sold are an input
into the lumber production process, each with their own identifiable
costs. On the other hand, wood chips result from the lumber production
process (i.e., cutting the log into its constituent parts), with no
identifiable cost since they result from a joint production process. As
such, we disagree that the treatment of one drives the treatment of the
other. Finally, Slocan's example of two respondents selling logs to each
other is simply a hypothetical situation which has nothing to do with the
issue at hand. There is no double counting of costs. The issue is simply
whether it is appropriate to reduce the cost of an input by profits earned
on the sale of other inputs. As noted above, we consider it inappropriate
and for the final results, we have excluded the profit and loss on the
sale of logs from Slocan's wood cost.

Comment 29: Depreciation expenses at the Plateau Sawmill

The petitioners state that Slocan failed to accurately report the process-
specific depreciation expense for its Plateau sawmill. The petitioners
argue that Slocan should have had a detailed itemization of depreciation
expense for all assets it owns and should have calculated depreciation
expense specific to each asset and each process. The petitioners contend
that the Department should not rely on the undocumented estimates of the
Plateau sawmill's reported process-specific depreciation expenses and
assert that for the final determination, the Department should instead use
the per-unit fixed cost as was calculated for the Mackenzie sawmill. In
addition, the petitioners point out that depreciation expenses associated
with idled assets must be included in Slocan's cost of production. 

Slocan argues that the Plateau sawmill does record depreciation on all of
its depreciable assets. Slocan explained that for the assets acquired
subsequent to Slocan's purchase of the Plateau sawmill, the depreciation
expenses can be assigned to particular processes; however, for the assets
acquired as part of Slocan's purchase of the Plateau sawmill, depreciation
expenses are based on the various asset classes and allocated to the
different production processes. Slocan asserts that the actual
depreciation expense calculated and reported to the Department was not an
estimate. Slocan points out that the depreciation issue discussed at
verification was in regard to the amount of actual depreciation expense
allocated to kiln drying versus the amount of depreciation expense
allocated to the sawmill process. The depreciation issue was not in regard
to the validity of the total depreciation calculation.

Department's Position: We agree with Slocan that depreciation expense
should not be adjusted for the final determination. At verification, we
discussed with Slocan officials how the Plateau sawmill's total
depreciation expenses were allocated to the different production processes
(i.e., sawing, planing, and kiln drying). Since we were not able to
identify anything unreasonable about its allocation methodology, we are
not making any adjustments to the Plateau sawmill's depreciation expenses
for the final determination. In addition, we noted no unreported
depreciation expense associated with idled assets. 

Comment 30: Unreported foreign exchange losses

The petitioners state that Slocan did not include all of its foreign
exchange losses on long-term debt in its financial expense ratio
calculation. The petitioners argue that the Department should recalculate
Slocan's interest expense ratio to account for the unreported foreign
exchange losses. 

Slocan did not comment on the issue.

Department's Position: We disagree with petitioners. At verification, we
traced the foreign exchange losses to Slocan's books and records and
determined that Slocan had included an appropriate amount in its interest
expense ratio calculation. As a result, there is no reason to make an
adjustment for Slocan's foreign exchange loss on long-term debt for the
final determination.

Comment 31: Timber tenure amortization

Slocan argues that the Department should not include the amortization of
timber tenures in the cost of production of the merchandise under
consideration. Slocan asserts that by including the amortization of the
tenures in the reported costs, the Department is double counting the
subsidy that was measured in the companion countervailing duty
investigation on softwood lumber from Canada. Slocan claims that in the
countervailing duty investigation the Department has preliminarily
determined that subsidies exist, which, Slocan claims, are equivalent to
the amortization on timber tenures. Slocan points out that in Tool Steel
from Germany and subsequently in the Solid Urea from the Former German
Democratic Republic, the Department stated that it was inappropriate to
add subsidies to actual expenses recorded in the company's books and
records.(290) Furthermore, Slocan points out that the amortization is not
an actual expense but rather the excess of purchase price over book value
paid for acquisitions, as assigned to woodlands. 

Petitioners did not comment on this issue.

Department's Position: We do not agree with Slocan that the Department is
double counting. In the companion countervailing duty investigation of
softwood lumber from Canada, the Department determined that the provincial
stumpage programs conferred a countervailable benefit on Canadian softwood
lumber producers. The amount of the benefit was calculated based on a
comparison of stumpage prices between Canada and the United States. Tenure
security was not accounted for in this benefit calculation. We would point
out, however, that in the countervailing duty case, petitioners have
argued that an adjustment should be made to the Canadian price to reflect
the value of tenure security, which would have the effect of increasing
the subsidy benefit.

Slocan acquired the timber tenures when it purchased companies that owned
these tenures. When recording the purchase of these companies in its books
and records, Slocan allocated the purchase price to the different assets
of the acquired companies, including the timber tenures. Slocan is now
amortizing the value assigned to the timber tenures. Contrary to Slocan's
assertions, the purchase prices paid to acquire the other companies
represents an actual cost to Slocan and has been recorded as such in its
normal books and records and its audited financial statements. The cases
Slocan cites where the Department considered it inappropriate to add
subsidies to actual expenses recorded in the company's books and records
are not applicable in the instant case. In the cases cited, the Department
did not include, in the reported costs, subsidies the respondents received
from a government. In this case, the amortization relates to purchase
prices allocated to the timber tenures and these purchase prices were
actually paid by Slocan to acquire the companies.

Comment 32: Startup adjustments 

Slocan claims that the Department should grant it a start-up adjustment
for its new planing and MSR testing facility at the Mackenzie sawmill.
Slocan asserts that even though the other processes within the Mackenzie
sawmill, such as the log yard, sawmill, or kiln drying, did not undergo
replacement, it is irrelevant and should in no way affect the analysis of
whether the costs related to the new planing and MSR testing facility are
entitled to a start-up adjustment. As an example, Slocan refers to Hot
Rolled from The Netherlands where the Department allowed a start-up
adjustment for the direct sheet plant (DSP), which was one facility in the
respondent's hot rolling steel mill.(291) Slocan points out that the
Department's determination in Hot-Rolled from the Netherlands case is
consistent with the statute at Section 773 (f)(1)(C)(ii), which uses the
term "new facility." Slocan contends that it would be improper to infer
that a more extensive requirement of the term "facility" be used, such
that an entirely new mill, from (log input to lumber output) be
constructed in order to qualify for the adjustment. 

Slocan points out that the evidence on the record demonstrates that
Slocan is using a new facility or producing a new product that required
substantial additional investment. Slocan also claims that the evidence on
the record shows that the Mackenzie planing and MSR testing facility has
undergone a substantially complete retooling of the existing plant which
required the replacement of nearly all production machinery or the
rebuilding of existing machinery. Slocan points out that the planing and
MSR testing facility at the Mackenzie sawmill is a completely separate
building with virtually entirely new equipment. 

Slocan argues that the second statutory requirement, (i.e., production
levels were limited by technical factors associated with the initial phase
of commercial production) was also satisfied by evidence on the record.
Slocan refers to its questionnaire responses where the detailed technical
factors were identified and subsequently reviewed at verification. Slocan
claims that because of these technical factors, production levels at the
Mackenzie planing and MSR testing facility were seriously limited. Slocan
states that significant volumes of unplaned lumber had to be shipped to
the Plateau sawmill and to an outside services provider for planing due to
the start-up problems incurred at the Mackenzie sawmill. Slocan also
points out that the planer production per shift dropped dramatically
during the installation of the planers and then gradually ramped up over
the next several months.

The petitioners did not comment on this issue

Department's Position: We agree with Slocan in part and have determined
that the company's new planing and MSR testing facility at the Mackenzie
sawmill is eligible for a start-up adjustment in accordance with section
773(f)(1)(C)(ii) of the Act. As for the appropriate start-up period, we
have determined that, for the Mackenzie planing process, the period ended
after the third quarter 2000 rather than extending beyond the POI, as
claimed by Slocan. 

Section 773(f)(1)(C)(ii) of the Act states that the Department will make
an adjustment for start-up costs where the following two conditions are
met: (1) A producer is using new production facilities or producing a new
product that requires substantial additional investment, and (2) the
production levels are limited by technical factors associated with the
initial phase of commercial production. We have examined Slocan's claim
and have determined that the criteria for granting a start-up adjustment
have been satisfied in this case. During the POI, Slocan completed
construction and began operating a new planing and MSR testing facility at
its Mackenzie sawmill. The new planing facility entailed a substantial
investment and consisted of a new foundation for the new planer building,
new planer infeeds, a new basement strip system, new rolling and grading
tables, a new sawdust bin and sawdust conveyor, new sorter lines, new
walls, new stackers, and new MSR grading equipment. 

As such, we believe Slocan has satisfied the first condition of the test
in that it is using a new production facility. As for meeting the second
condition of limited production due to technical factors under section
773(f)(1)(C)(ii) of the Act, we found that Slocan's production levels were
indeed limited by technical factors associated with bringing the new
facility online. We cannot identify these technical factors here due to
their proprietary nature (see exhibit D-8 of Slocan's July 23, 2001
section D response). In evaluating Slocan's start-up adjustment, we
focused on when the new planing and MSR facility achieved commercial
production levels. We reviewed the volume of lumber processed (i.e.,
inputs) at the planing and MSR facility from July 2000 through July 2001
and the volume of lumber produced (i.e., outputs) at the planing and MSR
facility from July 2000 through November 2001. The SAA directs the
Department to examine the units processed in determining when a company
has reached commercial production levels. See SAA at 836. In
Semiconductors from Taiwan, we stated "our determination of the start-up
period was based, in large part, on a review of wafer starts at the new
facility during the POI, which represents the best measure of the
facility's ability to produce at commercial production levels."(292)
Consistent with the SAA and the Department's practice, we continue to
apply production starts as the best measure of a facility's capability to
produce at commercial production levels. From analyzing Slocan's data, we
noted that the volume of lumber input into the planing facility
significantly changed in the fourth quarter of 2000 (See the business
proprietary information contained in exhibit SD-13 of Slocan's September
7, 2001 supplemental section D response). This change in volume,
consistent with the SAA, indicated that the planing process reached
commercial production levels at the end of the third quarter 2000.
Therefore, for the final determination, we made an adjustment to Slocan's
planing costs for the third quarter of 2000.

Issues Specific to Tembec

Comment 33: G&A expense

Tembec argues that the Department should base its G&A expense factor on
the Forest Products Group level. Tembec states that the G&A factor
calculated from the Forest Products Group closely relates to the
production of the subject merchandise. The company asserts that using a
G&A factor derived from the company-wide financial statements results in a
G&A ratio that reflects mostly industries other than those making the
subject merchandise. 

Tembec contends that the charge for assets removed from service and other
costs are extraordinary in that they are unusual in nature and infrequent
in occurrence and should not be included in G&A. In addition, Tembec
objects to the inclusion of costs from two non-operating facilities in
G&A. Tembec notes that one of these facilities had retail sales of non-
reportable merchandise which is represented in the cost of sales figure of
that facility and the second facility had no costs for the G&A calculation
period, fiscal 2000. 

The petitioners contend that the Department has a long-standing practice
of calculating G&A based on company-wide expenses. The petitioners argue
that limiting G&A to the Forest Products Group would not capture the
relevant expenses by Tembec Inc. The petitioners maintain that the
nonoperating items listed in the cost verification report should be
included in the G&A calculation for the final determination. The
petitioners reject Tembec's claims that these items are unusual and should
be excluded from G&A. The petitioners assert that Tembec does not explain
how these items are unusual in nature as required by Floral Trade Council
of Davis, CA v. United States, 16 CIT 1014, 1016 (Ct. Int'l Trade 1992)
aff'd on other grounds, Floral Trade Council of Davis, CA v. United
States, 74 F.3d 1200 (Federal Circuit 1995).

Department's Position: The statute at sections 773(b)(3)(B) and
773(e)(2)(A) directs the Department to calculate an amount for selling,
general and administrative expenses based on actual data pertaining to the
production and sale of the merchandise under consideration. The
antidumping law does not prescribe a specific method for calculating the
G&A expense rate. When a statute is silent or ambiguous, the determination
of a reasonable and appropriate method is left to the discretion of the
Department. Because there is no definition in the Act of what a G&A
expense is or how the G&A expense rate should be calculated, the
Department has developed a consistent and predictable practice for
calculating and allocating G&A expenses. This consistent and predictable
method is to calculate the rate based on the company-wide G&A costs
incurred by the producing company allocated over the producing company's
company-wide cost of sales and not on a divisional or product-specific
basis. This practice is identified in the Department's standard section D
questionnaire, which instructs that the G&A expense rate should be
calculated as the ratio of total company-wide G&A expenses divided by cost
of goods sold. See Section D Questionnaire, page D-14. This approach is
consistent with Canadian GAAP's treatment of such period costs and
recognizes the general nature of these expenses and the fact that they
relate to the activities of the company as a whole rather than to a
particular production process. The Department's methodology also avoids
any distortions that may result if, for business reasons, greater amounts
of company-wide general expenses are allocated disproportionally between
divisions. Therefore, we normally calculate the G&A expense rate based on
the respondent's unconsolidated operations plus, if applicable, a portion
of G&A expenses incurred by affiliated companies on behalf of the
respondent.(293) 

In this instance, Tembec deviated from the Department's normal
methodology and calculated its G&A expenses using an internal accounting
methodology, under which the company charged some G&A expenses directly to
each of its divisions. However, Tembec divisions are not separate entities
that require consolidation but merely separate business units that make up
a single corporation. Thus, we agree with petitioners that we cannot
consider the divisional P&L statements as "unconsolidated financial
statements." For the final determination, we have based Tembec's G&A
expense rate calculation on Tembec Inc's company-wide income statement. 

As outlined in Floral Trade Council of Davis, CA v. United States, 16 CIT
(1014, 1016) (Dec. 1, 1992), in order for an event to be considered
extraordinary it must be "unusual in nature and infrequent in occurrence."
An event is "unusual in nature" if it is highly abnormal, and unrelated or
incidentally related to the ordinary and typical activities of the entity,
in light of the entity's environment. An event is "infrequent in
occurrence" if it is not reasonably expected to recur in the foreseeable
future.(294) Removing assets from service and miscellaneous costs are not
highly abnormal and are clearly related to the company's operations as a
whole. Assets are disposed of in the normal course of business and
therefore this is not an infrequent activity. We have included the charge
for assets removed from service and other costs in the calculation of G&A
expenses for the final determination. The loss realized from disposal of
the assets and miscellaneous expenses are actual costs to the company and
are related to the company's general operations-comprised of all general
activities associated with the company's core business, including
production of the subject merchandise which are appropriate to include in
G&A. 

Tembec had two non-operating facilities during the POI. One facility had
expenses during the POI but none during the calendar year 2000. The second
facility sold non-reportable lumber from a retail yard attached to the
facility. We have not included any expenses from the first facility
because there were no costs incurred during the calendar year 2000, the
period from which we have based our G&A rate calculation. The second
facility's expenses relate solely to the cost of merchandise sold. The
cost of the merchandise sold is more appropriately included as cost of
sales, not G&A. Lastly, we note that the cost of sales from the second
facility was for non-reportable merchandise.

Issues Specific to West Fraser

Comment 34: Downstream sales

West Fraser argues that the Department correctly determined not to use
the downstream sales of its former affiliate, Revy, in the preliminary
determination because, as the Department verified, the quantities of
Revy's sales were small and its records did not identify the manufacturer
of the lumber it sold.(295) In addition, Revy sold lumber at considerably
marked up prices.(296) Should the Department decide to include Revy's
sales in its final determination, however, West Fraser maintains that the
Department would have to calculate a level of trade adjustment to take
into account the differences between West Fraser's and Revy's selling
activities.(297)

The petitioners argue that when West Fraser first asked to be excused
from reporting the downstream sales of Revy, it assured the Department
that these sales would pass the Department's arm's-length test. When it
became clear that these sales would fail the arm's-length test, the
Department instructed West Fraser to report them. The petitioners contend
that the Department's initial decision to exclude the sales was based on
inaccurate information provided by West Fraser and, had West Fraser not
delayed the process of collecting the Revy sales, it would have been able
to provide a more complete submission. As a result, the petitioners insist
that West Fraser should not be put in a better position for having delayed
the collection of the data, and the Revy downstream sales that West Fraser
did report should be used in the final margin calculation.

Department's Position: At verification, we found no evidence that Revy
stores recorded either their inventories or their sales of lumber on a
manufacturer-specific basis.(298) West Fraser was able to provide partial
sales data for some, but not all, of the Revy stores. Many of the sales
records that it could retrieve did not identify product characteristics
relied upon by the Department for product comparisons in this
investigation. We find that including these reported sales would result in
distorting our calculation of normal value and, for this reason, we have
not included the sales in our calculation. 

Comment 35: Inventory carrying costs

The petitioners state that the Department's verifiers found errors in the
calculation of the number of days in inventory for both Canadian and U.S.-
located vendor managed inventories (VMI).(299) The petitioners argue that
the Department had given West Fraser multiple opportunities to correct
these errors and that West Fraser's failure to correct the reported
information justifies the Department's resorting to adverse facts
available.(300) As adverse facts available, the petitioners argue that the
Department should assign the highest reported inventory carrying expense
for any U.S. VMI sale to all U.S. VMI sales.(301)

West Fraser argues that on the first morning of the sales verification,
it notified the Department that it had reported an excessive number of
days in inventory at VMI locations. Over the course of the verification,
the Department determined the correct number of days in inventory at VMI
locations and recorded them in the sales verification report.(302) 

Department's Position: We agree with West Fraser that, at the
verification, the company notified the verifiers that it had reported an
excessive number of days in inventory at VMI locations. We also agree that
during the course of the verification, West Fraser provided the corrected
information. Accordingly, the Department has no basis either to conclude
that West Fraser did not cooperate to the best of its ability or to apply
an adverse facts available proxy for the days in inventory at VMI
locations.

Comment 36: Log sales

The petitioners argue that West Fraser has understated its log costs by
recording its log sales at fair market value. The petitioners point out
that they voiced concerns about West Fraser's valuation of the cost of
logs sold prior to verification by referencing what they claim were
various inconsistent statements made concerning that valuation. According
to the petitioners, verification did not clear up the issue as additional
statements made at verification regarding the use of fair market value to
value logs sold did not correspond to earlier statements. Additionally,
the petitioners assert, there is nothing on the record that shows how this
fair market value was derived.

The petitioners suggest that by using fair market value, West Fraser is
deducting the profit earned on log sales in addition to the cost of the
logs sold when adjusting wood costs for transfers out of inventory.
Accordingly, the petitioners argue, the Department should remove an amount
for profit from the log sales value. Unfortunately, the petitioners
assert, the information needed to make such an adjustment is not on the
record and the Department should therefore use the facts that are
available under 19 CFR 351.308(a). Specifically, the petitioners contend,
the Department should deny the deduction for the reported amount of log
sales from the cost of logs calculation and increase the reported costs to
account for West Fraser's incorrect accounting of the cost of logs sold.

West Fraser disagrees with the petitioners' contention that it did not
properly account for the cost of logs sold and asserts that the
petitioners have confused the information provided on log sales with the
information provided on log trades. According to West Fraser, its
responses have not been inconsistent or misleading, and the petitioners'
confusion results from the fact that they have mixed statements concerning
two distinct issues. West Fraser argues that the information provided in
its responses referred to the valuation of log sales, and that the
information obtained by the Department at verification referred to log
trades. In regard to log trades, West Fraser notes, the same fair market
value was assigned to the logs sold and the logs received in the trade.
Thus, West Fraser concludes, there is no inconsistency between the
questionnaire responses and the information provided at verification, and
there is no profit element included in the verified cost of logs sold that
needs to be removed.

Department's Position: We disagree with the petitioners' assertion that
West Fraser has understated its log costs by recording its log sales at
fair market value. As noted by West Fraser, log sales and log trades are
two distinct issues. West Fraser explained its methodologies for valuing
log sales in its responses and explained its methodologies for valuing log
trades at verification. We do not find that West Fraser's statements made
during the course of this proceeding were misleading or inconsistent.

At verification, we noted that substantially all of West Fraser's log
sales transactions were actually log trades. In regard to log trades, the
Department verified that the logs traded and the logs received in the
trade were recorded as a sale and a purchase, respectively, at the same
market value. The only reason that the fair market value is assigned is to
allow for a mechanism which facilitates the trading of two different
species of logs with different market values. The assignment of a fair
market value does not affect the cost of logs delivered as no money
changes hands and the two sides of the transaction cancel each other out.
The full harvest costs associated with the traded logs remains unchanged
and no profit is realized. Therefore, the cost of logs used by West Fraser
is unchanged, and total actual harvest costs are spread across the total
quantity of logs delivered, which includes the logs received in the trade.

While some log sales transactions were not log trades but rather actual
log sales, we note that these were an insignificant percentage of the
total transactions, and that there is no record evidence to suggest that
West Fraser is deducting profits from its log costs when it records these
sales. We therefore find that the record of this investigation does not
support the petitioners' contention that West Fraser is deducting the
profit on log sales in addition to the cost of logs sold and have not
adjusted West Fraser's log costs for the final determination.

Comment 37: Prior period stumpage and silviculture

West Fraser argues that the Department should not adjust the reported
silviculture and stumpage expenses for the minor corrections submitted on
the first day of verification. West Fraser states that the revised
silviculture and stumpage costs in the minor corrections excluded
adjustments relating to prior periods that were recognized during the POI
and included adjustments relating to the POI that were recognized in the
subsequent period. Although it submitted this information to enable the
Department to make an adjustment if it was deemed necessary, West Fraser
contends that such an adjustment is not appropriate in this case.

West Fraser argues that its accrual-based accounting is in accordance
with Canadian GAAP and reasonably reflects the costs associated with the
company's harvesting and silviculture activities. Thus, West Fraser
asserts, there is no need for the Department to depart from its practice
as dictated by section 773(f)(1)(A) of the Act. If the Department does
decide to make an adjustment, West Fraser maintains, it should adjust both
the silviculture costs and the stumpage costs in order to be consistent.

The petitioners did not comment on this issue.

Department's Position: We agree with West Fraser that the Department
should not adjust the reported silviculture and stumpage expenses for the
minor corrections submitted on the first day of verification. Under
section 773(f)(1)(A) of the Act, the Department adheres to an individual
manufacturer or exporter's recording of costs in its books and records if
such records are kept in accordance with its home country GAAP and
reasonably reflect the costs associated with the production of the
merchandise under investigation. West Fraser reported its silviculture and
stumpage expenses in accordance with the amounts recorded in its financial
statements. Although these amounts included adjustments for stumpage and
silviculture related to the period prior to the POI and excluded
adjustments related to the POI but booked in the subsequent period, we do
not find them to be unreasonable as the net differences were not material
in nature. We therefore find no reason to depart from the costs recorded
in West Fraser's normal books and records and have not adjusted the
reported silviculture and stumpage expenses for the final determination.

Issues Specific to Weyerhaeuser

Comment 38: Sales verification

Weyerhaeuser argues that the Department should accept its submissions and
calculations and rely on them for the final determination. According to
Weyerhaeuser, the Department was able to verify that Weyerhaeuser's
responses were complete and accurate, including the ministerial errors and
minor corrections discovered by Weyerhaeuser and presented to the
Department prior to verification.(303) Weyerhaeuser asserts that over the
course of the investigation, it has demonstrated that is has fully
cooperated with the Department, as evidenced by the size of its databases
and the systemic process required to generate the databases in the time
required. That the verification process took place in four cities and
covered 18 producing mills, five sales systems and approximately 100
different inventory and distribution points, is, according to
Weyerhaeuser, illustrative of the magnitude and complexity of the task
involved in putting together its response.

The petitioners allege that the information submitted by Weyerhaeuser
after the beginning of the verification involves ". . . wholesale
alterations to previously submitted data information."(304) 

The petitioners point out that the Department's verification agenda for
Weyerhaeuser limited the acceptance of new information to the following
circumstances:

   A.  the need for . . . {the} information was not evident previously; 
   B.  the information makes minor corrections to information already 
       on the record; or 
   C.  the information corroborates, supports, or clarifies information
       already on the record.(305) 

The petitioners assert that, other than simple corrections to minor data
errors that Weyerhaeuser discovered during its verification preparation,
the Department must reject all new factual information proffered after the
beginning of the Weyerhaeuser verification. Moreover, the petitioners
allege that the sales verification demonstrates that Weyerhaeuser did not
comply to the best of its ability with the Department's requests for
information. Accordingly, the Department should apply adverse facts
available in each area where Weyerhaeuser had failed to provide
information that could be verified as accurate.(306)

Weyerhaeuser maintains that during the course of the investigation, it
reported data in the form and within the time requested by the
Department.(307) To do this required Weyerhaeuser to extract and harmonize
data from five different major accounting systems and more than a dozen
other data systems. The company's submissions to the Department required
it to review millions of transactions, perform thousands of data-
processing jobs, incurring tens of thousands of man-hours of company time
and considerable expense for purposes of retaining outside
consultants.(308) 

The specific verification issues are as follows:

   a. Weyerhaeuser misclassified and failed to report subject merchandise 

   The petitioners state that Weyerhaeuser misclassified and failed to
   report certain U.S. sales of SPF subject merchandise,(309) and that
   Weyerhaeuser also failed to assign product code numbers to certain sales
   of both subject and non-subject merchandise which it coded as "Not Carried
   on Stock Record" (NCOSR). At verification, the Department found that
   Weyerhaeuser had made no attempt to examine the invoices of this
   merchandise to segregate the subject merchandise from the non-subject
   merchandise.(310) The petitioners argue that the Department should apply,
   to both groups of unreported U.S. sales, as adverse facts available, the
   highest margin calculated for any U.S. sale. In addition, the petitioners
   argue that the Department should apply this adverse facts available margin
   to the full amount of NCOSR merchandise.(311) 

   Weyerhaeuser insists that the amounts of misclassified and unreported
   sales at issue are minuscule and could be ignored by the Department
   without affecting the calculation of a dumping margin.(312) It points out
   that reporting the sales classified as NCOSR, which were a relatively
   limited number of Weyerhaeuser's total reported sales, would have required
   spending hours going through paper invoices. If the Department decides to
   include these sales in the calculation of a margin, Weyerhaeuser argues
   that the Department should apply neutral facts available. Specifically,
   Weyerhaeuser would have the Department assign the company-wide average
   margin to these quantities.(313) 

   b.  U.S. warehouse-to-customer freight expenses for sales made from
       Weyerhaeuser Building Materials' (WBM) inventory 

   The petitioners state that Weyerhaeuser reported two sets of data for
   this expense - one based on sales value and the second based on weight,
   and that at verification, the Department found the weight data to be
   inaccurate.(314) The petitioners argue that the sales value-based
   methodology leads to the result that low-valued merchandise can be
   transported considerable distances at what are reported to be small
   expenses while higher-valued merchandise transported locally will show
   high expenses. Accordingly, the value-based methodology should not be
   used.(315) The petitioners conclude that the Department should employ, as
   facts available, the highest weight-based expense reported in the freight
   to the final customer (INLFWCU) field for all "channel 7" sales.(316)

   Weyerhaeuser argues that, at the time of its questionnaire responses, it
   had told the Department that it could not report these freight expenses on
   a quantity basis, resulting in the Department's supplemental questionnaire
   request to report freight out on a weight basis. Although Weyerhaeuser
   complied with this request, it also informed the Department that it could
   not represent that the weight information was accurate.(317) Weyerhaeuser
   reiterated that allocating freight expense on sales value was the only
   identifiable way to report freight out expense to the Department.

   c.  Out-bound freight ratio for WBM's Edmonton warehouse sales 

   Weyerhaeuser argues that the Department should apply the correct out-
   bound freight ratio for WBM's Edmonton warehouse sales. Weyerhaeuser
   acknowledges that the Department discovered an error in the reporting of
   the out-bound freight ratio for this location and argues that the
   Department has now fully verified the submitted data and should use the
   corrected ratio.(318)

   The petitioners did not comment on this issue.

   d.  Canadian Lumber Business' (CLB) freight expenses 

   The petitioners argue that Weyerhaeuser failed to provide reliable
   freight expenses incurred by CLB at Edmonton's JT reload, and that the
   Department should employ the highest reported freight amount for all U.S.
   sales that went through that reload. The petitioners state that
   Weyerhaeuser reported the transfer price paid to its affiliate, the
   Edmonton CSC, for services involving merchandise which went through
   Edmonton's JT reload during the POI. However, the petitioners state that
   at verification Weyerhaeuser (1) was unable to tie reported transfer price
   amounts; (2) found that labor and other costs were based on statistical
   information, not the actual amounts paid; and (3) that reported revenue
   was "at odds" with the amount recorded in the general ledger.(319) To
   compound matters, the petitioners allege that "verifiers attempted to
   replace the misreported freight amounts with new factual information taken
   at the verification," which is "contrary to law, the Department's
   practice, and the written verification agenda."(320) Moreover, the new
   information is based upon transfer prices, which the petitioners argue are
   inherently unreliable.(321) The petitioners propose that the Department
   deny the freight adjustment for all home market sales that went through
   the JT reload, and instead apply the highest reported freight amount for
   all such sales. 

   Weyerhaeuser argues that corrected freight expenses, incurred by CLB at
   Edmonton's JT reload, were examined during verification, and that, for the
   final determination, the Department should use the corrected, verified
   data included in its submission of February 5, 2002. Weyerhaeuser contends
   that the petitioners are actually confusing two separate issues: the
   reliability of the freight expense based on transfer price and whether the
   Department should accept the data for inter-company reload charges from
   the JT reload to CLB.(322) 

   With regard to whether the reported expense is reliable, Weyerhaeuser
   contends that it reported the transfer price as the basis of this reload
   expense throughout the investigation because the transfer price paid by
   CLB to the Edmonton CSC for warehousing at the Edmonton JT reload exceeded
   the CSC's cost of operating that reload.(323) Furthermore, Weyerhaeuser
   argues that officials at the Edmonton CSC had explained at verification
   that "the costs attributed to the JT reload could be calculated only by
   making certain assumptions because JT-specific costs were not accounted
   for in the ordinary course of trade."(324) Weyerhaeuser contends that the
   Department confirmed at verification that this was an appropriate basis on
   which to report expenses because the transfer price exceeded the Edmonton
   CSC's costs. Weyerhaeuser also argues that the Department verified
   Weyerhaeuser's allocation methodologies, and that "the difference between
   the revenues reflected in the general ledger and the worksheet are
   attributable to these allocation methods."(325) Weyerhaeuser argues that
   because the revenue amounts reflected in its calculation worksheet and the
   general ledger "are more than the verified costs of operating the JT
   reload, the small discrepancy between the revenue amounts in the worksheet
   and the general ledger are not only immaterial, but irrelevant to the
   issue of whether CLB's transfer price exceeded the Edmonton CSC's actual
   costs."(326)

   With regard to whether the Department should accept the data for inter-
   company reload charges from the JT reload to CLB, Weyerhaeuser argues that
   a programming error regarding unreported inter-company reload charges was
   discovered in the course of verification; however, Weyerhaeuser contends
   that the Department verified the corrected freight information, checked it
   for completeness, and noted no discrepancies.(327) Weyerhaeuser also
   contends that because the Department verified the corrected data, it
   should use it for the final determination and reject the petitioner's
   argument for using adverse facts available.(328)

   e.  Inventory carrying costs 

   The petitioners argue that Weyerhaeuser failed to properly report
   inventory carrying costs in the U.S. and Canadian markets. The petitioners
   state that the Department discovered this issue at verification in the
   course of reviewing calculation ratios, noting that inventory carrying
   cost (ICC) factors were incorrectly applied. The petitioners contend that
   Weyerhaeuser offered no "credible explanation," and the revision of the
   ICCs does not constitute a minor correction, as it affects five separate
   ICC fields in the U.S. and home market databases.(329) The petitioners
   suggest that the Department deny any ICC adjustments for home market
   sales. For U.S. sales, the petitioners argue that the Department should
   apply to each of the five ICC fields, the highest ICC charge on the record
   for a Weyerhaeuser accounting data system that verification exhibits
   indicate is accurate and complete, as adverse facts available.

   Weyerhaeuser argues that, although it was discovered during the course of
   verification, a programming error resulted in the ICCs being misreported
   for a number of WBM and Trading Group sales, and that the petitioners have
   "grossly mischaracterized and exaggerated this error."(330) Weyerhaeuser
   explains that the correct data needed to calculate inventory carrying
   costs was contained within the exhibits to its submissions, but a database
   coding error led to the ICCs being incorrectly applied to WBM's and the
   Trading Group's sales in the database. Weyerhaeuser contends that this
   error did not impact sales by BCC or CLB, only affected a small portion of
   quantity and value, and that the impact of the error is negligible.
   Furthermore, Weyerhaeuser argues that it fully explained at verification
   why the error occurred, as is reflected in the sales verification report.
   Weyerhaeuser also contends that since the data were provided previously as
   exhibits to its submissions, the data patch required to fix the error does
   not contain new factual information. Because the Department verified the
   corrected information, Weyerhaeuser argues that, for the final
   determination, the Department should use the corrected information and
   disregard the petitioners' argument for using facts available. 

Department's Position: We disagree with the petitioners' recommendation
that we apply adverse facts available in each area where Weyerhaeuser
failed to provide information that could be verified as accurate. Section
776(b) of the Act states:

   If the administering authority or the Commission (as the case may be)
   finds that an interested party has failed to cooperate by not acting to
   the best of its ability to comply with a request for information from the
   administering authority or the Commission, the administering authority or
   the Commission (as the case may be), in reaching the applicable
   determination under this title, may use an inference that is adverse to
   the interests of that party in selecting from among the facts otherwise
   available.

As a general matter, our verification confirmed the effort Weyerhaeuser
expended to report its data to the Department. The Department agrees with
Weyerhaeuser that the company generally complied with the Department's
requests for information and that the Department does not have a basis for
concluding that the company did not act to the best of its ability with
respect to any of the information at issue. Therefore, we have not applied
adverse facts available. We note that Weyerhaeuser lumber sales are made
by three separate business units, each of which functions independently.
One of those divisions, WBM, consists of a large number of CSCs scattered
throughout Canada and the United States, and the Trading Group. 

In compiling its databases, Weyerhaeuser's information technology
specialists were required to integrate a number of different accounting
systems, including two that are no longer in use. The information
technology specialists, who were not initially familiar with either the
accounting systems or the dumping law, had to develop programming language
to integrate all the systems and extract the large volume of data the
Department required. At verification, we traced any errors we found back
to the underlying cause to ensure that the problems were not systemic. In
many cases the errors traced back to a line or two of programming. We did
not find any systemic errors that led us to believe that Weyerhaeuser's
data were too unreliable to be used. 

Where possible, we requested that Weyerhaeuser provide corrections to the
errors discovered at verification, and used the corrected, verified data.
There are areas, however, where the company's responses were incorrect.
Where this proved to be the case, in accordance with section 776(a) of the
Act,(331) we were required to use facts available. Our use of neutral
facts available is issue specific (see below).

      With regard to Weyerhaeuser's misclassification of and failure to 
       report subject merchandise, we agree with the petitioners that 
       these U.S. sales should be included in the calculation of the 
       dumping margin, but do not agree that adverse facts available are
       appropriate. We agree with Weyerhaeuser that these unreported sales
       amount to an inconsequential portion of its overall sales. Moreover,
       the invoices for the sales coded NCOSR were of merchandise the 
       company does not normally sell. At verification, we confirmed 
       that Weyerhaeuser could not properly identify each product sold 
       without examining each paper invoice.(332) The large number of 
       invoices made it impracticable for Weyerhaeuser to examine each
       one individually. On this basis, we have excluded these sales from
       our analysis and assigned the weighted-average dumping margin 
       calculated for Weyerhaeuser's other U.S. sales. 

      Regarding U.S. warehouse-to-customer freight expenses for sales
       made from WBM's inventory, the Department agrees with the 
       petitioners that the expenses based on sales value result in 
       unreasonable amounts being reported. We note that this problem
       applies to WBM's Canadian sales as well as to its U.S. sales. 
       At verification, we confirmed that the weights taken from WBM's
       computer system, which were used as the basis of the weight-based
       freight allocation, were inaccurate. Weyerhaeuser itself pointed
       this out, stating that it was in the process of developing more
       accurate weights, but that during the POI the process was still
       on-going and, therefore, many of the weights were incorrect. 
       The inaccurate weights were the only product-specific shipment 
       quantity information available to Weyerhaeuser in electronic format. 

       We do not find that adverse facts available are justified in this
       circumstance. The verification established that a variety of 
       products were shipped that could not be converted to a single 
       unit of measurement and that freight contracts were not negotiated
       on a shipment-specific or quantity basis. For the final determination,
       we took the freight expenses of each of WBM's profit and loss centers
       as reported in the database using the value-based methodology, 
       totaled these expenses, and divided the total by the total sales
       of each centers on an MBF basis. We recognize that this does not
       resolve the problem of allocating freight between subject and non-
       subject merchandise, but we are using this information as neutral
       facts available, because we agree that Weyerhaeuser acted to the 
       best of its ability, although it was unable to provide the data 
       in the manner requested by the Department. 

      With regard to the out-bound freight ratio for WBM's Edmonton
       warehouse sales, the Department agrees with Weyerhaeuser. The
       Department's verifiers tied company sales records to the general
       ledger. Inasmuch as the correct information was verified, there
       is no reason to apply facts available. 

      In our examination of CLB's freight expenses, we note that there
       are two separate expenses reported by Weyerhaeuser at issue: 
       warehousing costs related to the JT reload, and an inter-company
       charge for loading and unloading. With regard to warehousing costs,
       Weyerhaeuser reported a transfer price between itself and the 
       Edmonton CSC responsible for running the reload. Because CLB and
       the Edmonton CSC are not affiliates, but rather divisions of the
       same company, Weyerhaeuser should have reported the actual cost 
       of providing these services, as was requested by the Department
       in both the first and the second supplemental questionnaires.(333)
       At verification, we confirmed that the transfer price for 
       warehousing services did exceed the cost of providing those
       services. Therefore, for the final determination, we have lowered
       the warehousing expenses at the JT reload by the ratio of transfer
       price to cost, as stated in the verification report.(334) 

       The second expense at issue is the inter-company charge paid 
       by CLB to the Edmonton CSC for loading and unloading, which 
       Weyerhaeuser stated in its second supplemental questionnaire
       had been included in the freight expense field.(335) We found
       at verification that this charge had not been incorporated 
       into the database. As with the warehousing expenses, Weyerhaeuser
       should have reported the actual cost related to providing
       these services. However, the only information currently on
       the record relates to the transfer price. Therefore, we have
       disallowed this adjustment in the home market, and in the U.S.
       market we have used the transfer price provided. 

      With regard to inventory carrying costs, we disagree with the
       petitioners. It is the Department's practice to correct minor
       errors found during the course of verification.(336) The 
       Department's sales verification team thoroughly examined the
       nature of the database coding errors, as well as the correct
       data already on the record in the form of exhibits to 
       Weyerhaeuser's previous submissions. Weyerhaeuser explained,
       and quantified, the nature of the error to the Department's
       satisfaction, as was stated in the verification report. See
       the February 4, 2002 Weyerhaeuser Verification Report at 
       pages 49-50; see also Exhibit F-5. Therefore, we will use the
       corrected, verified information for the final determination. 

      We found certain data errors on both of Weyerhaeuser's 
       December 14, 2001, volume and value-based allocation data
       sets. The data errors were in both the SAS and Excel versions.
       In order to use the files, it was necessary to create a clean
       data set before we calculated the margin. Specifically, we 
       found that certain COCONOs did not cross-foot to the TOTCOM 
       field. Moreover, we found that several of the processing fields
       were reported in the wrong columns. After comparing them to 
       earlier submissions, it became apparent that it would be 
       necessary to shift the data for purchased rough cut lumber
       and processing costs from one field to another. This error
       was not across all mills. We also note that the extended 
       TOTCOMs from the data files were reconcilable to the costs
       verified by the Department. Finally, it was necessary 
       manually weight-average the costs for certain COCONOs 
       because of amounts for inter-mill transfers. 

Comment 39: The petitioners received inadequate time to examine the
Weyerhaeuser sales verification report

The petitioners protest the seven-day deadline from the issuance of the
Department's verification report for the submission of their case brief as
an abuse of the Department's discretion.(337) The petitioners had pointed
out in January the necessity for an extension of time for filing the case
brief.(338) According to the petitioners, the Weyerhaeuser verification
report is unusually complex and the Department's failure to allow extra
time for the preparation of the petitioners' case brief arguably biases
the outcome of the proceeding in favor of Weyerhaeuser inasmuch as the
company knew what occurred at verification and was able to begin its case
brief well before the petitioners received the sales verification
report.(339) On this basis, the petitioners requested an additional five
days with which to further brief Weyerhaeuser issues.(340) That request
was denied in a telephone conversation between Department officials and
counsel for the petitioners. 

Weyerhaeuser did not comment on this issue.

Department's Position: The Department does not agree that the
investigation may have been biased because the petitioners could have used
more time for analyzing the Department's sales verification report for
Weyerhaeuser. This investigation is subject to a statutory deadline.
Although we agree with the petitioners that the Weyerhaeuser verification
was unusually complex, we were not able to grant additional briefing time
because the deadline for the final determination had already been fully
extended. The Department made every effort to work with the parties to
schedule verifications and stagger the release of our verification
reports. The Weyerhaeuser verification was the most complex of the
softwood lumber verifications and the Department had prepared and released
the verification report less than two weeks from the conclusion of the
verification to prevent a delay in the briefing schedule.

Comment 40: Warehousing expenses for WBM inventory sales

According to the petitioners, Weyerhaeuser reported warehousing expenses
associated with WBM-U.S.' inventory sales as indirect selling expenses in
the U.S. market while reporting WBM's(341) Canadian warehousing expenses
associated with its inventory sales as direct selling expenses. The
petitioners contend that Weyerhaeuser should, in fact, have done the
reverse. 

The petitioners argue that warehousing expenses associated with WBM-U.S.'
inventory sales should be treated as direct selling expenses in the U.S.
market because, "pursuant to 19 CFR 351.401(e), the 'original place of
shipment' is the actual production facility . . . and WBM-U.S. is a
separately incorporated, affiliated reseller."(342) The petitioners argue
that these warehousing expenses were incurred after the subject
merchandise left the original place of shipment and should thus be treated
as direct selling expenses. 

The petitioners contend that the warehousing expenses associated with
WBM's inventory sales should have been reported as indirect selling
expenses in the home market The petitioners point out that, unlike WBM-US,
WBM is not a separately incorporated entity, but a division of
Weyerhaeuser Company Ltd. Consequently, the petitioners argue that WBM's
warehousing expenses are associated with transferring product from one
division of the company to another. According to the petitioners, the
"original place of shipment" encompasses the single company, and therefore
WBM's warehousing expenses should be treated as indirect selling
expenses.(343) The petitioners point to the fact that the Department has
recognized pre-sale warehousing expenses as indirect expenses in two
previous cases.(344) 

Weyerhaeuser argues that it reported WBM's home market and U.S.
warehousing expenses as requested by the Department's Sections B and C
questionnaire, and the Department never requested that Weyerhaeuser report
its warehousing expenses differently. Weyerhaeuser observes that the
Department used the reported information for the preliminary
determination, and verified the accuracy of the warehousing expenses.(345)
Therefore, Weyerhaeuser contends that the Department should continue to
use the verified warehousing expenses reported for WBM for the final
determination. 

Weyerhaeuser also argues that the Department must reject the petitioners'
claim that WBM's home market warehousing expenses should be treated as
indirect selling expenses, and continue to treat WBM's warehousing
expenses as it did for the preliminary determination. Weyerhaeuser
contends that to treat its home market warehousing expenses as indirect
selling expenses would be "at odds with the statute," and that "the URAA
stated for the first time that movement expenses incurred after
merchandise leaves the place of production should be deducted from normal
value" and that "the SAA makes clear that warehousing expenses must be
included in this deduction."(346) Weyerhaeuser contends that the
petitioners have no legal support for their argument that WBM should be
considered an extension of Weyerhaeuser's production facilities, and
therefore, all of WBM's warehousing expenses should be considered "factory
warehousing."(347) Weyerhaeuser contends that the two cases cited by the
petitioners to support pre-sale warehousing expenses being treated as
indirect expenses are pre-URAA decisions, and 

that the cases have no bearing on post-URAA decisions. Furthermore,
Weyerhaeuser argues that WBM is a sales and distribution entity, not a
"factory warehouse."(348)

Department's Position: The petitioners are correct that sections
351.401(e) (1) and (2) of the Department's regulations state that the
original place of shipment is normally considered to be the production
facility, and that warehousing expenses incurred after the subject
merchandise or foreign like product leaves the original place of shipment
are characterized as movement expenses. 

However, we note that the Department's questionnaire, dated May 25, 2001,
instructed the company to report "only expenses incurred at a warehouse
not located at the distribution facility that sold the merchandise."(349)
Weyerhaeuser complied with the questionnaire's instructions for reporting
these expenses, and we did not ask Weyerhaeuser to revise its reporting at
any time in the investigation. We further note that the Department cannot
penalize the respondent for following the instructions given in the
questionnaire. 

In addition, we note that because WBM-U.S.' warehousing expenses were
incurred in the United States on CEP sales, they were deducted from the
starting price as part of indirect selling expenses incurred in the United
States. In addition, there is no possibility of the offset being skewed by
the inclusion of these movement expenses in indirect selling expenses
because no CEP or commission offset has been granted for Weyerhaeuser.
Therefore, for the final determination, we have continued to include
Weyerhaeuser's reported warehousing expenses associated with WBM-U.S.'
inventory sales in its indirect selling expenses in the U.S. market.

We note that home market warehousing expenses are correctly identified as
a movement expense, and we have not reclassified them as an indirect
selling expense for the final determination as requested by the
petitioners. The petitioners' citation to Cold-Rolled from Korea is
inapplicable in this case because Weyerhaeuser was able to demonstrate
that its warehousing expenses were directly related to the home market
sales under consideration.(350) We have continued to treat these expenses
as movement expenses in the final determination.

Comment 41: British Columbia Coastal's (BCC) warehousing expenses

The petitioners argue that throughout this proceeding, Weyerhaeuser
claimed it incurred no U.S. warehousing expenses for BCC during the POI.
However, the petitioners state that at verification, the Department was
notified that BCC's Somass mill sent merchandise to the Bridges reload,
and that the merchandise was typically destined for the United States. Due
to Weyerhaeuser's failure to report BCC's warehousing expenses incurred on
U.S. sales for merchandise shipped through the Bridges reload, the
petitioners argue that the Department should apply as adverse facts
available the highest reported U.S. warehousing expense to all of BCC's
U.S. sales through the Somass mill.

Weyerhaeuser contends that, at the outset of verification, it informed
the Department that it had not revised a table containing BCC's
warehousing expenses to reflect NLGA grades, thereby causing the Bridges
reload expenses to be omitted from the database. Therefore, Weyerhaeuser
argues that the Department should reject the petitioners' request to apply
adverse facts available and use the verified, corrected warehousing
expenses for the final determination. 

Department's Position: We disagree with the petitioners. Weyerhaeuser
presented the minor correction involving BCC's warehousing expenses at the
outset of verification as stated in the February 4, 2002, Sales
Verification Report at page 15. The Department verified that the only
warehousing expenses for BCC were incurred for the Bridges reload. We
thoroughly examined the corrected warehousing expense amounts, and tied
them to Weyerhaeuser's books and records. For the final determination, we
have used the corrected and verified warehousing expense amounts. 

Comment 42: Early payment discounts

The petitioners argue that the Department found at verification that for
a portion of U.S. and home market sales Weyerhaeuser failed to report
early payment discounts that Weyerhaeuser claimed it had granted.(351) The
petitioners argue that this error cannot be construed as minor in nature.
Because Weyerhaeuser failed to properly report early payment discounts,
the petitioners propose that the Department apply partial facts available
by using the highest reported early payment discount for each of the U.S.
sales involved, and deny any early payment discount for the home market
sales involved. 

Weyerhaeuser argues that it inadvertently omitted early payment discounts
from the U.S. and home market databases, but that "the impact of this
error is insignificant" and no adverse inferences are warranted.(352)
Weyerhaeuser contends that its efforts to convert information from the GFL
sales system, an accounting system that Weyerhaeuser no longer uses, to
the database submitted to the Department, were time consuming yet
successful. Weyerhaeuser contends that when this issue was discovered at
verification, the company concluded that the problem resulted from a
programming error that was limited to the GFL system. Weyerhaeuser argues
that the Department verified the data concerning the Trading Group's early
payment discounts, and there is no basis for applying adverse facts
available. 

Department's Position: We disagree with the petitioners. It is the
Department's practice to correct minor errors found during the course of
verification.(353) The Department's sales verification team thoroughly
examined the nature of the programming error, and confirmed that the error
was limited to the GFL system. Furthermore, Weyerhaeuser explained and
quantified the nature of the error to the Department's satisfaction, as
was stated in the verification report.(354) Therefore, we used the
corrected, verified information for the final determination. 

Comment 43: CLB's SLA tax amounts

Weyerhaeuser argues that the Department's verification report erroneously
states that CLB was unable to tie the allocations of the SLA export tax on
its worksheet to the general ledger.(355) Weyerhaeuser states that the
actual payments and refunds can be reconciled for each province shown on
page 4 of verification exhibit K-26. Exhibit 4 to Weyerhaeuser's case
brief accomplishes this reconciliation.

The petitioners did not comment on this issue.

Department's Position: We disagree with Weyerhaeuser's contention that
the sales verification report was erroneous. At verification, CLB was
unable to tie allocations of the SLA export tax from worksheets to the
underlying accounts. However, because Weyerhaeuser was able to utilize
information already on the record to complete its reconciliation, we have
not made any changes to its reported SLA tax.

Comment 44: CLB's quota-transfer sales

Weyerhaeuser reported that its home market sales for which SLA quota had
been transferred to a Weyerhaeuser customer would be removed from the home
market sales database because Weyerhaeuser could tie the sales to specific
invoices and thereby had knowledge that the product was destined to the
United States. The sales verification, however, disclosed that a "computer
programming error had caused all of CLB's sales made with quota transfers
to be left in the home market database."(356) Weyerhaeuser argues that the
Department should remove these sales from the home market database.

In addition to these misclassified U.S. sales discovered by the
Department at verification, the petitioners point out that the
Department's sales verification report also describes quota transfers that
the Department found had never been linked to individual invoices. 

The petitioners argue that the accurate reporting of U.S. sales at their
actual prices is at the heart of an antidumping investigation(357) and
these misreported U.S. sales were of a magnitude that cannot be
characterized as a "minor error." Moreover, both the misclassified sales
and the quota amount not linked to invoices were uncovered by the
Department at verification, indicating the pervasive unreliability of
Weyerhaeuser's reporting of quota sales by CLB. The petitioners argue that
the Department should apply, as adverse facts available, the highest
calculated margin for any CLB U.S. sale to the total unreported volume of
CLB quota sales.(358)

Department's Position: The Department does not agree that adverse facts
available are required for these quota sales. The misclassified sales,
which contain all of the relevant adjustments, can be moved from the home
market to the U.S. sales database. The volume of CLB quota sales not
linked to invoices can be assigned a neutral facts available dumping
margin. As neutral facts available, the Department chose to apply the
overall weighted dumping margin calculated for other U.S. sales.

Comment 45: Critical circumstances data for Monterra Lumber

Weyerhaeuser alleges that, contrary to the Department's sales
verification report, the critical circumstances data for Monterra Lumber
presented at verification did tie to source documents. Furthermore,
Weyerhaeuser contends that the correct critical circumstances data for the
months reviewed by the Department for Monterra are included in the sales
verification report.(359) 

The petitioners did not comment on this issue.

Department's Position: Contrary to Weyerhaeuser's assertion, the
Department's Sales Verification Report at pages 45 and 46 correctly states
that the submitted quantity and value for Monterra did not tie to the
company's books and records. We note that the information pertaining to
Monterra's critical circumstances data was incorrectly reported to the
Department in Weyerhaeuser's submissions of September 14 and November 7,
2001. However, the Department verified the corrected quantity and value of
shipments and these figures were supported by Weyerhaeuser's books and
records. The revised information is included as Exhibit F-19 of the
Department's verification report. 

Comment 46: Log/wood costs

In reporting costs to the Department, like other respondents,
Weyerhaeuser submitted two data sets, one using a value-based cost
allocation method and another using a volume-based cost allocation method.
However, Weyerhaeuser's situation differs somewhat from the other
respondents in that it was required to address the issue of how to
allocate costs between logs sold and logs retained for use as an input in
its sawmills. Another related issue for Weyerhaeuser was how to account
for the fact that each mill received logs of significantly different
quality and type, which it then processed into products that were often
specific to that mill. To address these issues, Weyerhaeuser relied on its
internal transfer prices recorded in its normal books and records,
adjusted to account for any profit or loss on the transfer. Weyerhaeuser's
internal transfer prices are based on the market prices specific to the
species and log quality.(360) Thus, a value-based cost was obtained by
backing out the profit or loss. 

For its volume-based cost allocation method, Weyerhaeuser first reported
the same overall total wood costs that it calculated under the value
method (i.e., a value method for the logs sold versus logs retained), but
then calculated an overall average cost per MBF, per species, not specific
to a sawmill. Weyerhaeuser later revised this method and calculated one
average cost per MBF, per species, regardless of whether the logs were
sold or retained. 

The petitioners argue that the Department should apply partial adverse
facts available to Weyerhaeuser's reported wood costs. They contend that
the Department cannot rely on either Weyerhaeuser's value-based allocation
method -- because it uses transfer prices, or Weyerhaeuser's volume-based
allocation method -- because it includes average costs across species and
values incorrectly the cost of logs sold. 

Concerning the value-based method, the petitioners argue that
Weyerhaeuser incorrectly relied on intra-company prices (adjusted for
average profit) to arrive at the reported wood costs for each sawmill. It
argues that the reported wood costs under this method are species-specific
only in that they result from a value-based allocation, and do not reflect
the actual costs incurred by the Timberlands Unit to acquire the wood
consumed by British Columbia Coastal (BCC) sawmills. Moreover, they argue
that the Department recognizes that the intra-company prices are
inherently unreliable in determining the cost of a major input (i.e., wood
costs for lumber) and thus disregards input prices between divisions of
the same legal entity in favor of actual costs. The petitioners argue that
companies may internally price an input without regard to the actual cost
of the input, but only with regard to other concerns, such as tax
consequences.(361) Further, the petitioners argue that using prices to
determine costs is always suspect in the context of an antidumping cost
investigation, which must determine whether price discrimination exists.
The petitioners argue that the Department should reject this inherently
unreliable and inaccurate method of reporting wood costs for the final
determination. 

Concerning Weyerhaeuser's volume-based method, the petitioners argue that
Weyerhaeuser incorrectly allocated costs between logs sold and logs
retained (for lumber production at its own mills). Specifically, the
petitioners argue that the cost of logs retained was undervalued in
Weyerhaeuser's most recent submissions and, therefore, the reported cost
of wood consumed in producing lumber was improperly reduced. As a result,
the petitioners argue that only the wood costs associated with logs
consumed at BCC's mills should be used in determining Weyerhaeuser's BCC's
wood costs. They argue that the record shows that there were differences
between the logs sold to third parties and the logs consumed by the BCC
sawmills and assert that the costs of the logs should reflect this fact. 

With regard to the petitioners' argument that Weyerhaeuser failed to
provide species-specific log costs for wood consumed by BCC sawmills, they
argue that Weyerhaeuser did not report species-specific wood costs as
instructed, but rather reported an average cost that includes the stumpage
costs of multiple species. The petitioners assert that as a result of this
methodology Weyerhaeuser has submitted costs that are inaccurate and
distortive. In the petitioners' view, Weyerhaeuser could have provided
species-specific stumpage costs. They note that when Weyerhaeuser cuts
timber from Crown Land in B.C., a licensed scaler records each piece, by
species and cubic meter. They further argue that the B.C. government
requires that the scaler maintain detailed scaling data, including a scale
return, which includes a piece segregation by species and grade quality,
copies of which must be provided to the company whose logs are scaled.
Thus, they claim, Weyerhaeuser either maintained or had access to the
underlying data (possibly electronically) regarding the volume, species
and quality of each log cut from every timber mark. Due to Weyerhaeuser's
inaccurate and distortive submitted wood cost data, the petitioners argue
that it is evident that a partial adverse inference is warranted in
selecting from the facts otherwise available to determine the actual
species-specific wood costs for the BCC mills. They point out that once
the Department has fairly requested the data it needs to compute
antidumping duties, it has discretion to determine whether the respondent
has complied with such requests as a prerequisite for facts
available.(362) Therefore, the petitioners argue that as partial adverse
facts available, the Department should use the single highest reported
wood cost at any BCC mill for all BCC wood costs. Alternatively, the
Department could employ the highest species-specific cost reported for
each BCC mill as the wood cost for all species at that BCC mill.

Weyerhaeuser contends that it provided information in the form required
for both a value-based and volume-based log cost allocation and that the
log cost information was verified for both methods. Weyerhaeuser argues
further that the Department's decision at the preliminary determination to
reject the value-based allocation at the sawmill stage necessitates the
rejection of a value-based wood cost allocation, in order to not distort
the margin analysis on BCC products. Weyerhaeuser argues that as a result
of the Department's preliminary determination methodology, the log costs
assigned to reportable merchandise became distorted, which in turn
distorted the margin analysis by creating fictitious home market profits
and losses. 

However, Weyerhaeuser concurs with the petitioners that the value-based
method should not be used for the final determination. It agrees with the
petitioners that intra-company prices should not be used to allocate BCC
Timberlands' log costs. Weyerhaeuser argues that in the normal course of
business, the BCC Timberlands simply divides its total harvesting cost by
the total quantity of logs it harvested. This allocation method, it
asserts, is the generally accepted method within the industry. Moreover,
it notes, parties to this case agree that, except for stumpage, log
harvesting costs do not vary to any meaningful extent across species.
Furthermore, Weyerhaeuser argues that the cost of harvesting logs is
incurred jointly for all products, regardless of species, grade, or
dimension. Thus, it concludes, a log sold should receive the same
proportion of costs as a log that is consumed internally.

Concerning the issue of species-specific costs that are alleged by the
petitioners to be lacking for the volume-based method, Weyerhaeuser argues
that the log grade percentages for any given species of timber under a
cutting authority are derived from the billing history record.
Weyerhaeuser argues that it has provided a stumpage cost that precisely
corresponds to the way in which the B.C. Forest Service bills
Weyerhaeuser. Thus, it argues that the reported costs are reasonable and
fairly represent the amount of stumpage the company pays for harvesting a
particular species. It notes that, in the normal course of business,
Weyerhaeuser does not track stumpage by species and that the Forest
Service does not provide, calculate, or bill Weyerhaeuser for stumpage on
a species-specific basis. 

In addition, it argues that for cost reporting purposes, Weyerhaeuser
relied on the Forest Service's methodology of calculating and billing
stumpage. It notes that a harvest of 100% of a particular species at a
particular BCC timber mark does not occur. Thus, a given coastal cutting
permit will inevitably yield multiple species. It argues that one can see
from the stumpage models, shown at cost verification exhibit 55, the
variations in stumpage rates that can be calculated are almost unlimited
due to the components of the Forest Service calculations (e.g., variations
in species harvested, the date harvested, the grades harvested, the change
in market prices used in the calculation, the difficulty and cost of
harvesting that cutting permit, the number of timber marks involved,
etc.). Finally, Weyerhaeuser notes that there is no evidence to indicate
that the reported species-specific stumpage is unreasonable.

Weyerhaeuser argues that the Timberlands, the Weyerhaeuser entity that
manages the forests, uses an average cost to determine the cost of sales
and financial statement inventory amounts reported in the audited
financial statements, prepared in accordance with GAAP. It argues that
while the log transfer to the mill is at a market price, the market price
of the mill's inventoried logs is adjusted back to the Timberlands moving
average-cost for financial statement purposes, prepared in accordance with
GAAP. It further argues that since the Timberlands and the mill are merely
integrated operating units of Weyerhaeuser Company Limited, the market
price-based transfer price is negated upon consolidation. Therefore, it
argues that it is reasonable and appropriate to use the cost of wood per
MBF rather than the market price-based transfer price. Finally,
Weyerhaeuser argues that departing from its cost accounting systems in
favor of the method used in its financial statements is consistent with
the Department's past practice. Weyerhaeuser objects to the petitioners'
request for facts available on BCC Timberlands' total log cost.
Weyerhaeuser argues that the Department's Cost Verification Report
identified a problem only with the allocation of species-specific stumpage
cost, not total log costs. More importantly, it asserts, the Department
found no discrepancies with the total cost of logs or the total quantity
harvested used to calculate per-unit log costs. Lastly, Weyerhaeuser
argues that if the Department does not accept this method, it should use
one of the individual factors that the Forest Service uses to calculate
stumpage, (e.g., the stumpage cost could be allocated based on volume
harvested or the market price of the logs harvested).

Department's Position: We disagree with both the petitioners and
Weyerhaeuser that the total wood costs, by species, under its value-based
log cost allocation are unreliable. Weyerhaeuser's value-based wood cost
allocation method is in accordance with its normal books and records, it
reasonably reflects the cost associated with the production and sale of
the merchandise, and it was successfully verified by the Department.
Section 773(f)(1)(A) of the Act states, "In general - costs shall normally
be calculated on the basis of the records of the exporter or producer of
the merchandise, if such records are kept in accordance with the generally
accepted accounting principles of the exporting country ... and reasonably
reflect the costs associated with the production and sale of the
merchandise."

Despite its assertions to the contrary, Weyerhaeuser's books and records
do account for logs using a value-based cost allocation method. That is,
the amount charged to a sawmill is based upon the market price of the log,
a price which it demonstrated to be reflective of the quality and species
of the log. The Department reviewed several of these records at
verification and included others as verification exhibits.(363) We
disagree with Weyerhaeuser that Uranium From France stands for the
proposition that the Department will reject the product-specific costs
recorded in a respondent's cost accounting system in favor of the broad
average aggregate inventory figures maintained in its financial accounting
records or on its balance sheet. Uranium From France addressed the issue
of a cost element that was valued at zero in the company's cost accounting
system while the actual amount paid for the item was included in the costs
on the financial statements. The Department routinely looks to the
respondent's cost accounting system as the starting point for reporting,
as long as that system does not result in distorted per-unit costs and can
be proven to capture all product costs by reconciling it to the audited
financial statements. 

Concerning species-specific costs, we have determined that it is
appropriate to use the wood costs by species from Weyerhaeuser's value-
based cost allocation method. In its methodology for the value-based
figures, Weyerhaeuser addressed the issue of species-specific costs by
applying the value-based method first to particular qualities of specific
species of logs, before allocating the sawmill specific costs to lumber
using a second value allocation. As a result, we have on the record the
species-specific costs for logs. We agree with Weyerhaeuser that its value-
based cost reporting methodology addresses this issue. 

The log costs recorded by the sawmills are representative of market
prices, and these costs flow through the sawmills' records in calculating
lumber costs. It is only upon consolidation that the elimination of the
profit or loss made by the Timberlands is removed. The petitioners'
argument that the Department always disregards input prices between
divisions is misplaced. The log transfer prices between divisions are
simply being used as a means to allocate the actual costs of the
Timberlands units, not to determine the wood cost to use for COP and CV
purposes. Moreover, the Department relies on transfer prices when they are
determined to be at arm's-length levels (i.e., at market prices and, for
major inputs, above cost), which is the case for Weyerhaeuser. 

The method used by Weyerhaeuser to adjust its log transfer prices was
reasonable and was verified and benchmarked the transfer price against
actual market prices by the Department verifiers.(364) While there may
have been alternative methods to accomplish the allocation, the method it
chose has the merit of relying on its actual books and records to the
greatest extent possible. Thus, we disagree with the petitioners that
partial adverse facts available is necessary and we have chosen to use the
wood costs reported by Weyerhaeuser in its value-based reporting method. 

Further, we disagree with the petitioners that the circularity argument
applies to logs which, in this case, are not subject merchandise.
Moreover, we are not allocating between two categories of products, one of
which has been alleged to be dumped, but within the same category, and
none of which is alleged to have been dumped. Furthermore, we agree with
Weyerhaeuser that there is no evidence on the record that indicates that
the relative values between log sorts and grades in the B.C. log market
are distorted. 

However, we agree with the petitioners that Weyerhaeuser's reported wood
costs, in its volume-based allocation method, do not accurately reflect
the costs incurred by Weyerhaeuser for individual species. Weyerhaeuser
reported wood costs in its volume-based allocation method using its
billings from the government. However, these costs are weighted-average
figures and do not reflect the actual species-specific stumpage fees paid
by Weyerhaeuser. While it is impossible for us to know specifically what
records Weyerhaeuser might have used to comply with the Department's
request for species-specific costs, it is clear from the record that
Weyerhaeuser has the underlying detail data on the stumpage fees paid for
different species and qualities of trees. We also note that the fact that
Weyerhaeuser had not reported species-specific wood cost did not arise
until found by the Department at verification. Finally, we note that other
respondents with B.C. operations took steps to disaggregate their stumpage
fees amongst species. 

Comment 47: Depletion expenses

The petitioners argue that the Department should revise Weyerhaeuser's
wood costs to account for depletion expenses. The petitioners assert that
Weyerhaeuser did not report any costs related to the depletion of its
privately-owned timberlands, stating that "Weyerhaeuser owns that land and
it only incurs harvesting costs. It does not have to pay any stumpage fees
on these logs." The petitioners argue that timber is a natural resource
for which GAAP ordinarily requires the recognition of a depletion expense.
They state that, "{i}n accounting, depletion is the allocation of the cost
of a natural resource against revenue as it is exploited and sold.
Examples of such resources are ore, oil {and} timber."(365) They argue
that the depletion expense relates to the reduction in the value of the
timberlands that occurs as a result of removing timber from the land. The
petitioners further argue that, for purposes of deriving the costs of
merchandise under consideration, the Department recognizes a depletion
expense even when it may not be required by the GAAP of the producer's
country.(366) Therefore, the Department must resort to "facts otherwise
available" (19 C.F.R. 351.308) in order to account for Weyerhaeuser's
missing depletion costs in the present case. The petitioners argue that
the Department should, as facts available, apply the depletion cost
Weyerhaeuser reported on interim financial statements. 

Weyerhaeuser rejects the petitioners' allegation that it excluded
depletion expense from its reported log costs. It argues that the
verification exhibits taken by the Department clearly show that
Weyerhaeuser included depletion as a component of its reported log costs.
Therefore, it asserts, the Department should ignore the petitioners'
allegation.

Department's Position: We agree with Weyerhaeuser that it properly
included the depletion costs as is shown in cost verification exhibits 30
and 40. These costs were tied to the reported costs and to the financial
accounting records. Thus, no adjustment for depletion expense is deemed
appropriate. 

Comment 48: G&A expenses

The petitioners argue that both the numerator (i.e., general and
administrative expenses) and the denominator (i.e., cost of goods sold) of
Weyerhaeuser's G&A expense rate calculation should be revised.
Weyerhaeuser argues that, for submission purposes, it correctly reported
the company-wide G&A expenses incurred at Weyerhaeuser Company Limited
(WCL), its Canadian subsidiary that produces the merchandise under
investigation in Canada. In addition, it argues that it correctly added a
proportionate amount of corporate-wide (headquarters) G&A expenses,
incurred by Weyerhaeuser Company, that was not otherwise reflected in
WCL's G&A expenses. Specifically, it argues that it isolated its U.S.
parent's headquarters costs (e.g., executive salaries, officer salaries,
corporate R&D, corporate information technology) that related to the
consolidated company as a whole and included the appropriate portion of
these expenses in the reported costs. The petitioners and Weyerhaeuser
disagree on the following specific G&A issues:

a. "Real Estate and Related Assets"

The petitioners argue that expenses related to "Real Estate and Related
Assets" should be in the numerator of the G&A ratio, rather than the
denominator. The petitioners argue that these expenses clearly are not
production costs, and they assert instead that they are identified as
"{r}eal estate held for sale," in notes to Weyerhaeuser's financial
statements.(367) These expenses, they assert, relate to the company as a
whole and, accordingly, should be included as G&A expenses in
Weyerhaeuser's G&A expense rate calculation.

In addition, the petitioners argue that even if the Department were to
agree with Weyerhaeuser that these expenses should not properly be
included in the company's G&A expenses, the Department still must remove
the real estate operation's cost of sales amount from Weyerhaeuser's
overall cost of sales (i.e., the denominator of the rate), as the
activities of the real estate operation certainly do not relate to actual
production of merchandise. The petitioners assert that Weyerhaeuser did
not include the "cost and operating expenses" associated with the
company's real estate operation in the company's overall cost of goods
sold in its financial statements. They argue that there is no evidence
that Weyerhaeuser is in the business of buying and selling real estate, or
that these real estate expenses relate to the manufacture of lumber. Thus,
such expenses are not a cost of production and cannot be properly
classified as part of the cost of goods sold.

Weyerhaeuser argues that the purpose of the Department's corporate-wide
G&A expense allocation methodology is to properly allocate those
headquarter G&A expenses that the parent incurs on behalf of its
subsidiaries. In this instance, it argues, Weyerhaeuser has identified and
allocated these expenses over the cost of sales of all operations that
benefit from the services. As such, it contends that the denominator used
to allocate these costs should be Weyerhaeuser's total cost of goods sold,
because all operations benefit from the services. Weyerhaeuser asserts
that it is not required to include its U.S. real estate operation's
general expenses in the calculation of headquarters G&A because these
expenses are not corporate expenses and do not relate to the consolidated
entity as a whole.(368) 

Weyerhaeuser argues that the petitioners' allegations appear to be based
on a misunderstanding of what Weyerhaeuser's corporate expenses (i.e.,
parent G&A and net financial expenses) represent and the mistaken
assumption that these costs should not be allocated to all Weyerhaeuser
subsidiaries that benefitted from the services provided.(369) Weyerhaeuser
claims that the petitioners' allegations are contrary to the Department's
precedent and the record evidence. In reporting these ratios, Weyerhaeuser
asserts that it has shown why it has included or excluded an item in its
calculations. It asserts that, moreover, most of the proposed adjustments
involve expenses that have already been captured in the reported costs or
relate to the expenses of other subsidiaries that have nothing to do with
the production of Canadian softwood lumber. Thus, it argues, adopting the
proposed adjustments would erroneously double count and overstate costs.

Department's Position: We agree with Weyerhaeuser that the cost of sales
associated with "real estate and related assets," which relate to a
grouping of Weyerhaeuser companies involved in real estate and homes,
should not be included in the numerator of the G&A expense calculation
(i.e., not included as a G&A expense related to lumber production and
sales). We note that on both the balance sheet and income statement,
Weyerhaeuser's consolidated financial statements present its forest
products companies separately from the real estate companies. Moreover,
Weyerhaeuser is correct that the purpose of the Department's corporate-
wide G&A expense allocation methodology is to properly allocate only those
headquarter G&A expenses that the parent incurs on behalf of its
subsidiaries. We believe it would be proper to only capture an appropriate
portion of the parent's G&A expense and the entire portion of WCL's G&A
expenses. Therefore, we have included the cost of sales of the real estate
companies in the denominator of headquarters' G&A rate and excluded the
corresponding selling, general and administrative expenses of the
companies involved in the real estate operations from the numerator of the
headquarters G&A rate. 

b. "Settlement of Claims" 

The petitioners argue that the expenses associated with the "Settlement
of Claims" should be included in the numerator of Weyerhaeuser's G&A
expense rate calculation. The petitioners argue that Weyerhaeuser treated
these expenses as a component of the cost of products sold, and not as G&A
expenses, in calculating the Weyerhaeuser-corporate G&A expense rate. The
petitioners assert that these expenses are not production costs, and were
not classified as a part of the cost of products sold in Weyerhaeuser's
financial statement.(370) These expenses, they assert, relate to the
company as a whole and accordingly should be included as G&A expenses in
Weyerhaeuser's G&A expense rate calculation

The petitioners disagree with Weyerhaeuser's claim that, because these
"settlement of litigation expenses" are not general in nature, but relate
instead to a class action for claims involving non-subject merchandise,
the expenses cannot be part of corporate G&A. The petitioners assert that
such expenses do not ever relate to actual production costs. The
petitioners argue that Weyerhaeuser included these costs in the
denominator of its parent's corporate overhead G&A rate. They argue that
the cost of goods sold should involve only those expenses related to
producing current production and should not include expenses incurred
after production to settle claims. Therefore, they argue, the Department
should not treat the settlement claims at issue as part of the cost of
goods sold. Rather, these expenses relate to the company as a whole and
should be included in G&A expenses.

Weyerhaeuser argues against the suggestion that it would be appropriate
to include claims made with respect to hardboard siding as a component of
the corporate-wide G&A expenses, rather than the manner in which it
treated them, as cost of sales. It claims that these expenses are not
general in nature and do not relate to the operations of the company as a
whole, but rather relate to a proposed class action settlement of the
hardboard siding claims. It notes that the settlement class consists of
all persons who own or owned structures in the United States on which the
company's hardboard siding has been installed. Thus, it contends, the
facts on the record clearly show that this cost is associated with a
specific product line of non-subject merchandise and that the expense does
not relate to the operations of the company as a whole. Therefore, it
should not be included as a component of corporate G&A.

Finally, Weyerhaeuser argues that its inclusion of this amount in cost of
sales is appropriate. It argues that most of the individual expenses shown
on the consolidated income statements result from reclassification of
costs that the subsidiaries account for as cost of sales, like R&D
discussed below. It claims that this cost was reclassified from cost of
sales to a separate line item for third party reporting purposes.
Weyerhaeuser also notes that this item should be included in the cost of
sales used to allocate company-wide and consolidated financial expenses.
By doing so, Weyerhaeuser claims, it has insured that its corporate-wide
G&A and consolidated financial expense ratios are on the same basis as the
amount to which they are applied.(371) 

Department's Position: We disagree with Weyerhaeuser. Settlement claims
are not a cost of goods sold, which is the base the Department typically
uses to allocate G&A expenses. Instead, these costs represent the
settlement of claims against products sold in prior years. We note that
these costs are included on the consolidated financial statements under
the forest products group companies. While the costs relate to non-subject
product, hardboard siding, the Department typically allocates business
charges of this nature over all products because they do not relate to an
production activity, but to the company as a whole. We recognize that one
time charges like this are ultimately a cost of doing business for the
company. Therefore, we have included them in the headquarters G&A, but
allocated them over all products in deriving the rate. 

c. "General Research and Development Expenses" 

The petitioners argue that the Department should include Weyerhaeuser's
"General Research and Development Expenses" in the G&A expenses. The
petitioners contend that Weyerhaeuser treated some of these expenses as a
component of the cost of products sold, and none as G&A expenses, in
calculating the Weyerhaeuser-corporate G&A expense rate. They assert that
the Department's practice is to treat general R&D as a G&A expense.(372)
The petitioners argue that even if part of the total R&D expenses are
already included in the reported costs, the remaining amount should be
included by the Department. Moreover, the petitioners argue that none of
the R&D expenses are listed under cost of products sold in Weyerhaeuser's
financial statements, but rather are listed  merely as "R&D" in its
financial statements. Therefore, they conclude, these costs appear to be
general R&D expenses (not specific R&D), which the Department should treat
as G&A expenses.

Weyerhaeuser argues that for cost calculation purposes, it relied on the
way in which the business unit captured its G&A costs. It contends that it
included the cost of R&D performed at the mill as a component of the cost
of manufacturing. Alternatively, it states, if a company treated part of
this expense as a general expense, Weyerhaeuser captured it as a component
of company-wide G&A expenses. Weyerhaeuser asserts that it treated any R&D
costs not captured by the business units as a component of corporate-wide
G&A expenses. Moreover, Weyerhaeuser objects to the suggestion that it may
be appropriate to include the R&D expenses excluded from the corporate
level in the calculation of the parent's G&A expenses. Weyerhaeuser argues
that the R&D amount that appears on the consolidated income statement
represents Weyerhaeuser's total R&D expense. It contends that it
reclassifies certain manufacturing costs that are included in its
subsidiaries' cost of sales figures to more informative cost groupings. It
argues that Weyerhaeuser shows these informative cost groupings on its
consolidated income statements and that the total R&D amount reported on
the consolidated income statements is one of these reclassified items.
Finally, Weyerhaeuser argues that if the Department includes this amount
as a component of parent G&A, it would erroneously double count costs. As
for treating part of the R&D as component of cost of sales, it contends it
included only the amount that had been included in the subsidiaries' cost
of manufacturing. It argues that it has already included most of these
costs as a component of its WCL and sawmill costs and that the only reason
they are shown in the parent's financial statements is because of
reclassifications made for financial statement presentation purposes.

Department's Position: We agree with Weyerhaeuser that we should not
include the R&D expenses that it excluded in our revised calculation of
the headquarters G&A expenses. The difficulty with calculating
Weyerhaeuser's headquarters G&A expenses from the consolidated financial
statements is that the Weyerhaeuser parent company does not publish a
separate unconsolidated financial statement and the consolidated financial
statements include all of the Weyerhaeuser companies. Each of these
companies brings with it to the consolidation its own R&D expenses. We
agree with Weyerhaeuser that it captured the R&D expenses at the
Weyerhaeuser Company Ltd. level and that the amounts excluded from the
headquarters G&A rate calculation includes these company specific R&D
costs already captured. Therefore, we have not made an adjustment for this
expense. 

d. "Taxes Other than Payroll and Income Taxes" 

The petitioners argue to reclassify "Taxes Other than Payroll and Income
Taxes" to G&A from cost of sales and product costs. The petitioners assert
that for both the Weyerhaeuser Company Limited and Weyerhaeuser-corporate
G&A expense calculations, Weyerhaeuser treated taxes, other than payroll
taxes and income taxes, as a component of the cost of products sold. It
argues that these taxes are not, however, classified as a component of the
cost of products sold on the companies' financial statements.(373) The
petitioners argue that non-income-based taxes are G&A expenses and have
been treated that way by the Department.(374) According to the
petitioners, the Department's practice is to treat Canadian property
taxes, business taxes, and capital taxes as G&A expense items as they are
periodic expenses, general in nature, and related to the company as a
whole.(375) 

Weyerhaeuser claims that it properly treated its tax expenses in the
calculation of its G&A expense ratios. As it argued before, Weyerhaeuser
asserts that it reclassifies certain manufacturing costs that are included
in its subsidiaries' cost of sales figures to more informative cost
groupings. Weyerhaeuser claims that it shows these informative cost
groupings on its consolidated income statement and that the total "taxes
other than payroll and income taxes" reported on the consolidated income
statements is one of these reclassified items. Weyerhaeuser contends that
at the business level (e.g., B.C. Coastal, Canadian Lumber Business),
these expenses are treated as either a manufacturing cost or a general
expense, depending on the nature of the expense. For cost calculation
purposes, Weyerhaeuser asserts that it relied on the way in which the
business unit captured these costs.

In addition, Weyerhaeuser argues that it included the taxes incurred at
the mill as a component of its cost of manufacturing, however, if a
company treated part of this expense as a general expense, then it would
be captured as a component of company-wide G&A expenses. It argues that
the record evidence supports this fact. In conclusion, Weyerhaeuser
contends that it would be incorrect to capture these costs at both the
company-wide producer level and at the consolidated parent level. 

Department's Position: We agree that we should not include the "taxes
other than payroll and income taxes" excluded by Weyerhaeuser from its
calculation of the headquarters G&A expenses. We agree that it treated
"taxes other than payroll and income taxes" consistently with how it
classifies these costs in each consolidated company's normal books and
records. As noted above, the difficulty with calculating Weyerhaeuser's
headquarters G&A expenses from the consolidated financial statements is
that Weyerhaeuser's parent does not publish an unconsolidated financial
statement and the consolidated financial statement includes all of the
Weyerhaeuser companies. Each of these companies brings with it to the
consolidation its own taxes and fees. We agree with Weyerhaeuser that it
captured these costs appropriately at the WCL level and the excluded
amount includes the costs already captured, plus the costs of other forest
products group companies. Therefore, we have not made an adjustment for
this expense. 


e. "Non-product Revenue and Expense" 

The petitioners argue for the inclusion of "Non-product Revenue and
Expense" in the G&A expense rate calculation. The petitioners assert that
for the WCL G&A expense calculation, Weyerhaeuser treated non-product
revenue differently than non-product expense. Specifically, Weyerhaeuser
offset G&A expenses by non-product revenue, but the non-product expense
was not included as a G&A expense. The non-product expense relates to the
company as a whole and should be included as a G&A expense.

Weyerhaeuser argues against the suggestion that WCL's "non-product
revenue and expense" amounts should be included as a component of company-
wide G&A. It asserts that it appropriately reported the applicable portion
of these costs. It claims that, consistent with the Department's
established practice, Weyerhaeuser excluded the item from both its
corporate and company-wide G&A expense calculations.(376) Weyerhaeuser
argues that if the Department were to include this as an expense at the
company-wide level, it would then have to make a corresponding offset to
Weyerhaeuser's corporate-wide G&A expenses. This amount would have to be
calculated by the Department because the amounts reported on
Weyerhaeuser's consolidated financial statements do not reflect the
impact. 

Weyerhaeuser argues it properly treated its royalty expenses in the
calculation of WCL's company-wide G&A expense ratio. It notes that it did
not treat royalty revenue different than royalty expense. It asserts that
Weyerhaeuser removed from G&A the royalty expenses that WCL paid to the
parent and excluded from the parent's G&A calculation the royalty revenue
it received from WCL. Weyerhaeuser argues that parent G&A was not offset
by the royalty income the parent received from its subsidiaries. It
contends that if the Department includes intra-company royalty expenses at
the company-wide level, it will have to make a corresponding adjustment to
Weyerhaeuser's parent G&A expenses in order to be consistent with its
established practice.(377) Thus, Weyerhaeuser argues that the other
operating expense amount included as a component of WCL's general expense
is an amount that is net of the royalty expense. It states that this
remaining balance consists of various miscellaneous items (e.g., rental
income, insurance proceeds, fines, legal expenses). Weyerhaeuser claims
that the Department normally includes these types of expenses as
components of G&A expense.(378)

Department's Position: While we agree that the non-product revenue and
expenses at issue should be included in the G&A rate calculation, we
disagree with Weyerhaeuser that it properly included these costs. The cost
verification exhibits show that the net expense for this item was included
in WCL's financial statements. In calculating its G&A expense rate for
WCL, however, it included only the non-product revenue and not the
expenses. Therefore, we have included the non-product expenses in the G&A
expense rate calculation for the final determination. 

Comment 49: Interest expense

The petitioners argue that the Department should revise several items
improperly reflected in Weyerhaeuser's interest expense rate calculation.
Specifically, the petitioners argue that costs associated with real
estate, the settlement of claims, general R&D costs, and taxes should be
removed from the cost of products sold (i.e., the denominator) in deriving
the net interest expense rate. The petitioners rely on their reasoning as
addressed above in connection with the calculation of the Weyerhaeuser-
corporate G&A expense rate. The petitioners argue that certain items that
Weyerhaeuser included as offsets to interest expense relate to returns on
long-term investments. The petitioners argue that these items should not
offset interest expenses. Only income related to short-term investments of
working capital qualify as an offset to interest expenses. 

Weyerhaeuser argues that it properly reported financial expenses by
excluding certain foreign exchange losses. Weyerhaeuser argues that at the
highest level of consolidation, the Department requires that the
respondent include a portion of its net foreign exchange transactions that
relate to borrowings denominated in foreign currencies. Weyerhaeuser
argues that during the fiscal year used to calculate the financial expense
ratio (i.e., 2000), the corporate entity had no borrowings denominated in
foreign currencies. See Weyerhaeuser's Consolidated Financial Statement
Footnotes 11 and 12 in Weyerhaeuser's Section A response at Exhibit A-15.
For these reasons, Weyerhaeuser claims that it has appropriately accounted
for its foreign exchange transactions and no adjustment is necessary.
Furthermore, Weyerhaeuser argues that it calculated the appropriate offset
to financial expense. It argues that the items that make up the offset
were explained at verification and it demonstrated that it appropriately
removed dividend income, rental income, fire and casualty reimbursements
and long-term interest income from its financial expense calculations.
Finally, as for the denominator used to allocate net financial expenses,
Weyerhaeuser argues that net financial expenses are allocated on the same
basis as the cost of manufacturing that the ratio is being applied to.
Weyerhaeuser notes that the Department should include in the denominator
of the interest expense rate calculation, the real estate operation's cost
of sales, the cost of settling claims, certain R&D included in COM, and
taxes included in COM. The inclusion of these amounts as components of
Weyerhaeuser's cost of sales follows the Department's established
practice. 

Department's Position: For reasons cited above, we agree with the
petitioners that the settlement of claims should be removed from the
denominator. However, the other items included by Weyerhaeuser in its
consolidated cost of sales appear appropriate, including the cost of sales
of the real estate companies. We disagree with the petitioners concerning
the adjustments for "offsets" to interest expense. These items have
already been removed by Weyerhaeuser. We agree with Weyerhaeuser that it
is correct to not offset interest expense by these items. Finally, we
agree with Weyerhaeuser that the Department should not include any further
adjustments for foreign exchange gains and losses, since during the fiscal
year used to calculate the financial expense ratio (i.e., 2000),
Weyerhaeuser had no foreign denominated borrowings. 

Scope Issues 

The scope and class or kind issues discussed below concern both the
antidumping and the countervailing duty investigations.

During the course of these investigations, the Department received
numerous scope-related requests. These requests could generally be
classified into one of two categories: (1) scope exclusion requests, and
(2) scope exclusion requests premised upon the theory that the various
products constitute separate classes or kinds of merchandise when analyzed
under the Diversified Products(379) criteria, and as such, are outside the
scope of the petition. In these instances, it is further argued that the
products should be excluded from the investigations because either the
petitions lack adequate description of these products, or the petitions
lacks the necessary elements to sustain an investigation on these
products.(380)

We consider there to be one class or kind of merchandise within the scope
of these investigations. Further, as stated in our preliminary
determination regarding the class or kind requests,(381) and contrary to
the assumptions behind the requests, a finding of multiple classes or
kinds does not automatically lead to the exclusion of a given product from
the scope of an investigation. Rather, if the Department finds that the
petition encompasses multiple classes or kinds of merchandise, the
Department must determine whether dumping or subsidization is occurring
with respect to each distinct class or kind of merchandise. If the
Department finds only one class or kind of merchandise, then it will
calculate a single dumping margin or subsidy rate with respect to that
class.(382)

When the Department receives a petition that meets the requirements of
the statute, it must initiate an investigation(383) and, if warranted by
the evidence, provide the relief requested.(384) The starting place for
determining the merchandise that is to be the subject of an investigation
is the petition itself.(385) The Department does, however, have the
authority to define or clarify the scope of an investigation(386) and must
exercise this authority "in a manner which reflects the intent of the
petition"(387) and the Department generally should not use its authority
to define the scope of an investigation in a manner that would thwart the
statutory mandate to provide the relief requested in the petition. As a
result, absent an "overarching reason to modify" the scope in the
petition, the Department accepts it.(388)

There are circumstances under which the Department has invoked its
authority to depart from the manner in which the petition treats the
merchandise subject to the investigation. For example, what is described
in the petition as a single class or kind of merchandise may, in fact,
encompass multiple classes or kinds of merchandise. In such cases, the
Department defines the separate classes or kinds covered by the
petition,(389) then conducts a separate investigation of each and, if the
decisions are affirmative, issues separate determinations for each class
or kind of merchandise.

The Department has also invoked its authority to define the scope of an
investigation when the class or kind of merchandise, as defined by the
petitioner, was not administrable. For example, in some cases, petitioners
will include parts and components in the class or kind of merchandise,
usually to avoid circumvention. In past cases, the Department amended the
scope of an investigation to exclude all parts and components, except the
primary component, because the others were so widely used that the scope
would capture parts and components used for non-subject merchandise, which
was not the petitioners' intent.(390)

In the instant softwood lumber investigations, as detailed in the March
12 Scope Memo, the Department received numerous requests for scope
exclusions and exclusion requests based on separate class or kind
treatment. The Department has responded to a number of these requests in
earlier preliminary determinations.(391) The Department received more than
200 scope related requests. These requests covered various types of
products including: (1) general lumber products (e.g., industrial grade
lumber, dimension lumber less than three feet in length, timbers, boards,
etc.); (2) carpentry construction products (e.g., door frame and sill
parts, door jacks, fascia and trim boards, flooring and siding, etc.); (3)
components and parts of finished products (e.g., furniture parts,
refrigerator stock, trellis stock, vegetable box components, etc.); and
(4) species specific (e.g., Western red cedar, Eastern white cedar,
Eastern white pine, yellow cedar, etc.). The Department received all the
information about these products and addressed many of these requests
before issuing its March 12, 2002, decision on scope and class or kind
treatment. In the March 12, 2002, scope memo, the Department conducted a
class or kind analysis with respect to those products that it determined
may demonstrate clear dividing lines and for which the parties provided
ample information. Thus, we analyzed Western red cedar, Eastern white
cedar, Eastern white pine, shop and better grade lumber, finger-jointed
flange stock, pallet stock, bed frame components and log cabin siding, and
a few other products. We were not persuaded to accept the various
arguments in favor of separate classes or kinds of merchandise. After
considering all of the information on the record, we found that all of
these products were within the scope and,(392) thus, we have continued to
treat softwood lumber products as a single class or kind of
merchandise.(393)

Moreover, with respect to scope exclusion requests, we reviewed the
description of each product provided by the parties and compared the
descriptions to the scope established at initiation, which was
subsequently amended and clarified in our preliminary determinations.
Based on this comparison, we determined whether a particular product was
covered by the scope of these investigations.(394) In some instances we
found products were within the scope and in others we found products to be
outside of the scope. For example, we determined that Western red cedar
(WRC), as classified under headings 4407.10.68 and 4407.10.69 of the
Harmonized Tariff Schedule of the United States (HTSUS), is part of the
scope as defined in the petition and our initiation notices, and as
amended in the preliminary determinations, because the petition
specifically described the products contained in these HTSUS
headings.(395) Conversely, by looking at "bed frame kits," we determined
that when certain circumstances were met, these products were outside of
the scope of these investigations.(396)

Comment 50: Due process

Among others, the Weyerhaeuser Company (Weyerhaeuser) and U.S. Red Cedar
Manufacturers Association (USRCMA) (collectively, the requesters), two
parties requesting separate class or kind treatment and scope exclusion
for Western red cedar, argue that the Department's issuance of its
preliminary decisions on class or kind so late in the investigations
violates statutory and regulatory procedural requirements and deprives the
requesters of their right to due process.(397) They assert that the
Department's March 12 Scope Memo violates the statutory requirement that a
preliminary determination be issued within 190 days of initiation.(398)
The requesters protest that the three days allowed to respond to the
Department's preliminary decision did not permit parties sufficient time
for a meaningful analysis of the Department's decision.

The requesters contend that Article 6.2 of the WTO Agreement on
Implementation of Article VI of GATT 1994 provides that in an antidumping
investigation the "parties shall have a full opportunity for the defense
of their interests." They note that Article 6.9 elaborates that the
"authorities shall, before a final determination is made, inform all
interested parties of the essential facts under consideration which form
the basis for the decision" and, according to the requesters, to issue a
preliminary determination.(399)

The requesters maintain that the Department has acted in an arbitrary and
capricious manner in failing to provide more time for parties' review of
its class or kind decision.(400) The requesters assert that, in violating
statutory and regulatory requirements concerning the timing of preliminary
determinations, the Department has deprived parties of their due process
rights under the Fifth Amendment of the Constitution. They cite a Federal
Circuit decision which stated that an importer is entitled to due process
whenever it faces a deprivation of property by the Federal
Government.(401) The requesters argue that the Department's actions
preclude due process in two ways. First, they contend that the compressed
briefing schedule did not provide sufficient time for the requesters to
address the Department's lengthy decision. Second, given the short time
remaining before the final, they argue that the Department will not have
time to consider the requesters arguments adequately.

The petitioners respond to these assertions with four arguments. First,
they contend that, while the timetable was somewhat compressed, the
parties had adequate time to brief these issues and have done so for
almost 11 months.(402) Second, they cite to their filings and respondents'
and other parties' submissions to demonstrate the depth and adequacy of
the submissions and information on the record pertaining to scope
issues.(403) Third, they note that the Department considered scope issues
and the information presented for several months, as illustrated by the
number of submissions by and meetings with the parties.(404) Fourth, they
infer that all of the evidence needed for the Department's decision was
previously submitted well in advance of the briefing and hearing schedule,
because there was no new information presented in the briefs or at the
hearing.(405) Therefore, the petitioners conclude that all parties were
given ample process.

Department's Position: We agree with the parties that these
investigations are among the most complex ever presented. The issues
pertaining to scope in these cases were burdensome in that the Department
received scope-related requests covering more than 50 products, ranging
from species-specific requests to engineered wood products, all of which
required our attention throughout the investigations.(406) We dealt with
scope issues throughout the investigations and during this process, the
Department considered information submitted by the parties and sought
advice from other experts such as U.S. Customs Import Specialists.(407)
And, while we agree with the requesters that the scope issues in these
investigations were unusually complex, we disagree that we were unable to
consider all submitted information. We evaluated and considered all
submitted information on these issues in a manner that allowed us to
comply with our statutory obligations.(409) Thus, we agree with the
petitioners that all parties were afforded due process and ample time to
respond to issues pertaining to scope.

The Department satisfied its statutory obligations with respect to
sections 774 and 782(g) of the Act. Section 774 of the Act provides that,
in an investigation, the Department ". . . shall . . . hold a hearing in
the course of an investigation upon the request of any party to the
investigation before making a final determination. . . ."(410) Section 774
further states that ". . . any hearing required or permitted under this
title shall be conducted after notice published in the Federal Register. .
. ."(411) Section 782(g) provides that the Department, before making a
final determination, ". . . shall cease collecting information and . . .
provide the parties with a final opportunity to comment on the information
obtained by the {Department} upon which the parties have not previously
had an opportunity to comment."(412) 

The Department provided notice of the scope hearing in two ways: First,
when it published its Federal Register notice of Preliminary
Determination; and second, when it distributed the verification reports
with a cover letter alerting parties to the separation of scope issues
from general issues.(413) Although the published Federal Register notices
of the Preliminary Determinations did not specifically mention the scope
hearing, the notices did alert parties that there would be a hearing, if
requested, on issues in the investigations.(414) Further, the antidumping
notice stated that, upon receipt of a valid request for a hearing, the
Department would provide notice to the parties and that the general
briefing schedule would be in direct correlation to the issuance of
verification reports.(415) This series of events alerted parties to the
fact that a hearing, if requested, would be forthcoming.

The Department, in a January 2, 2002, letter indicated that the record
would be closed and no new factual information would be accepted with
respect to scope and class or kind issues, hence all parties who submitted
new factual information on these issues, did so no later than 70 days
prior to the hearing.(416) When the Department distributed its antidumping
verification reports on January 30, 2002, as it stated in the preliminary
determination, it notified parties of the hearing and briefing schedule,
and also stated that scope issues would be handled separately.(417) The
effect of the January 30, 2002, letter was to put parties on notice that
the scope hearing would be after the hearing on the preliminary
determination and before the final. Based on the prior closure of the
record, there was a definitive period during which the parties would have
an opportunity to comment fully on the information presented and
participate meaningfully prior to the Department's issuance of its final
determination. After the AD and CVD hearings on general issues, the
Department issued its preliminary class or kind determination in the March
12 Scope Memo with a letter containing the briefing and hearing schedule
for the scope portion of the investigation, and the Department adhered to
this schedule. Therefore, by holding a hearing, providing notice to the
parties, and closing the record before the final determination and
allowing parties to comment meaningfully, the Department complied with its
statutory obligations.

Further, prior to issuing its final determinations, the Department
thoroughly considered and addressed all comments and information provided
by the parties with respect to these and other issues.(418) The
Department's preliminary scope decision is based on the record, including
facts and arguments submitted by all parties. Although the Department did
not provide a Diversified Products analysis for each of the requests
filed, because to do so would be too administratively burdensome, the
Department did consider all arguments and in its analysis indicated that
much of its analysis would be applicable to other products.(419) In many
instances, as discussed in the March 12 Scope Memo, the arguments and
rationale for addressing scope related comments for one product were the
same for dealing with others.(420) Moreover, contrary to assertions by
Weyerhaeuser, USRCMA, and others, we have not violated either the statute
or our regulations by issuing our preliminary decisions on scope issues,
including a determination of class or kind, close to the date of the final
determination. In the present cases, the Department gave parties adequate
notice, ample briefing period, and an opportunity to participate
meaningfully in the hearing.(421)

Comment 51: The Department has the Authority to Define the Scope of These
Investigations and Determine That Certain Products Are a Separate Class or
Kind

The Government of Canada, the Canadian Provinces and Territories and
Canadian industry associations ("Canada") argue that the Department has
"the inherent authority to define the scope of an ... investigation."(424)
Canada states that "(w)hile the description of the product in the petition
must be considered by the Department, the Department cannot abdicate all
responsibility to the petitioner to define the scope of the
petition."(425) Canada asserts that in particular the Department is
obligated to determine if merchandise included in the petition actually
constitutes one class or kind of merchandise.(426) It contends that the
Department has a legal obligation to limit the imposition of antidumping
duties to those products actually determined to be unfairly traded. Canada
state that the Department need not defer to the petitioners regarding the
definition of the scope and must determine whether certain species
constitute a different class or kind of merchandise and certain product
may be excluded.

Department's Position: The Department states it position on its authority
to define or clarify the scope of an investigation in the introduction of
this section and in the March 12 Scope Memo.(427) 


Comment 52: Class or Kind of Products

   A.  Western Red Cedar 

   Weyerhaeuser and USRCMA (jointly, the WRC requesters) argue that while no
   one characteristic of WRC may be conclusive under the class or kind
   factors, taking cumulatively all of the factors into account, the evidence
   overwhelmingly establishes that WRC is a separate class or kind of
   merchandise. The Government of Canada, Canadian Provinces and Territories
   and Canadian industry ("Canada") concur with this assertion. The WRC
   requesters reject the notion that all softwood lumber represents a
   continuum. They assert that the boundaries of the petitioners' continuum
   are drawn in a completely arbitrary fashion and suggest that if the logic
   of the continuum arguments is actually applied, one would have to include
   hardwood species in the scope of the investigations as well. They suggest
   that the March 12 Scope Memo in which we make our determinations regarding
   requests for separate class or kind treatment ignores much of the evidence
   on the record. The WRC requesters maintain that WRC as a species is unique
   and constitutes a distinct class or kind of merchandise. 

   The petitioners argue that the Department properly found that analysis of
   the Diversified Products criteria demonstrates that WRC is not a separate
   class or kind of merchandise distinct from other softwood lumber.

   WRC's physical characteristics set it apart from other species: The WRC
   requesters assert that a basket of characteristics distinguish WRC as a
   unique species. They insist that the Department ignored this basket of
   characteristics in making a determination that WRC fits within a continuum
   of softwood species. The WRC requesters take issue with the Department's
   finding on WRC and assert that the Department's decision contradicts the
   Department's recognition of the commercial significance of many of WRC's
   physical attributes. In this regard, they cite the Department's
   acknowledgment of both WRC's natural durability and low structural
   strength. They fault the Department's analysis of WRC's physical
   characteristics in general, alleging that the Department has considered
   particular attributes of WRC that other species might also possess without
   considering the sum of WRC attributes. The WRC requesters argue repeatedly
   that it is this combination of attributes that makes WRC unique as a
   species and that it is unfair to single out individual attributes that
   certain other species share with WRC.

   The WRC requesters consider the Department's statement that the natural
   resistance of WRC to decay is not enough to put WRC in a class by itself
   to be particularly egregious.(428) They note that the Department supports
   its conclusion by citing a recommendation of an independent expert that
   WRC be pressure treated for certain applications.(429) The WRC requesters
   suggest that the Department's use of this information is misleading since
   it only pertains to certain WRC products which are to be exposed to
   extreme conditions. They state that the same source states that untreated
   WRC in such applications simply has a reduced life span and alludes to the
   fact that pressure treatment of WRC is difficult and rare. In the same
   paragraph,(430) apparently referring to an earlier exchange of
   arguments,(431) the WRC requesters state that "{c}omparing the coatings
   occasionally applied to WRC by a do-it-yourselfer to a complex pressure
   treatment manufacturing process is a non sequitur."

   The WRC requesters list a number of unique WRC attributes which they say
   the Department has recognized.(432) They argue that while the Department
   acknowledges the commercial implications of these attributes, it fails to
   analyze them sufficiently. They argue that the Department's analysis is
   flawed for failing to consider such characteristics as dimensional
   stability, insulation properties, light weight and fragrance in sufficient
   detail. They suggest that the Department's comparison of WRC with yellow
   cedar reveals the weakness of the Department's analysis, noting that, when
   compared to WRC, yellow cedar has a different appearance, fragrance and
   texture when cut.

   The petitioners fault the logic and factual claims of the WRC requesters'
   physical characteristics position. They assert that the WRC requesters
   have simply described all the distinguishing features of one point of the
   continuum of softwood lumber species and claim that it is therefore a
   separate class or kind. The petitioners contend that by this logic any
   product or species on the softwood lumber spectrum could claim to be a
   separate class or kind of merchandise based on a combination of
   characteristics. They argue that the WRC requesters implicitly recognize
   the flaw in their logic when they claim that "WRC is unique and distinct
   from all other softwood species."(433) The petitioners assert that the WRC
   requesters are arguing "that WRC and only WRC is different."(434) They
   remark that the WRC requesters have never explained why only WRC is so
   different as to constitute a separate class or kind but all the other
   species remain in a single continuum. The petitioners contend that the WRC
   requesters' are also flawed on a factual basis. They argue that WRC
   physical characteristics do overlap with those of other species and are in
   some ways indistinguishable from other species.(435) 

   End-Use/Customer Expectations: The WRC requesters assert that the
   Department's findings in the March 12 Scope Memo on the end-uses of WRC
   are based on a number of generalizations that are completely unsupported
   and erroneous. As an example, they suggest that the Department erred in
   using decking as an example of an application where WRC is used for
   structural purposes. The WRC requesters contend that in decking, WRC is
   only used for deck boards and not for the joists that underpin the deck.
   The WRC requesters also maintain that the record shows that, in general,
   other softwoods are not substitutes for WRC in decking or other
   applications. Rather, they argue that the record shows that the main
   substitutes for WRC are composites, cement products and bricks.(436) 

   The WRC requesters contend that they never argued, as the Department
   suggests,(437) that non-structural items are outside the scope of the
   investigations, but have argued that since WRC is not generally used for
   structural and framing purposes, the lack of interchangeability is a
   factor that serves as a basis for a separate class or kind finding.

   The WRC requesters note the Department agrees with them that WRC is used
   predominantly in high-end applications. However, they argue that the
   Department is incorrect in opining that WRC is interchangeable with other
   high-end woods such as old-growth Sitka spruce, hemlock and Douglas
   fir.(438) The WRC requesters dismiss the Department's observation that
   "from a technical standpoint"(439) WRC could be substituted for other
   softwood products in structural applications, stating that the
   Department's decision must be grounded in reality, not the hypothetical.
   They assert that the Department has failed to provide support or take into
   account contrary information on the record when it concludes that the
   interchangeability of WRC with other high-end types of lumber anchors WRC
   firmly to a broader single class or kind of merchandise.(440)

   The WRC requesters criticize the Department's analysis of customer
   expectations in which the Department considers the possibility that a
   customer can build a deck from either treated Spruce-Pine-Fir or WRC.(441)
   They assert that the Department undercuts its own argument of
   interchangeability when it observes that customers will know that a WRC
   deck will be higher quality in terms of appearance and durability.(442)
   The WRC requesters maintain that the fact that customers are willing to
   pay twice as much for a WRC deck as for a pine deck clearly shows that
   they distinguish WRC from other softwoods.

   In the discussion of WRC's end-use as a distinguishing factor, the WRC
   requesters dismiss the Department's conclusion that there are other
   varieties of high-end lumber in the same price range dedicated to the same
   end-uses.(443)

   The petitioners assert that WRC is highly substitutable with other
   species and reject the WRC requesters claim that WRC is unique because it
   is ideal for particular specialty appearances. The petitioners reiterate
   that non-structural lumber is part of the scope. They also maintain that
   other species, such as redwood, Douglas fir, incense cedar overlap with
   WRC in end uses such as decking, fencing, shingles, and interior and
   exterior trim and fascia..(444) 

   The petitioners contend that customer expectations are similar to those
   of certain other products, including expectations regarding price, such
   that WRC cannot be distinguished as a separate class or kind on the basis
   of this criterion. They state that there is naturally competition based on
   price and performance all along the continuum of softwood lumber with
   overlapping uses.(445)

   Whether WRC is sold through distinct channels of distribution: The WRC
   requesters contend that the Department offers no support for its
   conclusion that other high-end lumber products are marketed through
   specialized channels similar to those which the WRC requesters describe
   for WRC. They maintain that the channels of distribution as described in
   earlier submissions are unique for WRC.(446) In addition they argue that
   WRC distributors store, handle and transport WRC differently than other
   softwood products.

   The petitioners maintain that the WRC requesters ignore ample evidence
   that many distributors and remanufacturers specialize in high-end products
   from many species in addition to WRC and that WRC is not unique simply
   because certain distributors and remanufacturers specialize in it.(447)
   They argue that evidence on the record shows that some distributors carry
   both WRC and other products.(448)

   Whether the manner in which WRC is advertised and displayed is unique:
   The WRC requesters argue that the Department's finding that other high-end
   lumber products are advertised in much the same manner as WRC is
   unsupported and erroneous. They state that while there is advertising of
   other species, there is nothing near the scope or magnitude devoted to
   WRC. They state that Weyerhaeuser, as the largest softwood lumber producer
   in the United States and North America, is well qualified to know about
   how WRC is marketed and sold. The WRC requesters acknowledge that
   Weyerhaeuser has a separate website for Douglas fir, but argue that this
   website is much less elaborate than their site for WRC. The WRC requesters
   also note that WRC has its own association, the Western Red Cedar Lumber
   Association which connects an extensive network of specialized WRC
   producers, manufacturers and distributors. They argue that contrary to the
   Department's conclusion that marketing WRC is similar to other high-end
   products, the record shows that Weyerhaeuser, the WRCLA and other
   specialized businesses have developed a broad range of WRC promotional
   materials in different media that are unlike anything developed for other
   softwood products.

   The petitioners dispute WRC requesters' claims that the method of
   marketing WRC products is unique and argue that other high-end products
   are marketed in the same manner. They assert that there is ample evidence
   on the record of this fact.(449) The petitioners reject the notion that
   the brand name and website that Weyerhaeuser devotes to WRC are so unique
   as to create a clear class or kind dividing line for WRC under this
   criterion. The petitioners observe that Weyerhaeuser maintains websites
   for other products as well. 

   Department's Position: For WRC and all of the other products discussed
   below, in deciding whether a product included in the scope of a proceeding
   falls within a separate class or kind of merchandise, the Department looks
   for clear dividing lines through the application of the five Diversified
   Products criteria which may distinguish the product in question from other
   products for which the petitioners have requested relief. In the case
   briefs submitted on class or kind in the instant investigations, many
   respondents and interested parties appear to discount the Department's
   analysis on this score. For each product or product group for which a
   party provided even minimal Diversified Products analysis, the Department
   generally examined each of the five Diversified Products criteria to the
   extent the information on the record permitted it do so, and considering
   the totality of the evidence in making its determination. 

   Everybody involved in the proceedings, including the petitioners, agrees
   that there are significant differences found among the wide range of
   products included in the scope of the investigations. As the March 12
   Scope Memo clearly demonstrates, we went to great lengths to identify and
   understand these differences for all of the products for which separate
   class or kind status was requested or suggested. Contrary to assertions
   that the Department based its class or kind finding only on selected
   submissions in the record,(450) we based our decision on a examination of
   a wide range of products included in the scope. It was on the basis of our
   comparison of the requested products with each other, and with other
   products covered by the scope, that we concluded that there was no basis
   to treat any single softwood species or product as a separate class or
   kind of merchandise. Although we found some unique physical
   characteristics and distinct end uses for most of the products for which
   separate class or treatment was requested, it became clear that these
   differences were not enough to make any individual product a separate
   class or kind of merchandise. Looking at all of the products requested, we
   noted a commonality among the very distinctions which each requesting
   party touted as the basis for separate class or kind treatment for their
   specific product. It also became apparent that other products in the
   softwood lumber spectrum for which we had not received requests also
   possessed distinctions that, pursuant to the rationale of class or kind
   requests we had received, would also be candidates for separate class or
   kind treatment. Given the diversity of products, even in the high-end
   sector of the lumber family, we found no clear dividing line by which to
   treat products as outside the class or kind of softwood lumber products.

   At the scope hearing, the representative of the Government of Quebec
   observed that there should probably be a single separate class or kind of
   merchandise for all high-end appearance grade softwood lumber.(451)
   Species such as Douglas fir provide both appearance grade lumber for
   speciality products and dimension lumber for basic construction, so
   species does not appear to provide a means of distinguishing such a class
   or kind. It also does not seem likely that we could administer any order
   on this basis. We have concluded that our current treatment of softwood
   lumber products as a single continuum of products within one class or kind
   is supported by the record and is reasonable. Paradoxically, it is as much
   the diversity of lumber production as the characteristics that all
   softwood lumber have in common that lead us to continue to treat all
   softwood lumber as a single class or kind of merchandise. Moreover, in all
   of the other investigations on softwood lumber products that the
   Department has conducted in the last twenty years, covers all softwood
   lumber, whether used in structural or other applications.

   Having made these general observations on the difficulty of separating
   individual lumber products out of the spectrum as separate classes or
   kinds of merchandise, we nevertheless had to validate our general
   conclusion with product-specific Diversified Products analysis of the
   softwood lumber products for which separate class or kind treatment was
   specifically requested. As we outlined in the summary of arguments,
   requesting parties have raised serious questions about the depth of our
   product-specific analysis for our preliminary decision. We have re-
   examined our product-specific class or kind analysis for all products
   which parties addressed in the case briefs. We summarize our review of our
   Diversified Products analysis below for Western red cedar, Eastern white
   cedar, Eastern white pine, selected shop or better lumber, flange stock
   and bedframe stock. We also consider class or kind arguments for railroad
   ties which we did not explain in detail our class or kind decision.

   Physical Characteristics: In our preliminary analysis, we noted a number
   of WRC's distinctive characteristics, including appearance, natural
   durability, fragrance, dimensional stability, thermal and sound insulation
   qualities, and light weight. In their case brief, the WRC requesters
   maintain that, given our recognition of these characteristics, only one
   conclusion was possible. We maintain that WRC's distinct physical
   characteristics, even when considered in combination, do not provide us
   with the clear dividing line necessary to consider WRC as a separate class
   or kind of merchandise. We found in our class or kind determination that,
   as important as these characteristics are to WRC in the market place, they
   are by no means unique to the species. The record we have concerning the
   other species-related class or kind requests (Eastern white pine, Eastern
   white cedar and shop and better made from four old-growth species) already
   provides ample evidence that there are other species covered by the scope
   that have similar distinct characteristics. The Department found that
   these other species possess similar distinct and commercially important
   characteristics such as attractive appearance (all named), light weight
   (EWC an EWP), natural durability (EWC and old growth shop and clear) and
   lower structural strength (EWP and EWC). By noting these similar
   characteristics we are not suggesting that these species are mirror images
   of WRC. Rather, we are simply indicating that the shared distinctions lead
   us to agree with petitioners that WRC is not so different from other
   softwood species in its physical characteristics that it cannot be linked
   on a continuum of softwood lumber products. If we add appearance grade
   lumber from all species and lumber milled from other cedar species to this
   analysis, the linkage of WRC to the continuum increases. We acknowledge,
   as the WRC requesters demonstrate with the example of yellow cedar's less-
   than-desirable fragrance and workability,(452) that none of the other
   species is a perfect match with WRC, but the same can be said in comparing
   the physical characteristics of these other species with each other. We
   thus agree with the petitioners that WRC's physical characteristics
   overlap with those of other species to one degree or another, linking WRC
   to other species and products covered in these investigations.

   End-use: In our Diversified Products analysis of WRC, we considered the
   ultimate use criterion at length. We stated that a fundamental
   underpinning of the WRC requesters' separate class or kind argument rested
   on the premise that WRC is not primarily used as dimension lumber for
   structural or framing purposes and that this argument presupposes that
   only lumber used in structural applications is covered in these
   investigations.(453) The WRC requesters have protested that they never
   said that non-structural items were outside of the scope, but assert that
   they simply sought to establish that the lack of interchangeability
   between structural lumber and non-structural WRC is a factor that serves
   as a basis for a separate class or kind finding. The Department agrees
   with WRC respondents that in general there is little actual substitution
   of WRC in structural applications where a less expensive SPF might better
   serve the purpose. We also agree with the WRC requesters that the
   hypothetical possibility that WRC could be used for structural purposes
   does not by itself negate the WRC requesters' argument. However, our
   initial conclusions concerning the ultimate use of WRC did not focus on
   its possible interchangeability with dimension lumber. It focused on
   common applications with other high-end lumber products. The record is
   replete with examples of other non-structural lumber that have
   applications in common with WRC. Weyerhaeuser provided in one of its own
   submissions a study that reported that WRC is used as shingles paneling,
   siding, poles and garden accessories such as pergolas, gazebos, fence
   panels and sheds.(454) The Government of Quebec reported that Eastern
   white cedar is also used as shingles, poles, fencing and outdoor
   furniture.(455) We therefore continue to conclude that there is a high
   degree of substitutability between WRC and other species used in high-end
   applications requiring good appearance and durability. If we were to apply
   the WRC requesters' arguments concerning the end-use criterion and WRC, it
   would be inconsistent on our part to ignore the other high-end products
   which would also satisfy the end-use criterion on this basis. We agree
   with petitioners that there is no clear dividing line between the
   multitude of lumber products with relatively unique end-uses and other
   softwood lumber products. 

   Ultimate Customers Expectations: We do not dispute the WRC requesters'
   position that customers that purchase WRC have a distinct set of
   expectations about the products made from the species. The expectations
   are based on WRC characteristics that make it particularly suitable for
   certain applications. However, our review of the end-uses of WRC
   reinforced our conclusion that there is overlap between WRC applications
   and those of other selected species such as Eastern white cedar and old
   growth Douglas fir. The WRC requesters present the argument that WRC's
   unique customer expectations are reflected in the fact that the customers
   are willing to pay a much higher price for WRC than other softwoods. We
   note however that high-end customers are willing to pay a higher price for
   other appearance grade products as well, such as Eastern white cedar and
   Eastern white pine. This fact was well documented in this proceeding not
   by the petitioners, but by respondents and interested parties seeking
   separate class or kind treatment for those species. 
   
   Channels of Trade: The WRC requesters argue that the channels of trade
   for WRC are normally quite distinct from that of dimension lumber.
   However, WRC requesters have not demonstrated that the WRC channels of
   trade are unique when compared to those of other appearance grade lumber
   where a high proportion of production is first sold to remanufacturers.
   The petitioners in an earlier submission provided examples of other
   species that were marketed through specialized channels.(456)
   
   Manner in Which Product is Advertised and Displayed: While the WRC
   requesters have indicated that Weyerhaeuser's promotional program for WRC
   is one of its bigger species-specific marketing efforts, we have also
   noted the fact that Weyerhaeuser has advertising programs for other high-
   end species.(457) We have learned from our review of the marketing of EWP
   and EWC that distributors of those species also use similar sorts of
   targeted marketing strategies which Weyerhaeuser and International Forest
   Products, Ltd. employ for WRC.(458) We therefore find that while the WRC
   marketing programs of the companies for which we have information are
   impressive in their scope, they are not so different from other high-end
   lumber promotional programs as to provide us with a clear dividing line
   for WRC with respect to this criterion.
   
   B. Eastern White Cedar
   
   The Government of Quebec (GOQ)(459) claims that Eastern White Cedar (EWC)
   is both a separate class or kind of merchandise and falls outside the
   scope of the investigations. The GOQ maintains that EWC is clearly not
   included in the scope of the petition which describes the subject
   merchandise as a commodity product used in structural applications.(460)
   This is in contrast to EWC which is not suitable for structural uses due
   to its physical characteristics, and does not compete with commodity
   lumber due to its high price and specialized nature.(461) However,
   according to the GOQ, if the Department finds the petition to be ambiguous
   with regard to EWC, then it is obliged to apply the Diversified Products
   criteria in order to determine if this species is a separate class or kind
   of merchandise from that covered in the petitions. In applying the
   Diversified Products criteria, the GOQ emphasizes that it is not necessary
   for the Department to determine that EWC is a completely unique product
   without any overlap in characteristics with other softwood species;
   rather, it states that it is adequate for the Department to merely find
   that EWC is sufficiently different from the other product types.(462)
   Based upon significant differences between EWC's and the subject
   merchandise's physical characteristics, primary uses and expectations of
   users, channels of trade, and the manners in which the products are
   advertised or displayed, the GOQ states that in the final class or kind
   determinations, the Department should reverse its earlier determination
   that EWC does not constitute a separate class or kind and, furthermore,
   exclude this species from the scope of the investigations. 
   
   The petitioners support the Department's finding that EWC is not a
   separate class or kind of merchandise in this proceeding. Although the
   petitioners acknowledge that there are some differences between EWC and
   other softwoods, they state that there is sufficient overlap in all five
   Diversified Products criteria so as to render a clear division between EWC
   and all of the other softwood lumber species impossible.(463) The
   petitioners counter the GOQ's claim that EWC is appearance-grade lumber,
   unsuitable for structural purposes and, therefore, a different class or
   kind and outside the scope of the investigations, by stating both that EWC
   can be, and is, used for construction/structural purposes and that
   appearance-grade lumber is within the scope of the investigations.(464)
   The petitioners maintain that EWC is a part of a single class or kind of
   the subject merchandise.
   
   Department's Position: The Department holds that EWC cannot be
   distinguished as a separate class or kind of softwood lumber in this
   investigation. The Department has based this decision on a careful and
   thorough evaluation of the entire case record concerning EWC as it relates
   to the Diversified Products criteria.(465) While EWC is a separate
   species, it substantially shares each of the Diversified Products criteria
   with other softwood lumber species, particularly the other cedar species,
   including WRC for which a separate class or kind determination was also
   requested. Therefore, the Department finds that it is unable to discern a
   clear division between EWC and the other species that constitute the
   subject merchandise.
   
   C. Eastern White Pine
   
   Tembec Inc., the Ontario Forest Industries Association, the Ontario
   Lumber Manufacturers Association, the Government of Canada, and the
   Government of Quebec (collectively, the requesters,(466) for purposes of
   this comment), argue that Eastern White Pine (EWP) is a separate class or
   kind of merchandise and that the Department's failure to come to the same
   conclusion in its class or kind determinations is due to its inadequate
   application of the five Diversified Products criteria. Tembec, OFIA, and
   OLMA allege that the Department's preliminary class or kind determinations
   did not comply with "the standard of review set forth in 10 U.S.C. 
   1516a" which states that the Department's determination must be supported
   by "substantial evidence on the record."(467) The requesters claim that
   the Department based its determination on a one-page National Arbor Day
   Foundation circular, placed on the record by the petitioners, which stated
   that EWP is in demand today for use as structural lumber, while ignoring
   the numerous declarations and other evidence to the contrary on the
   record.(468) Should the Department take the entire record of this case
   into consideration and carefully evaluate each Diversified Products
   criteria, which the requesters assert that it must do if it finds any
   ambiguity in the petitions or notices of initiation, then the Department
   cannot fail to determine that EWP is a distinct product. The requesters
   point to the different physical characteristics, uses, purchasers,
   advertising, channels of trade, and price movements of EWP compared to
   those of other products subject to these investigations. While the
   requesters proclaim that EWP is a distinct product according to all five
   of the Diversified Products criteria, they assert that it is possible for
   as few as two criteria to be met in order for the Department to determine
   that such merchandise constitutes a separate class or kind.(469)
   
   In addition, certain requesters claim that a determination of EWP as a
   separate class or kind of merchandise necessitates a further determination
   that this species is outside the scope of the investigations.(470) These
   requesters assert that the description of the merchandise provided in the
   petition, namely that of commodity softwood lumber with a high strength-to-
   weight ratio produced for structural uses, is not applicable to EWP, which
   they describe as appearance-grade lumber with a lower strength-to-weight
   ratio and unsuitable for structural purposes.(471) These requesters
   therefore ask that after having determined that EWP constitutes a separate
   class or kind of merchandise, the Department rule that it is also outside
   the scope of these investigations.
   
   The petitioners reiterate that separate class or kind determinations and
   scope exclusions are two distinct processes. With regard to scope, the
   petitioners state that the HTSUS headings cited in the petition clearly
   encompass all softwood species, including EWP.(472) With regard to whether
   or not EWP should be considered a separate class or kind of the subject
   merchandise, the petitioners contend that EWP exists along a continuum of
   softwood lumber species, sharing physical characteristics, uses, user
   expectations, channels of trade, and the manner in which it is advertised
   and displayed with other softwood lumber species, particularly the Western
   Pines.(473) To support this view, the petitioners refer to affidavits and
   a U.S. Forest Service publication which they have placed on the record. On
   the other hand, the petitioners claim, the requesters have relied on "only
   affidavits from their clients and other interested parties prepared for
   this litigation."(474) The petitioners support the Department's
   preliminary determination that EWP does not constitute a separate class or
   kind and ask that the Department affirm this finding in its final
   determination.
   
   Department's Position: The Department maintains its position that EWP is
   part of a single class or kind of merchandise in these investigations. The
   Department has reached this conclusion based on a careful and thorough
   evaluation of the entire case record concerning EWP as it relates to the
   Diversified Products criteria.(475) While the Department acknowledges that
   differences among softwood lumber species clearly exist, in the case of
   EWP, they do not rise to the level required for a separate class or kind
   determination. The Department finds that EWP shares its general physical
   characteristics with other pine species, particularly the Western Pines.
   Regarding its uses, the information on the record reveals that not only
   are EWP's primary uses as an appearance-grade lumber shared with other
   species including the Western Pines, WRC, and EWC, but it is also used in
   structural applications along with SPF lumber. User expectations for all
   appearance-grade lumber are quite similar as they are all based on the
   appearance of the lumber itself. Claims by the requesters that EWP is sold
   in unique and distinguishable channels cannot be substantiated with the
   information on the record. Although EWP may be marketed and displayed
   separately, so can several other species of softwood lumber such as WRC
   and EWC. 
   
   D. Shop and Better Grades of Sitka spruce, hemlock, balsam species,
   Douglas fir, and cedar 5" and thicker by 5" and wider with a mill price of
   $500 U.S. per thousand boarded feet or higher (Shop or better)
   
   Tebb points out that the Department has said that the interchangeability
   of shop or better type of lumber with regular dimension lumber is
   unlikely. In response to the Department's assertion, in the March 12 Scope
   Memo, that the different high-end products are comparable to one another
   and may compete with shop or better lumber, Tebb argues that there are
   differences which make it unique from other high-end lumber and dimension
   lumber. First, shop and better comes from large, old growth unlike other
   high-end lumber products. Further, claims Tebb, old-growth lumber is not
   harvested in the United States and, therefore, there is nothing within the
   United States with which to compare it. Also, Tebb argues that shop and
   better lumber is manufactured for superior appearance and visible
   applications in home construction and is far more expensive, and less
   strong, than dimension lumber, which is graded on strength rather than
   appearance and used in applications that will ultimately not be visible
   once construction is completed. 
   
   Tebb argues that the Department, by concluding shop or better lumber is
   part of a continuum of softwood lumber, was overly broad in its ruling.
   Tebb claims shop or better is sufficiently unique under the Diversified
   Products criteria to be given separate class or kind treatment and it
   analyzes the five criteria to support this claim. First, Tebb argues that
   shop and better lumber is manufactured for a desirable appearance and,
   therefore, its physical characteristics are unique from the other softwood
   lumbers in the investigations. Second, shop and better lumber ultimate
   customers have radically different expectations than softwood products
   customers do. Therefore, shop and better lumber is not interchangeable
   with dimension lumber. Third, the ultimate use of shop and better wood is
   for appearance products and musical instruments, which is entirely
   different from the uses of dimension lumber. Lastly, Tebb argues that shop
   and better lumber is distributed through different trade channels and
   advertised differently than dimension lumber. 
   
   The petitioners respond that shop and better lumber is part of the
   softwood lumber continuum. They disagree with Tebb's assertion that there
   is nothing to compare shop or better lumber to, stating instead that it,
   and other high-grade lumber, competes directly with high-grade Canadian
   lumber. Furthermore, the petitioners claim, remanufacturing of lumber does
   not remove it from the scope. Therefore the remanufacturing Tebb performs
   on the softwood lumber it imports to produce shop or better lumber should
   not remove it from the scope or make it a separate class or kind. In
   response to Tebb's Diversified Products criteria claims the petitioners
   argue that Tebb's comparison of shop and better to dimension lumber was
   too narrow. The petitioners emphasize that the investigations are not
   limited to dimension lumber, and to be a different class or kind, shop or
   better lumber must be found to be different from all softwood lumber,
   something which the petitioners argue has not occurred. The petitioners
   also argue that ultimate use of a product is not determinative of class or
   kind and concluded that shop or better should not be considered a separate
   class or kind of softwood lumber.
   
   Department's Position: The Department recognizes that Fred Tebb's shop
   and better lumber has distinct physical characteristics in terms of
   appearance, texture and dimensions, but does not find these
   characteristics significantly different to draw a clear diving line
   between the shop and better and other high-end lumber products. We note
   that both physical characteristics and price make shop and better an
   unlikely substitute for regular dimension lumber used for construction.
   However, as we argued in our discussion of WRC, EWC and EWP in our class
   or kind determination, the high-end nature of a product does not by itself
   make it a separate class or kind of merchandise as there are other high-
   end products in the scope of the investigations which may compete with the
   shop and better grades considered here. For the same reason, we are unable
   to distinguish shop and better's market channels and marketing methods to
   the extent that we would consider the shop and better products a separate
   class or kind of merchandise.
   
   E. Bed Frame Stock/Square-end Bed Frame Components
   
   Abitibi argues that square-end bed frame components, including end
   filters, L-braces, center support and similar products represent a
   distinct class or kind of merchandise due to their similarity to radius-
   end bed frame components and their differences from generic softwood
   lumber, in terms of Diversified Products criteria. The Government of
   Canada agrees with this assertion. If the Departments does find square-end
   bed frame components to represent a different class or kind of merchandise
   Abitibi argues, it should be excluded from the scope of the petition and
   hence the investigations. Furthermore, Abitibi asserts that these products
   should be excluded from the scope of the investigations due to their
   customization, value-added processing, dedicated use, and their lack of
   interchangeability with the type of lumber targeted by the petition.
   
   The petitioners respond by maintaining that their previously submitted
   letter shows that square-end bed frame components are "merely a collection
   of boards."(476) The petitioners support the Department's preliminary
   finding that it is difficult to distinguish square-end bed frame
   components from other softwood lumber defined by the scope of these
   investigations and, therefore, the components do not represent a different
   class or kind of merchandise. 
   
   Abitibi argues that, while the Department recognizes the Diversified
   Products criteria, as outlined in the March 12 Scope Memo, it only
   addresses the "physical characteristics," which is the first of five
   criteria, in its analysis. Further, Abitibi feels that there is no
   indication that meeting one of the five criteria is dispositive and
   therefore believes the Department must analyze and make a determination
   that is inclusive of all five Diversified Products criteria. 
   
   Abitibi points out that the exclusion of radius-end bed frame components
   from the scope of the petition is recognized by both the petitioners and
   the Department.(477) Abitibi then argues that the exclusion of radius-end
   bed frame components but not square-end bed frame components is logically
   inconsistent and cannot be reconciled for the following five reasons.
   First, Abitibi claims that it has demonstrated that box spring
   manufacturers generally require both radius-end and square-cut end frame
   components.(478) Second, both types of components are customized during
   manufacturing in such a way that it is difficult to distinguish one from
   the other. Third, Abitibi purchase agreements with manufacturers cover
   both types of components. Fourth, both radius-end and square-cut end frame
   components have the same end use, and purchasers expect both products to
   be ready to use, i.e., not requiring any significant additional cutting or
   processing. Finally, both types of components are targeted at mattress box
   spring manufacturers and sold through identical channels of distribution. 
   
   The petitioners respond that, due to radius cuts on both ends for
   facilitating bed-frame construction, radius-end bed frame components are
   different from square-end bed frame components, citing their previous
   submissions for support.
   
   A. Physical Characteristics: Abitibi argues that, despite the Department's
      findings to the contrary, the physical characteristics of square-end bed
      frame components are indeed noticeably different from other lumber
      products and quite unlike generic lumber. Further-processing customizes
      square-end bed frame components to customer-requested specifications for
      the size of bedframe for which the component is intended. Abitibi states
      that the process of turning softwood lumber into customer specified square-
      end bed frame components means Abitibi incurs additional production costs
      and, therefore, prices the components "significantly" higher than dressed
      and dried boards of standard dimensions. Additionally, Abitibi claims that
      the dimensions of square-end bed frame components easily distinguish them
      from standard dimension lumber. Specifically, Abitibi states that square-
      end bed frame components are either much smaller, shorter, of odd
      thickness, or uniquely shaped, as in the case of the "L-Brace."(479)
      Further, the fact that they are sold in boxes of 2,000 to 3,000, generally
      shipped with radius-end bed frame components, and sold as part of a
      complete set of bed-frame components makes them easily distinguishable
      according to Abitibi.(480) Abitibi proposes an end-use certificate could
      be attached to square-end bed frame components as is done with Maritime
      lumber from the CVD investigation of softwood lumber from Canada. 
   
   B. Expectations of Ultimate Purchasers and Ultimate Use: Abitibi argues
      that, unlike end users of softwood lumber, bed frame manufacturers use
      square-end bed frame components made expressly to meet their
      specifications. They also argue that these components are ultimately used
      only to manufacture box spring frames whereas softwood lumber has multiple
      uses. 
   
   C. Chanel of Trade and Advertising: Abitibi argues that square-end bed frame
      components are marketed distinctly from softwood lumber products and have
      a narrower channel of distribution than that of softwood lumber. Square-
      end bed frame components are not sold to retailers and are generally sold
      through annual contracts with fixed prices, whereas softwood lumber is
      sold to a variety of buyers, including retailers, is often sold in spot
      sales, is not sold under annually fixed contracts, and is subject to a
      high degree of price volatility.(481) 
   
   Department's Position: We agree with the petitioners that it is difficult
   to distinguish square-end bed frame components from other lumber, based on
   their physical characteristics, but as a review of our statement
   concerning bed frame stock will reveal, we also analyzed these products
   under the Diversified Products criteria involving end-use and market
   channels to the extent the information on the record permitted us to do
   so.(482) In fact, we stated that there were relatively stronger arguments
   for separate class or kind treatment under these criteria than under
   physical characteristics. However, we determined that the differences did
   not rise to those of a separate class or kind. Regarding customer
   expectations, we note that these are bound to the specific end use, as is
   the case with many other lumber specialty products. However, because there
   are a multitude of lumber speciality products that are defined by their
   end use, it is not practical to consider each one as a potential separate
   class or kind of merchandise. On the same basis, for purposes of
   determining a separate class or kind, we are unable to draw a clear line
   between bedframe components and other speciality lumber products when we
   consider the marketing channels and methods of advertising. 
   
   The difference between the square-end and radius end bedframe components
   is not a class or kind issue. We agree with the petitioners that both
   products are lumber. We granted a scope exclusion to the radius cut
   components because the petitioners agreed to this exclusion based on the
   fact that radius cut components are readily identifiable.
   
   F. Flange Stock
   
   Tembec claims that the Department must apply the five Diversified
   Products criteria to determine if flange stock is a separate class or kind
   of merchandise and cites multiple cases to support this claim.(483) Tembec
   stresses that, since the class or kind determination failed to consider
   these criteria the final determination must address all five criteria.
   Furthermore, Tembec asserts that because neither the petition nor the
   notice of initiation in this case specifically references flange stock
   and, since its characteristics are different from the softwood lumber
   described in the petition, a Diversified Products analysis must be done. 
   
   Tembec argues that flange stock has the following physical
   characteristics that render it unique from softwood lumber and, therefore
   a separate class or kind of merchandise: First, flange stock, unlike
   softwood lumber, is engineered to be straighter, denser, stronger, more
   stable, and contains fewer natural defects due to an optimization process
   during manufacturing. Second, it is produced in only two dimensions,
   mainly 2x3 and 2x4, unlike softwood lumber which is produced in a wide
   range of dimensions. Finally, flange stock is easily identified by its
   length, generally 48 and 52 foot lengths, whereas softwood lumber is
   limited by the length of the log from which it was cut. Canada concurs
   with Tembec that flange stock is a separate class or kind of merchandise.
   
   The petitioners respond that flangestock is not a separate class or kind
   of merchandise and incorporate, by reference, arguments for this position
   made in previous submissions. The engineering that flangestock undergoes
   does not alter it to the point that it would be considered non-subject
   merchandise but, rather, argue the petitioners, it is a product that may
   be used as input to make an engineered wood end-product. 
   
   Tembec argues that flange stock is engineered for highly specific uses
   that the scope of the investigations does not cover. Tembec also argues
   that neither the petitions nor the notices of initiation contain
   allegations or information necessary to impose countervailing or
   antidumping duties on flange stock as required under sections 701 and 731
   of the Act, respectively,(484) and that because flange stock is a separate
   class or kind of merchandise and not specifically mentioned by the
   petitions or the notices of initiation it must be excluded from the scope
   of the investigations.
   
   The petitioners respond that flange stock is not a separate class or kind
   and, therefore, cannot be excluded from the scope of the investigations on
   these grounds. Furthermore, the petitioners contend that it would continue
   to fit into the scope even if it were erroneously considered a different
   class or kind than generic softwood lumber. The petitioners claim that for
   Tembec(485) to assert that flange stock should be excluded on the grounds
   of class or kind is to assume the results it seeks. In response to
   Tembec's claim that because flange stock was not specifically named it
   must be excluded from the scope, the petitioners state that not only are
   they not required to name every product, but to do so would make it
   virtually impossible to define the scope of the investigations. 
   
   Department's Position: We have re-examined all the Diversified Products
   arguments presented by the respondents on flange stock. While the
   particular length of certain finger-jointed flange stock presents an
   unusual characteristic, we still regard flange stock as another lumber
   product in a broad field of lumber products with distinct characteristics
   and end-uses. We have not found any differences which satisfy any of the
   Diversified Products criteria to the extent that we would treat flange
   stock as a separate class or kind. The particular construction, strength
   rating, dimension and end-use of flanges cannot be the sole basis for
   their treatment as a separate class or kind. If this were the case, the
   number of separate classes or kinds that the Department would be obliged
   to create would be too numerous to administer. We note that Tembec has
   identified a distinct channel of trade (sales to I-beam producers) and
   manner of advertising (none, since it sells all of its flange stock to I-
   beam producers).(486) However, we again conclude that this channel of
   trade and this manner of advertising, distinct as they are from most of
   the dimension lumber, are not so distinct from those of other lumber
   speciality products.
   
   The Department agrees with petitioners that it was not necessary for
   every individual product included in the scope to be specifically named as
   long as the categories of products were clearly defined. In addition, all
   parties have been given a number of opportunities to inquire and to
   clarify what is included in the scope and the petitioners have made it
   clear throughout the proceeding that it was their intention to include
   flange stock in the scope.
   
   G. Used Railroad ties
   
   Anderson Wholesale requests that the Department consult with the U.S.
   Customs Service (Customs) in order to classify used railroad ties under
   HTSUS Heading 4401, a heading that falls outside the scope of the instant
   investigations. Anderson Wholesale states that it believes that used
   railroad ties are wood, waste, and scrap. 
   
   If railroad ties are not excluded from the scope, Anderson requests that
   they be treated as a separate class or kind of merchandise, based on its
   Diversified Products analysis. Anderson argues that the physical
   characteristics of used railroad ties are unique from other softwood
   lumber products. They support this argument by stating that such railroad
   ties are used and have damaged ends and sides, or are recycled. Anderson
   further argues that used railroad ties can be made from hardwood and
   softwood and that there is no way to distinguish such a difference. These
   ties, argues Anderson, are used for landscaping purposes, almost
   exclusively and give the consumer a different expectation than that of
   other softwood lumber. Finally, Anderson argues that used railroad ties
   cannot be further manufactured, and used ties are sold by auction - a
   different channel of trade than that of other softwood lumber products.
   
   The petitioners argue that used railroad ties do not pass under a good
   analysis of the Diversified Products criteria. Under the physical
   characteristics criterion, the petitioners argue that used railroad ties
   are not unique. They argue that even if used and damaged, such railroad
   ties are still lumber. For the expectation of the user and for end use,
   the petitioners state that purchasers of used railroad ties, usually for
   landscaping purposes, have the same expectations for used railroad ties as
   they would for other timbers used in landscaping. Last, the petitioners
   refute the argument that used railroad ties have different channels of
   trade, arguing that Anderson did not show how the channel of trade differs
   whatsoever from other landscaping timbers. The petitioners also note that,
   while Anderson did not make an argument about the marketing of used
   railroad ties, they are not advertised nor displayed any differently than
   other landscaping timbers.
   
   Department's Position: We agree with the petitioners. Under no provision
   of Diversified Products are used railroad ties unique enough for the
   Department to consider them a different class or kind of merchandise. Used
   railroad ties are similar enough in physical characteristics, even if
   damaged, used, or very old, to other softwood lumber products to consider
   them the same class or kind of merchandise. Even damaged, used, and old
   softwood lumber products continue to fall under the scope of our
   investigations. Under the criteria of customer expectations, end use,
   channel of trade, and marketing; both the record evidence and Anderson
   fail to demonstrate that used railroad ties are different from other
   landscaping timbers. Therefore, the Department cannot justify giving a
   separate class or kind status to such products. 
   
   We further find that all railroad ties classified by Customs in
   categories included in the scope remain in the scope of the
   investigations.(487) 
   
   Single Family Home Packages 
   
   
   In its July 9, 2001, submission Lindal Cedar Homes, Inc. (Lindal) argued
   that prefabricated home packages are outside the scope of the
   investigations because (1) they did not fit in the definition of the scope
   and (2) the prefabricated home packages satisfied the Diversified Products
   criteria.(488) Lindal stated that it made this request because it had been
   advised by the Customs Service that its home packages were to be
   classified based on the proper classification for each constituent element
   in the home package. Consequently, parts of the home packages were covered
   under HTSUS provisions included within the scope. Lindal argued in its
   submission of November 14, 2001, that the Department, and not U.S.
   Customs, makes scope decisions.(489) In a March 15, 2002, letter, the
   company noted that the petitioners had agreed that Lindal's home packages
   should be excluded and provided proposed exclusion language.(490)
   
   The petitioners argued the following in an earlier submission:
   
      The issue is not whether "prefabricated homes" are within the 
      scope; Petitioner has previously agreed that prefabricated 
      homes which are classified in HTSUS 9406, are not within the
      scope. The issue here is whether or not Lindal's "packages" 
      are prefabricated homes, i.e., whether they have been properly
      classified by Customs.(491) 
   
   In its March 15, 2002, case brief, the petitioners agreed that single
   family home packages meeting the criteria proposed by Lindal in its March
   15, 2002, letter should be excluded from the scope.(492) 
   
   Department's Position: We note that Lindal never requested that we
   consider prefabricated home packages as a separate class or kind of
   merchandise and provided only scant Diversified Products analysis. We
   agree with the petitioners that prefabricated homes which are classified
   in HTSUS 9406 are not included in the scope.
   
   Based on agreement of the petitioners, the Department is including in its
   final determination the exclusion language provided by Lindal for single
   family home packages. 
   
Comment 53: Other scope issues

   A. Bed-frame kits (also referred to as box-spring frame kits)
   
   The International Sleep Products Association (ISPA) and Sinclar
   Enterprises Ltd. (Sinclar) reiterate their request that the exclusion of
   wooden bed-frame kits, granted in the preliminary determinations in both
   the antidumping and countervailing duty cases, be expanded to cover both
   kits imported in bulk form and kits that are individually packaged.(493)
   They claim that the individual packaging of kits is economically
   impractical for the mattress industry because it involves increased
   shipping and manufacturing costs. Allowing kits to be imported in bulk,
   although on the same carrier, would be more economically efficient. Under
   ISPA's and Sinclar's proposal, if all components that arrive on a given
   truck entry are destined for the same customer, the U.S. Customs Service
   (Customs) would consider all the components presented together to
   determine whether the bed-frame kit exclusion is satisfied. Any other box
   spring frame components loaded on the same carrier that do not make up a
   full kit would not benefit from the exclusion.
   
   ISPA and Sinclar also contend that widening the exclusion to include bulk
   kits would not increase the likelihood of circumvention or impose added
   administrative burdens on Customs. They claim that slats, which are the
   components currently in the scope, have only limited alternative
   applications and that the likelihood of diversion is minimal because of
   the requirement that higher-value radius cut pieces also be included. They
   believe that it would be easier for Customs to verify compliance with bulk
   kits, rather than with individually packaged kits, because of the smaller
   number of bundles to inspect. As a safeguard against circumvention, ISPA
   and Sinclar ask that, in line with Customs' treatment of truss and pallet
   kits, Customs brings this product to the attention of the import
   specialist for review and verification. They also suggest that the bulk
   kit producer affix a label to inform downstream purchasers that the
   product is intended exclusively for consumption in the manufacture of box
   spring frames and that Customs require, as a condition for entry, that the
   destination for the qualified components is a bona fide box spring frame
   or mattress manufacturing plant.
   
   The petitioners respond that, as a preliminary matter, there is no such
   thing as a "kit" for assembly of another component.(494) Bed frames are
   simply components used in the manufacture of box springs; they are not
   finished products themselves and there is no HTSUS subheading for "bed
   frames." By excluding bed-frame kits from the scope, the Department has
   provided producers and importers of bed-frame components with an exception
   that would not necessarily be provided by normal Customs classification
   practice. As an exception to Customs' practice, this exclusion must be
   interpreted narrowly in order to serve a meaningful purpose. With regards
   to the requesters' arguments concerning the additional labor costs and the
   cost of possible breakage in transit, the petitioners point out that a
   fractional increase in the price of the components that represent only a
   small portion of the cost of the finished good would not have harmful
   effects on the mattress industry.
   
   Department's Position: The Department has weighed all of the
   considerations presented by ISPA and Sinclar. We understand that the
   requirement of individually wrapped kits imposes additional costs on the
   industry. However, the type of exclusion proposed by the industry presents
   some insurmountable problems. 
   
   While the idea of bulk kits seems, on its face, fairly straightforward,
   the proposal contains aspects that give us pause. For instance, the
   Department is concerned with the implication that shipments may include
   not only the components necessary for the kits but also additional
   components. While those components would obviously not be covered by the
   exclusion, this arrangement adds additional layers of complexity to the
   administration of the exclusion as proposed by the requesters.
   
   The requesters state that this exclusion would be easily administrable.
   Information on the record sharply contradicts the respondents. Customs has
   expressed concern with regard to the implementation of any exclusion
   concerning bed frame kits and has advised us of specific difficulties that
   it would encounter in the administration of the exclusion if agreed to by
   the petitioners and adopted by the Department.(495) Such difficulties are
   primarily related to a classification of bed-frame kits in the current
   tariff schedule. Unlike trusses and pallets, Customs does not recognize
   box frame kits unless they are imported with springs - as essential
   elements of a box spring "kit." Therefore, under a "kits" exception,
   Customs does not have a specific tariff number under which to classify the
   kit. Therefore, the Customs entry form would list only the individual
   components of the kits, and each component would be classified
   independently, under different HTSUS subheadings. This presents
   enforcement problems and data collection problems, since Customs'
   regulations on kits would not apply. To compound this enforcement problem,
   there would be no possibility for data collection on these types of kits.
   
   We are aware that these difficulties also affect individually wrapped
   kits. However, to the extent that the petitioners have stated that such
   kits are not in the scope of these proceedings, we have granted the
   exclusion. The petitioners have not agreed to the exclusion of bulk kits.
   Therefore, we will continue to exclude individually wrapped bed- frame
   kits as described in the AD Preliminary Determination. We are not granting
   the exclusion of bulk kits, as proposed by the requesters.
   
   B.  U.S. origin lumber further processed in Canada 
   
   The Government of Quebec (GOQ) argues that U.S.-origin lumber that is
   minimally processed in Quebec - through drying and planing - is not
   substantially transformed and is outside the scope of these investigations
   because the country of origin remains the United States.(496)
   
   The petitioners respond that a U.S. lumber producer may ship U.S. lumber
   to Canada for minor processing that does not alter the essential character
   of the product and bring back to the United States the finished product
   under subheading 9802 of the HTSUS, which provides for the return of U.S.
   merchandise with no duty or duty assessed only on the cost or value of the
   additional minor processing performed abroad.(498) However, the
   petitioners also recognize that U.S. lumber remanufactured in Canada may
   or may not be classifiable under 9802, depending on the type of processing
   that occurs abroad and whether or not commingling of U.S. lumber with
   Canadian lumber occurs during the processing. Accordingly, the petitioners
   agree that U.S. lumber undergoing only minor processing in Canada, as
   provided for under HTSUS 9802, and with proper documentation of the
   lumber's origin (as determined by Customs) is not subject to this
   investigation.
   
   Department's Position: Since the petitioners have agreed to this
   exclusion, the Department will amend the scope language accordingly. The
   following language will be added to the list of products excluded from the
   AD and the CVD investigations:
   
   U.S. lumber shipped to Canada for minor processing and imported into the
   United States is excluded from the scope of the CVD investigation 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 Customs' satisfaction that
   the lumber is of U. S. origin. 
   
   C. Pallet and Truss Kits and Stringers
   
   The petitioners state that the Department should clarify its language on
   scope exclusions, with regard to truss kits, pallet kits, and pallet
   stringers.(499)
   
   With regard to pallet and truss kits, the QLMA, Tembec, OFIA, and OLMA
   argue that the petitioners' assertion that such kits must be shipped with
   all kit components in the same railcar or truck is unadministrable. They
   also argue against the petitioners' request to impose size restrictions on
   stringers, on the grounds that there is no basis for such restrictions
   under the relevant HTSUS customs category.
   
   Department's Position: We agree with the QLMA, Tembec, OFIA, and OLMA
   that the scope exclusion language, as it is currently formulated in our
   scope exclusion list, is administrable for truss kits, pallet kits, and
   pallet stringers.(500)
   
   D.  Certain further manufactured products 
   
   In its March 15, 2002, brief, the QLMA requested scope clarification
   regarding the following softwood lumber products: 1) angle-cut for truss
   components; 2) I-joists for beams and their components; 3) drilled and
   notched lumber; 4) window, door and edge glued components; 5) wooden
   pallet components; 6) square-cut end bed-frame components; and 7) fence
   components. The QLMA claims that "none of these products {was} intended by
   the petitioner to be included in the investigations" and that "{i}nclusion
   of these products would render any resulting order unadministrable"
   because it would include nearly all further manufactured softwood lumber
   products.(501) 
   
   Department's Position: All of these products are within the scope except
   where they have already been specifically excluded as described in comment
   57 of this memorandum. As regards the questions raised by the QLMA
   concerning the angle-cut trusses and window and door components, see the
   Department's specific discussion regarding these products in comment 57.
   
Comment 54: Industry Support 

Several respondents and interested parties question the petitioners'
standing with respect to certain species of softwood lumber and certain
specialized products for which they have requested findings of separate
classes or kinds of merchandise.

Abitibi states that no valid petition was ever filed against imports of
square-end bed frame components because the petitioners do not purport to
represent the domestic producers of square-end bed frame components and
therefore lack the standing required for an investigation to be initiated
against this product.(502) 

Tembec questions whether the petitioners have standing with respect to
flange stock and whether the petition was "filed on behalf of the domestic
industry."(503) Tembec argues that the petitioners fail to meet the
definition of an interested party for flange stock because their members
do not engage in the manufacture, production, or wholesale in the United
States of a domestic like product of Canadian flange stock.(504) Tembec
concludes that, because flange stock represents a different class or kind
of merchandise, the lack of allegations in the petition specifically
against this product, combined with a lack of record evidence establishing
the petitioners as an interested party for the flange stock industry,
means that the petition does not meet the requirements. Hence,
investigations should not have been initiated against flange stock. 

Tembec, along with OLMA and OFIA, also contends that because EWP is a
separate class or kind of merchandise, in order for the petitions to be
valid with respect to this product, the petitioners must show that the
petitions were filed on behalf of the domestic EWP industry.(505) As the
petitions fail to make any mention of EWP, they were clearly not filed on
behalf of the domestic industry and, therefore, the investigations with
respect to EWP should be terminated.(506)

In response to all of these comments, the petitioners claim that there is
a single lumber industry with each of the above mentioned species or
products merely parts of the whole. With the required support of the
domestic lumber industry, the petitioners assert that they have standing
with respect to all of the subject merchandise. The petitioners point out
that according to

Congress, "standing cannot be revisited at this point in the
litigation."(507) 

Department's Position: The Department has determined that square-end bed
frame components, flange stock, and EWP are all within the scope of these
investigations and part of a single class or kind of merchandise.
Therefore, the question of industry support and standing based upon
requested findings of separate classes or kinds is moot. At the time of
initiation, the Department found that the margins and industry support
established by the petitions were adequate for the single class or kind of
softwood lumber products. The Department is prevented under the Act from
reconsidering its determination on industry support once an investigation
has been initiated.(508) Therefore, the Department maintains that the
petitioners have sufficient domestic industry support in these proceedings.


Comment 55: Whether including certain products within the softwood lumber
category is harmful to softwood lumber industry in the United States

Weyerhaeuser and USRCMA argue that the inclusion of WRC within the
softwood lumber category covered by the investigations will have damaging
consequences for WRC remanufacturers and sellers in the United States and
will harm the U.S. softwood lumber industry in general. They highlight two
consequences in particular if WRC continues to be grouped with other
softwood lumber as a single class or kind of merchandise in these
investigations and the Department imposes duties on this merchandise as a
result of the investigations. First, the requesters contend that duties on
WRC affect the availability of WRC in the United States to the extent that
the market will shift from WRC to non-wood substitutes such as composites
and plastics because wood substitutes for WRC do not exist. Second, they
predict that many of the remaining jobs in WRC remanufacturing, retail and
distribution channels will shift from the United States to Canada. They
note that well over a hundred companies have written to the Department
about these possible consequences, asking for an exclusion of WRC. The
requesters maintain that absent the Canadian supplies of WRC, these U.S.
companies would not be able to obtain enough raw material to survive. The
requesters assert that if the continuum theory were correct, these
companies would not care about the availability of Canadian WRC because
they could simply substitute another softwood as their input. 

Tebb argues that the inclusion of shop and better lumber in the scope of
the investigations actually injures United States remanufacturers because
shop and better lumber is not produced in the U.S. in "commercially
needed" quantities. Tebb argues that the Act is supposed to aid the U.S.
industries, not hurt them. Finally, Tebb states that besides having
adverse effects on U.S. remanufacturers, leaving shop and better lumber
within the scope of these investigations would give Canadian companies a
large price advantage, allowing those companies to steal away customers
from U.S. companies.

The petitioners dispute Tebb's suggestion that since its specific types
of shop or better lumber are not produced in the United State their import
does not injure the U.S. softwood lumber industry. They assert that high-
quality old growth lumber from Canada competes directly with other types
of softwood lumber produced in the United States. Second, the petitioners
assert that there is no evidence on the record that Tebb manufactures
products that have been excluded such as trusses, I-joist beams, complete
window frames, or furniture.

Department's Position: In making the above arguments concerning injury,
the requesters are confusing the functions of the Department of Commerce
and the ITC. When the Department considers the universe of softwood lumber
products included in the scope of the investigations, it is looking at
products produced in Canada and not at possible substitutes produced in
the United States. While we are well aware of the concerns of U.S.
businesses that have historically depended on supplies of certain softwood
products from Canada, the Department's function in its investigations is
to determine whether these imports, which are included in the scope
defined by the U.S. industry seeking relief, have been unfairly subsidized
or sold at less than fair value. Issues of which like products in the
United States are actually being injured by these imports are the domain
of the ITC injury investigation.

We are consequently not in a position to base either our scope exclusion
decision or our separate class or kind decision on a consideration of the
potential consequences that an imposition of duty on Canadian WRC and shop
and better would have on U.S. users of WRC and shop and better. The ITC
does, at times, consider the issue of limited availability of a given
product in its injury determinations.

As an additional consideration, we reiterate that even if the Department
were to find that WRC or shop and better constituted a separate class or
kind, our practice would require that these products remain subject to an
investigation, albeit a separate investigation. Even with a separate
investigation, duties could be imposed on WRC and shop and better if
dumping or countervailable subsidies were found. Therefore, establishing
WRC or shop and better as a separate class or kind of merchandise does not
necessarily resolve the issue of WRC and shop and better availability in
the United States as it is perceived by the requesters.

Also regarding the possibility that imposition of duties might
injuriously limit the U.S. supply of WRC and shop and better, we refer to
our discussion in the March 12 Scope Memo concerning the steps that the
Department has taken to insure that product coverage does not include
anything that the parties seeking relief did not intend to include.(509) 

Comment 56: Remanufactured Products

The Government of Canada (GOC), the Canadian Provinces and Territories,
and Canadian industry associations argue that the Department must exclude
remanufactured products from the scope of the investigations because it is
not sold at less than fair value in the U.S.(510) These parties further
argue that the petitioners' allegations encompassed only Eastern and
Western spruce pine fir dimensional lumber produced by sawmills, leaving
the export price, normal value, and dumping margins in the petition as
calculations that exclude remanufactured products. Last, these parties
state that sawmills and remanufacturers have such differences in size and
annual shipment value that the petitioners' calculations do not represent
remanufactured products.(511)

Department's Position: Under the Department's regulations 19 CFR
351.225(k), the Department must first consider "{t}he descriptions of the
merchandise contained in the petition, the initial investigation{s} and
the determinations of the Secretary . . . and the Commission."(512) Only
"{w}hen the above criteria are not dispositive, the {Department} will
further consider"(513) other information. We initiated the dumping
investigation based on our determination that the petition was adequate as
required by 19 CFR 351.202(b) and contained the factual information
describing the "subject merchandise that defines the requested scope of
the investigation."(514) The regulations further require that the
petition's description of subject merchandise contain the technical
characteristics and uses of the merchandise and U.S. tariff classification
number.(515) In these cases, we believe that the information contained in
the petitions describing all subject merchandise within the scope,
including characteristics and uses of the merchandise, whose descriptions
included remanufactured products, was sufficient to initiate these
investigations. Therefore, we maintain that remanufactured products,
falling under the scope of the investigations in the petitions, should
remain under the scope in these investigations. 

Comment 57: Scope exclusion requests

This comment addresses the remaining scope exclusion requests raised by
numerous interested parties in the course of these proceedings. In the
preliminary countervailing duty and antidumping determinations and in a
subsequent amended preliminary determination, we addressed a number of
scope exclusion requests and provided a number of scope
clarifications.(516) On March 12, 2002, we issued a memorandum
preliminarily determining that certain lumber products for which a class
or kind determination had been requested, do not constitute a separate
class or kind and are included under the scope of these
investigations.(517) This memorandum covers the requests for scope
clarifications or scope exclusions for products which were not included in
prior notices and decision memoranda. In many instances, we received
multiple requests for the exclusion of the same product. Our response
takes into account the information and arguments presented by all parties,
although not all submissions may be specifically cited.


Overview of Scope Requests 

We received several requests for exclusion of certain softwood lumber
products from the countervailing duty investigation based on the source of
the lumber or of the logs from which the lumber was manufactured:

1. Maritime lumber produced from Maritime logs, further worked in Quebec
   from Mobilier Rustique.

2. Lumber produced from timber harvested in First Nations territory from
   Dakwakada Forest Products.

3. Lumber produced from timber harvested in aboriginal lands of the nine
   First Nations of the Meadow Lake Tribal Council from Norsask Forest 
   Products Inc. 

4. Used railroad ties from Cando Contracting. 

5. Recycled timber from Last Mountain Timber. 

In addition, various interested parties requested that the products in
the following list be excluded from the scope of both the antidumping and
countervailing duty investigations. To facilitate the analysis, we have
grouped the products under the following three headings:

A. Generic lumber products 

1.  Hemlock clear cut stock from Bridgeside Higa Forest Ind., Ltd. 
2.  Industrial grade lumber from Bright Wood Corp. 
3.  Treated lumber from Weldwood of Canada, Inc. 
4.  Dimension lumber (less than 3' in length) from Weldwood of Canada, Inc. 
5.  Timbers from Weldwood of Canada, Inc. 
6.  Boards from Weldwood of Canada, Inc. 
7.  Turning blanks from Sundance Forest Industries 

B. Carpentry construction products

1.  2"x3" or 2"x4" lumber of finger-jointed Eastern Canadian black spruce -
    machine stress rating 1650 and above 2"x4" or 2"x6" lumber, machine 
    stress rating 1650 and above from Louisiana Pacific Corp. 
2.  Door frame and sill parts from Alberta Spruce Industries, Ltd. 
3.  Window sills and frames from Sundance Forest Industries 
4.  Door jacks from Weldwood of Canada, Ltd. 
5.  Triple corners from Weldwood of Canada, Ltd. 
6.  Finger-jointed blocks from Weldwood of Canada, Ltd. 
7.  Angle-cut lumber for trusses and sheds from Alliance Forest Products
    Ind., Ltd. 
8.  Garage door core from Bridgeside Higa Forest Ind., Ltd. 
9.  Laminating blanks from Sundance Forest Industries 
10. Edge glue blanks from Sundance Forest Industries 
11. Stair part turning squares from Cahan Wood Products 
12. 3/4" and 5/16" interior tongue and grooved wall claddings from Greenwood
    Forest Products, Ltd. 
13. Fascia and trim boards from Sundance Forest Industries 
14. Real Trim (TM) exterior molding and trim board system from Woodtone 
15. Flooring and Siding from Weldwood of Canada, Ltd. 
16. Guard rails from Weldwood of Canada, Ltd. 
17. Cedar shingle blocks from Shakertown 1992 Inc. 

C. Components/parts of finished products

1.  Furniture parts and furniture blanks from Alberta Spruce Industries, 
    Ltd. and Sundance Forest Industries
2.  Display fixtures parts from Alberta Spruce Industries, Ltd. 
3.  Recreational vehicle product from Bridgeside Higa Forest Ind., Ltd. 
4.  Refrigerator stock from Bridgeside Higa Forest Ind., Ltd. 
5.  Trellis stock from Bridgeside Higa Forest Ind., Ltd. 
6.  Fencing and fence parts from Sundance Forest Industries 
7.  Turb-o-Web Truss Webs from Tembec Inc. 
8.  Cable reel staves from Universal Reel & Recycling Inc. 
9.  Box parts, crating parts, and vegetable box components from Sundance
    Forest Industries and Weldwood of Canada, Ltd. 

Analysis

As a general principle, the Department has the authority to define or
clarify the scope of an investigation.(518) The Department may use this
authority to establish, when appropriate, separate classes or kinds of
merchandise under the scope, or to modify the scope, as defined by the
petitioner, when the resulting order would not be administrable. However,
the Department cannot use its authority in a manner that would thwart the
statutory mandate to provide the relief requested in the petition.
Therefore, absent an "overarching reason to modify" the scope in the
petition, the Department generally accepts the scope defined in the
petition.

Requests for exclusion from the scope of the countervailing duty
investigation based on input sourcing

   1.  Maritime lumber from Maritime logs, further processed in Quebec 

   Mobilier Rustique purchases softwood lumber from the Maritime Provinces
   and further processes it in Quebec by planing, cutting to length, cutting
   lengthwise and/or performing all processes.(519) Mobilier Rustique is
   asking the Department to determine that the resulting lumber products are
   excluded from the scope.
   
   The petitioners respond that once the lumber is processed in Quebec, it
   becomes a product of Quebec.(520) The petitioners point out that the
   extent of the processing that Mobilier Rustique performs appears to be
   quite extensive and that it is virtually impossible to determine whether a
   specific shipment of softwood lumber from a particular company consists
   only of lumber produced from Maritimes-origin wood, unless that company
   processes Maritimes-origin wood exclusively. Accordingly, the petitioners
   conclude that this request should be treated as a company exclusion
   request, not as a scope request.
   
   Department's Position: Once the lumber is processed in a non-Maritimes
   province, it becomes indistinguishable from lumber of other origin and may
   benefit from subsidies bestowed on the mill. To the extent that a company
   processing the Maritimes-origin lumber can demonstrate that it does not
   receive any other subsidies, the company can be excluded from the CVD
   investigation and the Maritimes-origin lumber processed in an unsubsidized
   mill outside the Maritime provinces is not subject to CVD duties.
   
   2.  Lumber produced from timber harvested in First Nations territory and 
   3.  Lumber produced from timber harvested in aboriginal lands of the nine
       First Nations of the Meadow Lake Tribal Council 
   
   Dakwakada Forest Products Inc. (Dakwakada) asks for the exclusion of
   products manufactured from white spruce harvested in First Nations
   territory, owned by the Champagne Aishihik First Nations in the Yukon
   Territory (which also owns Dakwakada).(521) No specific reason is provided
   for the request. The petitioners respond that spruce is covered in the
   scope and that softwood lumber products in the Yukon are no different from
   products from other regions.(522) Therefore, in the petitioners' view, the
   request should be denied.
   
   Norsask Forest Products Inc. and the Meadow Lake Tribal Council (MLTC) of
   Northern Saskatchewan (Norsask) request that softwood lumber products
   exported by NorSask be excluded from these investigations because no
   subsidy may be found to exist with respect to timber harvested from
   aboriginal lands, which supply 90 percent of the input to Norsask.(523)
   The petitioners assert that this lumber is covered by the scope, because
   the general physical requirements, end use, expectations of ultimate
   purchasers, channels of trade, and manner of advertisement are the same as
   those for softwood lumber products produced by non-First Nations
   Aboriginal communities.(524)
   
   Department's Position: In the CVD investigation, we have not examined the
   status of the aboriginal lands with respect to subsidization. Therefore,
   the Department has no basis to make a different finding with regard to
   potential subsidization affecting the products manufactured by Dakwakada
   and Norsask. Therefore, based on the information on the record, we are not
   granting the exclusion of products manufactured from timber harvested on
   aboriginal lands. 
   
   5. Used railroad ties
   
   6. Recycled Timber 
   
   Cando Contracting Ltd. (Cando) asks for the exclusion of railway ties
   which it reclaims from abandoned track throughout Canada.(525) The ties
   are then used in other short lines or sold to retail outlets for posts and
   landscape material. They are generally 30 to 60 years old. Last Mountain
   Timber asks for the exclusion of softwood timbers obtained from
   dismantling old grain elevators, barns, and warehouses.(526) The timbers
   are de-nailed and can be either sold as is or sawn into planks. The
   appearance of this wood is quite different from lumber, but it can be used
   in the same manner. Typically, this type of wood is used in higher-end
   home markets. It is currently classified under HTSUS 4407.10. The reason
   for the exclusion of both products would be neither of them can have
   benefitted from stumpage fees, the railroad ties because of their age, and
   the recycled timber because the source of the wood is not the Canadian
   public forest.
   
   The petitioners cite to a Customs ruling which classifies used railroad
   ties, if not further manufactured, under HTSUS 4407, as sawn pieces of
   lumber used principally as landscape timbers.(527) Given the
   classification, the petitioners claim that the product is covered under
   the scope.
   
   On the recycled wood, the petitioners claim that the fact that Customs
   classifies this type of wood under HTSUS 4407 puts the product squarely
   within the scope.(528) The petitioners also comment that appearance does
   not take recycled wood outside the scope of these investigations and that
   Canadian subsidies date from the beginning of the 20th Century. Therefore,
   it is not clear that the timber and the railway ties benefitted from them.
   
   Department's Position: The scope of these investigations includes all
   products classified under HTSUS 4407.1000. The petitioners do not agree to
   the exclusion of these products. There are no "overarching" reasons for
   the exclusion. Therefore, we are not granting these exclusions.
   
   
Requests for product exclusion from the scope of the AD and CVD 
investigations
   
A. Generic Lumber Products 
   
   1. Hemlock clear cut stock
   
   Bridgeside Higa Forest Limited Inc. (Bridgeside) describes this product
   as "a high grade product, species specific," and tight grained.(529) It
   may be either cut to length or in blocks for finger joining and it is used
   in the production of high-end doors. Bridgeside requests its exclusion
   from the scope on the following grounds: 1) the volume of imports is low;
   2) domestic supply is limited and fully utilized; 3) selling price is
   higher than the price of structural lumber; 4) because of its grading
   characteristics, is not interchangeable with the domestic stock.
   Bridgeside did not provide a Customs classification.
   
   The petitioners respond that the scope of the petitions covers all
   softwood lumber, regardless of the grade, size, or use of the lumber;
   hemlock is covered under HTSUS 4407.10.00.64.(530) The petitioners also
   state that significant quantities of hemlock are produced in the United
   States, although, in their view, it is not necessary for the U.S. industry
   to be able to supply 100 percent of the market demand for this product,
   since lumber products of different species and grades compete with each
   other.
   
   Department's Position: Hemlock (rough and other) is classified under
   4407.1000. The scope of these investigations includes all products
   classified under this subheading. The petitioners do not agree to the
   exclusion of this product. There are no "overarching" reasons for the
   exclusion. Therefore, we are not granting the exclusion. 
   
   2. Industrial grade lumber 
   3. Treated lumber 
   4. Dimension lumber (less than 3' in length) 
   
   Industrial grade lumber is defined as lumber graded as shop or molding-
   grade and used by remanufacturers in the production of moldings, millwork,
   doors, door frames and door components, window components, staircase
   components, furniture components, and interior and exterior trim. The
   Bright Wood Corporation (BWC), the requester, states that because of
   physical differences, industrial lumber cannot be substituted for
   dimension, structural, and framing grade lumber.(531) BWC asks for this
   exclusion for the following reasons: 1) the volume of imports is very
   small; 2) there is limited domestic availability;(532) 3) prices are
   higher than those of structural and framing products; 4) it is the raw
   material used to produce many of BWC's products, which are exempted from
   the investigations; a tariff on industrial lumber favors BWC's Canadian
   competitors. 
   
   The exclusion of treated lumber and of dimension lumber was requested by
   Weldwood Canada Inc. (Weldwood).(533) Weldwood did not provide a physical
   description of the products. With regard to treated lumber, Weldwood only
   quoted a sentence from a letter from the petitioners stating that treated
   lumber is significantly different from untreated lumber. With regard to
   dimension lumber, the only physical characteristic provided by Weldwood is
   the 3-foot maximum length. The reason provided in support of these
   requests is that these products are highly specialized and that it
   constitutes trivial export volumes.
   
   The petitioners respond that treated lumber is covered under HTSUS 4407
   and that dimension lumber in lengths of 3' or less is still dimension
   lumber, which is also expressly included in the scope.(534) The
   petitioners claim that the Department cannot exclude a product based on
   length limitations. The petitioners also clarify that the letter cited by
   Weldwood was related to reporting of sales and cost information and not
   scope coverage.
   
   Department's Position: The petitioners have repeatedly stated that grade
   and price are not factors in determining whether or not a specific product
   is covered under the scope. Furthermore, treated lumber is classified
   under HTSUS 4407.1000, and dimension lumber, regardless of length, is also
   in the scope. The petitioners do not agree to the exclusion of these
   products. There are no "overarching" reasons for any of these exclusions.
   Therefore, we are not granting these exclusions.
   
   5. Timbers 
   6. Boards 
   
   Weldwood describes timbers as "lumber pieces that are at least 5" in
   their smallest dimension, also classified as beams, stringers, girders,
   etc."(535) Boards are described as lumber that is 1" in nominal thickness
   or less. No support for these requests is provided, except for a generic
   statement that this is a specialized product and import volumes are
   minimal.
   
   The petitioners state that timbers are simply thicker pieces of softwood
   lumber.(536) Both timbers and boards, 1" or less nominal thickness but
   greater than 6 mm in thickness, are classified under heading HTSUS 4407.
   Both products are included in the scope.
   
   Department's Position: The petitioners state that this product is
   classified under HTSUS 4407.1000 (the requester provided no tariff
   classification). The scope of these investigations includes all products
   classified under HTSUS 4407.1000. The petitioners do not agree to the
   exclusion of this product. There are no "overarching" reasons for the
   exclusion. Therefore, we are not granting the exclusion. 
      
   7. Turning blanks 
   
   Sundance Forest Industries Ltd. (Sundance) requests that turning blanks,
   classified under HTSUS 4407, be excluded from the scope of these
   investigations.(537) Sundance manufactures these products in "varying
   degrees" of finished state and requests that the Department exclude all
   rough, semi-finished and finished products. The petitioners point out that
   this product is not adequately described for the Department to make a
   determination.(538) Based on the information on the record, the
   petitioners assert that this product is a piece of softwood lumber that
   may be turned. According to the petitioners, "turning blanks," are clearly
   within the scope of these investigations.
   
   Department's Position: The scope of these investigations includes all
   products classified under this HTS subheading. The petitioners do not
   agree to the exclusion of this product. There are no "overarching" reasons
   for the exclusion. Therefore, we are not granting the exclusion. 
   
B. Carpentry construction products
   
   1. 2"x3" or 2"x4" lumber of finger-jointed Eastern Canadian black 
      spruce - machine stress rating 1650 and above and 2"x4" or 2"x6"
      lumber, machine stress rating 1650 and above 
   
   Louisiana Pacific Corp. (Louisiana Pacific) imports these products (two
   types of flange stock) to manufacture structural I-joists.(539) The reason
   for requesting the exclusion is that there are no domestic manufacturers
   of the first product and only limited domestic availability of the second. 
   
   The petitioners respond that these products appear to be only a
   particular size of finger jointed and machine-stress-rated lumber, which
   is included in the scope.(540) They also point out that supply shortage is
   not a basis for exclusion: There is no statutory language requiring the
   Department to consider domestic availability when ruling on a scope
   exclusion request, nor is it necessary that domestic producers be able to
   meet 100 percent of the demand for a particular product in order to obtain
   a remedy for unfair trade. Furthermore, the requesters failed to
   demonstrate that domestic producers cannot provide these products and that
   domestic substitutes are inadequate or unavailable. The petitioners claim
   that the number of U.S. producers is higher than the one cited by the
   requester, that if the market permitted it, MSR capacity could be added,
   and that some substitutability may be possible with high-strength domestic
   products, such as Douglas fir and Southern yellow pine.
   
   Department's Position: The Department finds that finger-jointed flange
   stock is in the scope and does not constitute a separate class or kind
   with respect to all other softwood lumber products.(541) The petitioners
   do not agree to the exclusion of finger-jointed flange stock from the
   scope. This requester did not present any "overarching" reason to consider
   its exclusion from the scope. Therefore, we are not granting this
   exclusion.
   
   2. Door frame and sill parts 
   3. Window sills and frames 
   
   Alberta Spruce Industries, Ltd. (Alberta) and Sundance request that door
   sills and frames be excluded from the scope of these investigations.(542)
   Both companies claim that these products are classified under HTS
   4418.20.80.60. Alberta clarifies that the company supplies ready-to-
   assemble frame parts in specified length ratios to produce complete
   frames. These frames are then assembled on site with the use of metal
   connector hardware. Alberta also supplies wood door sill cores that are
   ready to receive a plastic or aluminum extruded sill cap. Sundance does
   not provide a physical description of this product.
   
   Additionally, Sundance requests that window sills and frames, also
   classified under HTS 4418.20, be excluded from the scope.(543) With
   regards to both products, Sundance states the it produces these products
   in "varying degrees" of finished state and requests that the Department
   exclude all rough, semi-finished, and finished products.
   
   The petitioners respond that properly classified and assembled window and
   door frames are outside the scope of these investigations, but that lumber
   components or frame stock is within the scope.(544) The petitioners
   explain that softwood lumber components that may be used to make a window
   sill or frame are within the scope of these investigations.
   
   Department's Position: In the CVD Prelim the Department explicitly stated
   that properly classified complete door frames and window frames are
   excluded from the scope. With respect to components, the Department found
   that window, door, and edge-glued components are within the scope and that
   they do not constitute a separate class or kind of softwood lumber
   products.(545) The petitioners do not agree to the exclusion of these
   products from the scope. There are no "overarching" reasons for exclusion.
   Therefore, we are not granting the exclusion. 
   
   4. Door jacks
   5. Triple corners 
   6. Finger-joint blocks 
   
   Weldwood asks for the exclusion of door jacks, triple corners, and finger-
   joint blocks. Door jacks are pre-manufactured components used in
   residential construction for framing door openings; they are manufactured
   by laminating two pieces of 2"x4" approximately 7' and 8' in length which
   are then precision-end trimmed to match the length of the wall studs.(546)
   Triple corners are pre-manufactured components used in residential
   construction for framing the corner that joins two walls of a building;
   they are produced from three pieces of 2"x4" and trimmed to the exact
   length of the wall studs. Finger-joint blocks are produced from planer
   mill trim ends; they are defect trimmed, sorted, and graded, are 8" to 24"
   long and are used in the manufacture of finger-jointed studs and dimension
   lumber. Weldwood claims that these products are covered under HTSUS
   4418.90.4090. The reason for the exclusion would be due to the fact that
   these products are highly specialized and constitute trivial export
   volumes.
   
   The petitioners point out the there is no corroboration from Customs on
   the classification presented by the requester.(547) The petitioners also
   add that it is unclear that there is commercial demand for door jacks and
   triple corners, because door framing and corner framing is generally done
   on site. While pre-manufactured housing might be an exception, the
   requester did not indicate that this is where the products will be used.
   Concerning finger-joint blocks, the petitioners state that these blocks
   are only short pieces of dimension lumber used to make finger-jointed
   lumber, which is expressly included in the scope.
   
   Department's Position: Door jacks and triple corners are permanently
   assembled products, which are not covered under the scope of these
   investigations. Generally, they would be classified under HTSUS
   4418.90.40.40 or 4418.90.40.90, as stated by the requester. While we
   understand the concern of the petitioners with regard to potential
   loopholes, the drawings of these two products show that the assembly of
   door jacks and triple corners is fairly elaborate and would not lend
   itself to easy separation of the components without damage to the parts.
   On the other hand, we agree with the petitioners that finger-jointed
   blocks are dimension lumber and are included under the scope. Therefore,
   we are not granting this exclusion.
   
   7. Angle-cut lumber for trusses and sheds 
   
   Alliance Forest Products Inc. (Alliance) requests an exclusion from the
   scope of these investigations for angle-cut lumber for trusses and
   sheds.(548) Alliance describes these products as angle-cut roof truss
   components and boards with one or both ends cut at an angle other than 90
   degrees, used to construct the side walls and roofing of sheds. Alliance
   provides Customs rulings stating that both products are classifiable under
   4418.90.40.90. The requester also points out that both products were not
   covered by the Softwood Lumber Agreement. 
   
   The petitioners challenge Alliance's assertion that Customs "consistently
   classified such angle-cut roof truss components" under HTSUS 4418.(549)
   The petitioners maintain that Customs issued specific rulings regarding
   unassembled wood trusses classified under HTSUS 4418, applicable only if
   the trusses met specific requirements. The petitioners further assert that
   Alliance's written description and drawings of its products do not conform
   to an industry standard definition for a truss, and that these products do
   not appear to be "shed kits." On that basis, the petitioners conclude that
   Alliance's angle-cut lumber does not meet the requirement of being a
   component of a specific truss; it is just generic softwood lumber which is
   covered by the scope of these investigations.
   
   Department's Position: The Department preliminarily determined that
   trusses and truss kits, properly classified under HTSUS 4418.90, are
   excluded from the scope (See AD Prelim). With regard to truss components,
   the Department stated in its Amended Prelim that truss components are
   covered by these investigations and added 4418.90.4090 to the list of
   HTSUS subheadings under which truss components may be classified. The
   requester has provided no new facts that would require the Department to
   revisit its prior determinations.
   
   With regard to angle cut lumber which may not be truss components, angle
   cut lumber is specifically mentioned in the petitions as being included in
   the scope. The petitioners do not agree to the exclusion of angle cut
   lumber. This requester did not present any "overarching" reason to
   consider the exclusion of angle cut lumber from the scope. Therefore, we
   are not granting the exclusion of angle cut lumber for trusses and sheds.
   
   8.  Garage door core 
   9.  Laminating blanks 
   10. Edge glue blanks 
   
   Bridgeside requests the exclusion of garage door core, described as
   "finger jointed stock, machined to very tight tolerances" and produced to
   customer's specifications.(550) This product is designated as an
   industrial component which is shipped to a manufacturer to be assembled
   into garage door panels. Bridgeside states that the HTSUS classification
   is 4407. Bridgeside requests its exclusion from the scope on the following
   grounds: 1) the volume of imports is low; 2) domestic supply is limited;
   3) selling price is higher than the price of structural lumber; 4) due to
   its grading characteristics, is not interchangeable with the domestic
   stock; the only alternate input supply for this product is from South
   America. The petitioners respond that finger-jointed lumber is within the
   scope of these investigations.(551)
   
   Sundance requests the exclusion of laminating blanks and edge glue
   blanks, but did not provide a description of these products.(552) It
   provides 4407 as the HTSUS classification. The requester adds that the
   product is sold in varying degrees of finished state and asks for the
   exclusion of rough, semifinished, and finished products. The petitioners
   respond that, based on the information provided, "laminating blanks" are
   simply lumber boards used for particular applications and "edge glue
   blanks" are simply lumber used for manufacturing edge-glued lumber.(553)
   Both products are clearly within the scope.
   
   Department's Position: The scope of these investigations includes all
   products classified under HTSUS category 4407. The petitioners do not
   agree to the exclusion of these products. There are no "overarching"
   reasons for the exclusion. Therefore, we are not granting the exclusion of
   these products. 
   
   11. Stair part turning squares 
   
   Cahan Wood Products Ltd. (Cahan) states that this product is an industry-
   specific item that is produced in a range of restricted sizes due to the
   limitations imposed by local building codes, which require that stair
   systems be produced to a certain height.(554) Stair-part turning squares
   are kiln-dried clear Western hemlock molded smooth on all four faces, with
   square edges or 1/8" radius eased edges, depending on customer
   specifications. The product is precision-end trimmed to designated sizes
   which are packaged by size and length.
   
   The petitioners respond that Cahan's turning squares are just small
   square pieces of softwood lumber in lengths ranging from 31" to 42"
   without defects, that are likely to be used to manufacture stair
   balusters.(555) The petitioners assert that these products are stair-part
   stock, a type of softwood lumber product that is included the scope of
   these investigations
   
   Department's Position: Based on the information on record, we accept the
   petitioners' assessment that this product appears to be stair-part stock
   and would be classified under HTSUS 4407.10. The scope of these
   investigations includes all products classified under this subheading. The
   petitioners do not agree to the exclusion of this product. No
   "overarching" reasons were presented for the exclusion. Therefore, we are
   not granting the exclusion of these products. 
   
   12. 3/4" and 5/16" interior tongue and grooved wall claddings 
   
   Greenwood Forest Products, Ltd. (Greenwood) describes this product as a
   continuously molded product.(556) The wall claddings have a profiled face
   and a rough back face, and tongue and groove edges. The length is between
   32" and 96". Greenwood states that both products are primarily used in the
   aftermarket by do-it-yourself homeowners on existing wall structures. They
   are not interchangeable with any other softwood lumber product and
   domestic availability is limited. They are exported to the United States
   under HTSUS 4409.10.90.40 and 4409.10.90.20. The petitioners respond that
   both products are siding and clearly fall within one of the HTSUS
   classifications identified in the petitions and listed in the scope
   description.(557)
   
   Department's Position: The scope description clearly covers all products
   classified under HTSUS 4409.10.90. The petitioners do not agree to the
   exclusion of this product. No "overarching" reasons were presented for the
   exclusion. Therefore, we are not granting this exclusion.
   
   13. Fascia and trim boards 
   14. RealTrim(TM) exterior molding and trimboard system 
   
   The exclusion of fascia and trim boards was requested by Sundance.(558)
   The requester does not provide a description of the product nor the
   pertinent HTSUS classification. Sundance indicates that the product is
   sold in varying degrees of finished state and asks for the exclusion of
   rough, semifinished, and finished products.
   
   The exclusion of "RealTrim," was requested by Woodtone.(559) Woodtone
   describes "RealTrim" as an ornamental exterior molding used around
   windows, doors, gable ends, etc., to improve the appearance of a home.
   "RealTrim" is manufactured from high-grade spruce; it is molded and then
   coated with a primer. It is manufactured in custom sizes that are not
   produced by any other manufacturer in Canada or the United States. "Real
   Trim" is currently classified under HTSUS 4407.10.0015; however, Woodtone
   contends that this classification is incorrect. Woodtone states that it is
   applying for a binding Customs ruling for "RealTrim" to be classified
   under 4409.10.4500. 
   
   With regard to generic fascia and trim boards, the petitioners respond
   that fascia and trim boards are simply lumber boards used for particular
   applications and they are within the scope.(560) As for "Real Trim," the
   petitioners assert that "RealTrim" is primed fascia board, properly
   classified under HTSUS 4407, and, therefore, covered by the scope of these
   investigations. The petitioners further state that Woodtone's claim that
   "RealTrim" is like interior moldings is misleading. The petitioners
   contend that all information available, including information on
   Woodtone's web site, confirms that "RealTrim" is "simply a board to be
   used as fascia or exterior trim" and not a molding.(561) 
   
   Woodtone responds that there is a difference between "actual fascia" and
   "so-called fascia." "Actual fascia" is lumber which has been molded,
   primed, and is actually used in exterior molding applications. In
   contrast, "so-called fascia" is lumber that is purported to be used as
   fascia, but is actually used for framing purposes. Woodtone contends that
   "actual fascia" should not be denied a scope exclusion because "so-called
   fascia" is causing U.S. producers to lose framing lumber sales. Woodtone
   provides definitions of "fascia" and "molding" from several sources and
   concludes that "RealTrim" can be used as fascia; however, that doesn't
   preclude it from being defined as a piece of molding, since it meets all
   definitions of a molding in both physical dimensions and use.(562)
   
   In rebuttal, the petitioners claim that the scope of these investigations
   includes boards such as "RealTrim."(563) As to the claim that "RealTrim"
   is a molding, the petitioners respond that "RealTrim" is "neither a
   molding nor other builders' joinery and carpentry of wood." The
   petitioners maintain that the evidence on the record demonstrates that
   "RealTrim" meets the literal terms of HTSUS 4407.1000 and is included in
   the scope. With regard to the assertion that "RealTrim" is not correctly
   classified, the petitioners note that the company can avail itself of
   statutorily-provided procedures for challenging that classification. The
   petitioners also refute Woodtone's claim that "RealTrim" or a like product
   is not available in the United States by contending that "RealTrim"
   competes directly (and indirectly) with softwood lumber boards produced in
   the United States.
   
   Department's Position: The Department is not in a position to determine
   whether the product is a board or a molding. For this reason we rely on
   Customs' expertise and take into account Customs' classification. If
   Woodtone believes that the current classification is inappropriate, it may
   want to pursue appropriate procedures with Customs to obtain a new ruling.
   Furthermore, it appears that the arguments presented by Woodtone
   specifically address "Real Trim" and not fascia and trim boards in
   general. In examining products for purposes of scope exclusion, the
   Department considers generic products, without regard to manufacturers or
   name brands. To the extent that the product is currently classified under
   HTSUS 4407.10, "Real Trim" and all fascia and trim board products are
   covered under the scope. Because the petitioners do not agree to the
   exclusion of this product and no "overarching" reasons were presented for
   the exclusion, we are not granting the exclusion of fascia and trim boards
   from the scope of these proceedings.
   
   15. Flooring and siding 
   
   Weldwood asked for the exclusion of siding (including strips and friezes
   for parquet flooring, not assembled) continuously shaped (tongued,
   grooved, rabbeted, chamfered, V-jointed, beaded, molded, rounded or the
   like) along any of its edges or faces, whether or not planed, sanded or
   finger-jointed (including re-sawn bevel siding) and 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.(564) The reasons for the exclusion would
   be based on the fact that these products are highly specialized and
   constitute trivial export volumes.
   
   The petitioners respond that flooring and siding are expressly covered by
   HTSUS 4409.(565) Flooring and siding compete with other types of softwood
   lumber products arguing, for example, that fascia is softwood lumber
   within the scope, but that it could just as well be called siding.
   
   Department's Position: Flooring and siding are covered in the scope. The
   petitioners do not agree to the exclusion of these products. No
   "overarching" reasons were presented for the exclusion. Therefore, we are
   not granting this exclusion.
   
   16. Guard rails
   
   Weldwood describes guard rails as rough, full-sawn timbers measuring
   6"x8" in 5' and 7' lengths. They have an angle-cut top and pre-drilled
   bolt holes, and they are used to support the metal barrier of a highway
   guard rail.(566) The petitioners respond that "guard rails" are large
   pieces of lumber and note that Weldwood did not claim that these products
   are classified under an HTSUS heading outside the scope of these
   investigations. The petitioners assert that guard rails share the same
   general characteristics as all softwood lumber products that are covered
   by these investigations.(567)
   
   Department's Position: The information on the record is insufficient for
   the Department to make a determination. Therefore, we are not granting
   this exclusion.
   
   17. Cedar shingle blocks 
      
   Shakertown 1992, Inc. (Shakertown) requested that the Department exempt
   certain specialty cuts of Western red cedar imported from Canada.(568)
   Shakertown purchases Western red cedar material cut from shingle blocks on
   shingle saws in nominal lengths of 18, 15, 12 and 9 inches. Shakertown
   provided the grading standards for the specialty cut material it purchases
   and indicated then the purchased boards are currently classified under
   HTSUS 4407 and are subject to the investigations.
   
   Department's Position: The Department examined the grading standards and
   noted the other information on the record, including the tariff
   classification and dimensions of the boards purchased. Based on that
   information, we have determined that, had Customs considered that the
   specialty cuts constituted a shake or shingle, these products would have
   been classified under the HTSUS 4418.50.00, articles of shingles and
   shakes, which are not covered by the scope of these investigations.
   However, due to the fact that Customs classifies the specialty cut
   products under HTSUS 4407, which is within the scope of the
   investigations, and because the Department has determined that Western red
   cedar products under that HTSUS subheading cannot be excluded from the
   investigations. We have not excluded these products from the scope of the
   investigations.
   
C. Components/parts of finished products 
   
   1. Furniture parts; furniture blanks 
   2. Display fixtures parts 
   
   Alberta provided detailed design and technical descriptions of the
   furniture parts it manufactures.(569) Copies of invoices which show that
   the parts in question are not generic, but are earmarked to be used in a
   specific piece of furniture. Some of the parts appear to require minor
   finishing operations when assembled, such as planing, trimming to exact
   length, and finish sanding. Alberta and Sundance provide an HTSUS item
   number under which they claim their products are covered (HTSUS 9403), but
   do not submit actual entry documentation (with Customs classification) or
   an official Customs' ruling to support their statements. Sundance
   indicates that the furniture parts and blanks are value-added non-
   construction type products. They are delivered in varying degrees of
   finished state. Sundance asks that all rough, semifinished, and finished
   products be excluded.
   
   Alberta also requested the exclusion of display fixtures parts and
   included in its request pictures of retail shelving units incorporating
   softwood components. The components are described as "pine staves that are
   approx. 15/16" thick by 4 " wide by 48", 45", or 36" long (length ratio
   is 85-10-5)." Alberta Spruce claims that shelving staves are classified
   under HTSUS 9403.60.80.80, but no documentation is provided.
   
   The petitioners point out that the information provided by Alberta Spruce
   and Sundance does not clearly indicate that the companies produce finished
   furniture components.(570) In fact, based on the information provided, the
   petitioners believe that both companies may produce components that, after
   importation, are used to make parts of furniture that are then assembled
   into finished furniture. According to the petitioners, these are simply
   softwood lumber products within the scope of these investigations. Neither
   company has submitted Customs rulings indicating that these products are
   indeed classified as finished furniture components. With respect to the
   display fixtures parts, the petitioners conclude, based on the description
   provided, that these parts are simply softwood lumber (boards) of
   particular dimensions that are likely to be used to manufacture shelving,
   and are within the scope of the investigations.(571)
   
   Department's Position: To the extent that the product exported to the
   United States is a furniture part, Customs will classify that merchandise
   under HTSUS 9403, which provides for furniture (other than medical) and
   parts thereof. In this case, there is no need for an exclusion. If instead
   the furniture parts that are being exported are at a processing stage
   where they have not yet assumed the unique characteristics of a component
   of a specific item of furniture, they may still be considered generic
   softwood lumber products and be covered by the scope of these
   investigations. We are not granting this exclusion. 
   
   3. Recreational vehicle product
   4. Refrigerator stock 
   
   These requests were submitted by Bridgeside Higa.(572) Recreational
   vehicle product is finger-joined SPF or hemlock stock produced to exact
   specifications. This product is shipped to a manufacturer of recreation
   vehicles and is not useable for any kind of structural application. After
   importation into the United States, the product may be used as is or may
   be cut to length for cabinet construction. Refrigerator stock is also
   finger-joined stock, 1 " thick, 3 " wide, and 16 feet in length, and is
   also subject to specific quality requirements. It is used in the
   manufacture of walk-in refrigerators. It is not clear whether additional
   operations are necessary in the United States to incorporate this product
   in refrigerators. The requester claims that its refrigerator stock is
   classified under HTSUS 4407; the classification of the recreational
   vehicle stock is unclear.
   
   The reasons for the exclusion requests are the following: 1) low import
   volumes; 2) inadequate domestic supply, although the price is attractive;
   3) not interchangeable with domestic species, such as Southern yellow
   pine; 4) this product is transacted in the recreational
   vehicle/refrigerator manufacturing market, not the lumber market; 5) these
   products do not lend themselves to mass production. The petitioners,
   however, contend that finger-joined stock, whether used in recreational
   vehicles or as flooring for refrigerators, is covered under HTSUS 4407 and
   is included in the scope.(573)
   
   Department's Position: Finger-joined stock is covered in the scope. The
   petitioners do not agree to the exclusion of these products. No
   "overarching" reasons were presented for the exclusion. Therefore, we are
   not granting this exclusion.
   
   5. Trellis stock
   
   Bridgeside Higa describes this product as a small cross-sectional piece
   of SPF (11/16" x 13/16").(574) Each purchase order has a specific number
   of pieces cut to specific lengths for each different model of trellis. In
   any one shipment, a set amount of trellises can be produced. Trellises are
   constructed in accordance with customer's specifications. The stock is
   shipped to a manufacturer who assembles the pieces into a finished
   product. Once cut to the size required by the construction of trellises,
   the stock is not resalable. Trellis stock cannot be used for any kind of
   structural applications. Import volume is low and domestic supply is
   limited, notwithstanding an attractive price. Domestic species (such as
   Southern yellow pine) are not good substitutes. Trellis stock does not
   compete with lumber, since its price is determined by the demand for
   trellises. This product does not lend itself to mass production. The HTSUS
   classification is 4407. The petitioners claim that this product is covered
   under the scope, since the dimensions provided indicate that this is
   softwood lumber over 6 mm in thickness.(575)
   
   Department's Position: The scope of these investigations includes all
   products classified under HTSUS 4407.1000. The petitioners do not agree to
   the exclusion of trellis stock. No "overarching" reasons were presented
   for the exclusion. Therefore, we are not granting this exclusion. 
   
   6. Turb-o-Web Truss Webs
   
   Tembec claims that Turb-O-Web truss webs are not included in the scope of
   these investigations.(576) This product is a supporting member connecting
   the top and bottom members of a roof truss. They are radius cut at both
   ends and are precisely cut according to specific truss design
   requirements. They are imported ready for assembly. Tembec provides
   reference to a Customs ruling, in which Turb-O-Web components are
   classified under subheading 4418.90.4090, provided that the truss
   components adhere to specific dimension requirements and were sold to
   truss manufacturers.
   
   The petitioners claim that the Customs' ruling was specifically limited
   to truss components meeting certain specific requirements and claim that
   Tembec is now asking the Department to exclude Turb-O-Web truss components
   regardless of whether they meet those requirements.(577) The petitioners
   state that what Tembec seeks to describe as "Turb-O-Web" here is nothing
   more than softwood lumber, clearly within the scope of this investigation.
   
   Department's Position: As we have already stated with regard to "Real
   Trim," the Department only considers generic products for purposes of
   exclusion, not brand name products. The Department has already
   preliminarily determined that complete trusses (assembled and unassembled)
   are excluded from the scope(578) and that truss components are included
   under the scope.(579) Tembec has not provided any new information
   requiring the reexamination of these decisions.
   
   7. Cable reel staves 
   
   Universal Reel & Recycling Inc. asked for the exclusion of contoured reel
   staves.(580) Staves are less than 48" long and are a component of cable
   reels. Staves are sold to reel manufacturers. They are classified under
   HTSUS 4409.10.9040. The petitioners respond that this subheading is
   expressly covered in the petition; therefore, the staves are within the
   scope.(581) The requester has not presented any information that would
   lead to the conclusion that they should be classified elsewhere in the
   tariff schedule.
   
   Department's Position: The scope of these investigations includes all
   products classified under HTSUS 4409.1090. The petitioners do not agree to
   the exclusion of contoured staves. No "overarching" reasons were presented
   for the exclusion. Therefore, we are not granting this exclusion
   
   8. Box parts/crating parts/vegetable box components 
   
   Sundance requests the exclusion of box parts and crating parts. It does
   not provide a description of the product.(582) It provides HTSUS 4415 as
   the proper tariff classification, with no corroboration from Customs. It
   indicates that the product is sold in varying degrees of finished state
   and asks for the exclusion of rough, semifinished, and finished products.
   The petitioners respond that the tariff classification provided is not
   corroborated by Customs documentation and that "lumber pieces to make
   boxes are not classified under HTSUS 4415.(583) Without a technical
   description, the product is simply a piece of softwood lumber that may be
   used to manufacture boxes, and thus within the scope.
   
   Weldwood requested the exclusion of vegetable box components.(584) The
   product is described as SPF lumber measuring 1 " by 1 1/4" in PET
   specified lengths, to be used as components for the construction of
   vegetable crate ends. No support is provided for the request, except for a
   generic statement that it is a highly specialized product and constitutes
   trivial export volume. The petitioners state that these "vegetable box
   components" are just short pieces of lumber.(585) The requester does not
   claim that they will be imported in complete kits or sets, with all
   necessary parts to assemble the vegetable box. 
   
   Department's Position: Box parts, crating parts and vegetable box
   components, based on the description provided are generic pieces of
   lumber, generally classified under HTSUS 4407. Such products are covered
   under the scope of these investigations. The petitioners do not agree to
   the exclusion of these products. No "overarching" reasons were presented
   for the exclusion. Therefore, we are not granting this exclusion.
   
   
Recommendation

Based on our analysis of the comments received, we recommend adopting the
positions described above. If these recommendations are accepted, we will
publish in the Federal Register the final determination of the
investigation and the final weighted-average dumping margins. 




Agree ______ Disagree ______



__________________ 

Faryar Shirzad
Assistant Secretary for
  Import Administration

_________________
Date



______________________________________________________________________
footnotes:

1. See Notice of Preliminary Determination of Sales at Less than Fair
Value and Postponement of Final Determination: Certain Softwood Lumber
Products From Canada, 66 FR 56062 (November 6, 2001) (Preliminary
Determination). 

2. The two respondents who filed allegations of ministerial errors in the
preliminary determination are Canfor Corporation and Slocan Forest
Products Ltd. See letters from Kaye Scholer, LLP and Baker and McKenzie,
respectively, to the Department (November 13, 2001). 

3. See Ministerial Error Allegations Memorandum from Christopher Smith
and Taija Slaughter, Case Analysts, to Bernard Carreau, Deputy Assistant
Secretary, Group 2 (January 11, 2002). 

4. The petitioners are the coalition for Fair Lumber Imports Executive
Committee; the United Brotherhood of Carpenters and Joiners; and the
Paper, Allied-Industrial, Chemical and Energy Workers International Union. 

5. In addition, case briefs were received from the American Consumers for
Affordable Housing (ACAH), "an alliance of 17 organizations, representing
the sectors that account for over 95% of American consumption of softwood
lumber," an interested party as defined by section 777(h) of the Act; the
Idaho Timber Corporation; and the provinces of New Brunswick, Nova Scotia,
Prince Edward Island, Newfoundland, the Maritime Lumber Bureau, and lumber
producers located in those provinces (the Maritimes). Case and rebuttal
briefs were received from the British Columbia Trade Council (BCLTC) and
its Constituent Associations, the Cariboo Lumber Manufacturers'
Association, the Coast Forest & Lumber Association, the Interior Lumber
Manufacturers' Association, and the Northern Forest Products Association;
and the Ontario Forest Industries Association and Ontario Lumber
Manufacturers Association (OFIA/OLMA). 

6. A group of products that were excluded from the scope as classified
was listed in the preliminary determinations as Group A. This list remains
applicable as we determined , through our review of the petition and
factual information submitted, and consultations with the parties, that
the products were outside the scope of the investigations. 

Group A. Softwood lumber products excluded from the scope: 

   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 

7. Weyerhaeuser also argues that the Department should not be conducting
an investigation, but for different reasons. According to Weyerhaeuser,
there are "legitimate issues that need to be addressed due to the
differences in the structure and practices in the two countries," but the
antidumping law is not the way to address the issues (Weyerhaeuser case
brief at 1). Instead, Weyerhaeuser contends that the parties and
governments should reach an agreement regarding the "appropriate
conditions of competition that should govern trade in these products" (Id.
at 2). Weyerhaeuser argues that the use of the antidumping law in this
situation will lead to a mismanagement of resources, not achieve a level
playing field, penalize consumers, and distort the U.S. market. 

8. See BCLTC case brief at 2; See also Antidumping Agreement, Article 5.8. 

9. See the petitioners' general issues rebuttal brief at 51; See also
section 351.202(b) of the Department's regulations. 

10. For support, the petitioners cite to Initiation-Certain Cold-Rolled
Steel Sheet Products from Various Countries, Statement of Reasons, No.
4258-115, AD/1265 (Canadian Customs and Revenue Agency (CCRA) March 12,
2001); Initiation-Certain Hot-Rolled Carbon Steel Sheet from Various
Countries, Statement of Reasons, No. 4218-12/CV94, 4258-114/AD1262 (CCRA
January 19, 2001)(same); Initiation-Corrosion-Resistant Steel Sheet from
Various Countries, Statement of Reasons, No. 4218-11/CV92 4258-113/AD-1258
(CCRA December 4, 2000). See petitioners' general issues rebuttal brief at
note 136. 

11. See the petitioners' general issues rebuttal brief at 54. 

12. Id. 

13. See Notice of Initiation of Antidumping Duty Investigation: Certain
Softwood Lumber Products From Canada, 66 FR 21328, April 30, 2001
(Initiation Notice); See also AD Investigation Initiation Checklist:
Certain Softwood Lumber Products from Canada (April 23, 2001) (Initiation
Checklist). 

14. Gilmore Steel Corp. v. United States, 585 F. Supp. 670 (Ct. Int'l
Trade 1984). 

15. H.R. Doc. No. 103-316 at 860 (1994). 

16. See, e.g., "Issues and Decision Memorandum for the Final
Determination in the Antidumping Duty Investigation of Certain Non-Frozen
Apple Juice Concentrate from the People's Republic of China" from Richard
W. Moreland, Deputy Assistant Secretary, Group I, Import Administration,
to Joseph A. Spetrini, Acting Assistant Secretary for Import
Administration, April 6, 2000, Comment 9. 

17. See ACAH case brief at 2; Abitibi case brief at 5; Canfor case brief
at 5; Slocan case brief at 1; Tembec case brief at 5; Weyerhaeuser case
brief at 2; West Fraser case brief at 1; 

18. See Canfor case brief at 6; See also Agreement on Implementation of
Article VI of the General Agreement on Tariffs and Trade 1994, Article
2.4, (Antidumping Agreement). 

19. See OFIA/OLMA case brief at 5. 

20. The petitioners cite Canadian trade publications to provide numerous
examples of these distortions. See the petitioners' case brief regarding
Abitibi at 2-4. 

21. See the petitioners' case brief regarding Abitibi at 5-6. 

22. See Abitibi rebuttal brief at 2; Canfor rebuttal brief at 4; Slocan
rebuttal brief at 2; Tembec rebuttal brief at 3; West Fraser rebuttal
brief at 2; Weyerhaeuser rebuttal brief at 1; BCLTC rebuttal brief at 2; 

23. Again, the parties note that during the POI, Canadian softwood lumber
prices (either on average or as charged by the respondent companies) were
higher in the U.S. than in Canada. Furthermore, the respondents recovered
their costs and were profitable during the POI. Weyerhaeuser specifically
argues that, as a U.S. company, it has more sales in the United States
than in Canada; therefore, it would be illogical for the company to sell
its products in the United States at less than fair value. 

24. 19 CFR 351.206(h)(2)(i). The statute requires that a "relatively
short period" be used as the basis for the finding of massive imports. See
section 733(e)(1)(B) of the Act. 

25. See the GOC rebuttal brief at 12, citing Notice of Final
Determination of Sales at Less Than Fair Value: Certain Steel Concrete
Reinforcing Bars from Turkey, 62 FR 9737 (March 4, 1997). 

26. See, e.g., Notice of Final Determination of Sales at Less Than Fair
Value: Certain Polyester Staple Fiber from the Republic of Korea, 65 FR
16880 (March 30, 2000). 

27. GOC cites, among other determinations, Concrete Reinforcing Bars from
Turkey, supra. 

28. There have been no previous antidumping cases involving softwood
lumber from Canada. 

29. Each of the mandatory respondent's preliminary determination dumping
margin or corrected preliminary determination dumping margin was below the
25 percent threshold for export price sales and below the 15 percent
threshold for constructed export price sales. 

30. In this investigation, the USITC made a preliminary determination of
threat of material injury. The Department does not find a threat of
material injury a sufficient basis for imputing knowledge of material
injury. The U.S. Court of International Trade has upheld this practice.
See The Coalition for the Preservation of American Brake Drum and Rotor
Aftermarket Manufacturers v. United States, 44 F. Supp. 2d 229, 253
(1999). 

31. See Tembec case brief at 15. 

32. See Abitibi case brief at 2. 

33. Id. at 14; The respondents claim that by using an average cost per
MBF for certain cost elements for the preliminary determination, the
Department compared a cost that represented an average of multiple
products with sales prices which were specific to each product. 

34. Id. at 21. 

35. Id. at 22. 

36. See Idaho Timber case brief at 1. 

37. See West Fraser case brief at 3. 

38. See Slocan case brief at 32. 

39. See Canfor case brief at 19. 

40. See West Fraser case brief at 5. 

41. Chemical Products v. United States 645 F. Supp. 289, 297 (Ct. Int'l
Trade1986). 

42. See, e.g., Notice of Final Determination of Sales at Less Than Fair
Value: Canned Pineapple Fruit from Thailand (Thai Pineapple) 60 FR 29553,
29560 (June 5, 1995). 

43. See, e.g., Notice of Final Determination of Sales at Less Than Fair
Value: Polyvinyl Alcohol from Taiwan (PVA from Taiwan), 61 FR 140064,
14072 (March 29, 1996). 

44. See West Fraser case brief at 11-13. 

45. See Slocan case brief at 41. 

46. Id. at 41. 

47. See Canfor case brief at 13. 

48. Id. at 2. 

49. See Idaho Timber case brief at 2-3. 

50. Net realizable value is the selling price of an inventory item less
the cost incurred after the split-off point for joint products. A joint
production process occurs when a single process yields two or more
products simultaneously. Sixth Edition Cost Accounting, A Managerial
emphasis, Charles T. Horngren/George Foster, p. 478. 

51. IPSCO Inc. v. United States, 965 F.2d 1056 (CAFC 1992) (IPSCO). 

52. See West Fraser case brief at 3. 

53. See Idaho Timber case brief at 6. 

54. Id. at 3. 

55. Id. at 7. 

56. See West Fraser case brief at 9. 

57. The point in a joint production process where joint products become
separately identifiable. 

58. The conversion costs incurred prior to the split-off point and the
cost of the input logs are mutual to all grades of product cut from the
logs. Thus, we consider it appropriate to allocate the sum of these costs
to the various grades of lumber produced using the same cost allocation
method. Management Accountants' Handbook, Fourth Edition, Keller, Bulloch,
and Shultis at 11.5. 

59. For financial reporting purposes, the respondents value inventory at
the lower of the average cost per MBF or market price. 

60. We consider it inappropriate to incorporate dimensional differences
into the value-based methodology. While differing qualities/grades of wood
are inherent in a log, dimensional differences are primarily the result of
production decisions by the producer. Companies do not attempt to produce
the largest possible dimensions from a given log. Instead, they produce
the dimensions necessary to meet market demand. In addition, the different
dimensions of lumber within a given grade category are composed of the
same part of a given log, thus utilizing a homogeneous input. Lastly, the
Department believes that value-based cost allocations should only be used
as a means for allocating costs to broad product groups that differ
significantly in value. We do not consider it appropriate to use a value-
based cost allocation method for allocating different costs to a large
number of varying products with only minor physical differences (e.g., the
hundreds or even thousands of differing combinations of dimensions and
grade of lumber cut from logs) and no clear significant differences in
value. Where minor differences in values occur among products having minor
physical differences and are inconsistent due to frequent and inconsistent
price fluctuations, any resulting cost differences would be artificial and
meaningless. Using broader product ranges results in a more meaningful
allocation of costs because it captures the distinct, significant
differences in values. 

61. Random Lengths publication is a widely circulated and respected
source of information for the wood products industry. It tracks softwood
lumber prices for all major producing regions of the U.S. and Canada. 

62. See Memorandum to Neal M. Halper, Director, Office of Accounting from
Robert B. Greger, Senior Accountant: Analysis of Grade-Specific Period of
Investigation (POI) Versus Pre-POI Relative Prices, 

(March 21, 2002).

63. It had been suggested that the Department might consider the
allocation of sawmill costs on the basis of number of pieces of lumber
produced at the sawmill. Every respondent objected to this approach,
arguing that joint costs cannot be traced to different end products. While
the petitioners stated that a per-piece cost allocation method might be
reasonable, they did not provide support for this approach. Accordingly,
we decided not to pursue this option and instead determined that a value-
based cost allocation method would be more appropriate for allocating the
sawmill costs. See comment 4 above for further discussion. 

64. Tembec and Abitibi did not provide a cost data set based on a value
allocation. 

65. To support this approach Abitibi cites Notice of Final Determination
of Sales At Less Than Fair Value: Fresh Cut Roses from Colombia, 60 FR
6980, 6990 (February 6, 1995) as an example of where the Department has
compared average costs to average prices. 

66. To support this approach Abitibi cites Daewoo Electronics Co., Ltd.
v. United States, 712 F. Supp. 931, 941-942 (Ct. Int'l Trade 1989) as an
example of where the Department has accepted that sales below cost can be
made in the ordinary course of trade. 

67. See e.g., Notice of Final Determination of Sales At Less Than Fair
Value: Stainless Steel Sheet and Strip in Coils from the United Kingdom,
64 FR 30688, 30691 (June 8, 1999) and Mitsubishi Heavy Industries, Ltd. v.
United States, 15 F. Supp. 2d 807, 826-827 (Ct. Int'l Trade 1998). 

68. See Notice of Preliminary Determination of Sales at Less Than Fair
Value: Greenhouse Tomatoes from Canada, 66 FR, 51,010, 51,013 (October 5,
2001) and Notice of Preliminary Determination of Sales at Less Than Fair
Value: Fresh Tomatoes from Mexico, 61 FR, 56,607, 56613-14, (November
1,1996). 

69. See Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Stainless Steel Bar from
France, 66 FR, 40201, 40205 (August 2, 2001). 

70. See Notice of Preliminary Determination of Sales At Less Than Fair
Value: Greenhouse Tomatoes from Canada, 66 FR 51010, 51013 (October 5,
2001). 

71. See General Issues - Comment 4, value-based cost allocation
methodology, above. 

72. See also Notice of Final Determination of Sales At Less Than Fair
Value: Stainless Steel Bar From France 67 FR, 3143 (January 23, 2002)
referencing "Issues and Decision Memorandum" from Richard W. Moreland,
Deputy Assistant Secretary for Import Administration to Faryar Shirzad,
Assistant Secretary for Import Administration, dated January 23, 2002 at
comment 1. 

73. See SAA at 832. 

74. See Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Bar From France, 67 FR, 3143, January 23, 2002,
referencing "Issues and Decision Memorandum" from Richard W. Moreland,
Deputy Assistant Secretary for Import Administration to Faryar Shirzad,
Assistant Secretary for Import Administration, at comment 2 

75. See 62 FR 27296. 

76. See 62 FR 27296, 27361. 

77. See, e.g., Preliminary Determination of Sales at Less than Fair
Value, Live Cattle from Canada, 64 FR 36848, 36851 (July 8, 1999), and
Final Determination of Sales at Less Than Fair Value: Large Newspaper
Printing Presses and Components Thereof, Whether Assembled or Unassembled,
From Japan, 61 FR 38139, 38145 (July 23, 1996). 

78. See BCLTC case brief at 15; Slocan at 46; Tembec at 7; and,
Weyerhaeuser at 42. 

79. See Gustafon v. Alloyd Co., Inc., 513 U.S. 561,570 (1995) (citing the
"normal rule of statutory construction" that "identical words used in
different parts of the same act are intended to have the same meaning.);
Sullivan v. Stroop, 496 U.S. 478,484 (1990). 

80. See Abitibi's case brief at 25; BCLTC at 17; Slocan 45; Tembec at 8;
West Fraser at 30; and, Weyerhaeuser at 44. 

81. See Slocan case brief at 53. 

82. See BCLTC case brief at 8; Slocan at 36; and, Weyerhaeuser at 36. 

83. See BCLTC case brief 10. 

84. See SAA at 840. 

85. See Slocan case brief at 54; Tembec case brief at 13; and,
Weyerhaeuser case brief at 42. 

86. Floral Trade Council v. United States 41 F. Supp. 2d 319 (Ct. Int'l
Trade 1999). 

87. See West Fraser rebuttal brief at 14. 

88. SKF II. 

89. See petitioners' case brief at 32. 

90. See petitioners' general issues rebuttal brief at 33 and note 76. 

91. See section 773(e)(2)(A) of the Act and the SAA at 840. 

92. See section 771(15) and 773(b)(1) of the Act. 

93. See section 771(15) of the Act. 

94. Final Results of Antidumping Duty Administrative Reviews;
Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts
Thereof From France, Germany, Italy, Japan, Romania, Singapore, Sweden,
and the United Kingdom, 63 FR 33320, 33332 (June 18, 1998). 

95. See SAA at 840. 

96. See also, Mitsubishi Heavy Industries, Ltd. v. United States, 275
F.3d 1056, 1063-66 (Ct. Int'l Trade 2001) (In this case, the CIT
determined that the Department's decision to use CV rather than price-to-
price comparisons did not mean that home market merchandise could not
reasonably be compared to exported goods. Therefore, home market
merchandise was the "foreign like product" for the purposes of calculating
CV profit.) 

97. In particular, the SAA states that the alternative statutory CV
profit and SG&A methods under section 773(e)(2)(B) of the Act apply "where
the method described in section 773(e)(2)(A) cannot be used, either
because there are no home market sales of the foreign like product or
because all such sales are at below cost prices." SAA at 840. 

98. SAA at 833. 

99. RHP Bearing Ltd. v. United States, 83 F. Supp. 2d 1322 (Ct. Int'l
Trade 1999). 

100. See Abitibi case brief at 24. 

101. See Abitibi case brief at 24, see also Slocan case brief at 17 and
19 and BCLTC case brief at 13. 

102. See Abitibi case brief at 29, see also Slocan case brief at 15,
Weyerhaeuser case brief at 45, West Fraser case brief at 18 and 19. 

103. See Abitibi case brief at 29. 

104. See Weyerhaeuser case brief at 44; see also 19 U.S.C. 1677(a)(1)(A). 

105. See Weyerhaeuser case brief at 45. 

106. See West Fraser case brief at 18, quoting Argentina - Definitive
Antidumping Measures on Imports of Ceramic Floor Tiles from Italy,
WT/DS189/R, at  6.116 (September 28, 2001). See also BCLTC case brief at
14. 

107. See Final Determination of Sales at Less Than Fair Value: Greenhouse
Tomatoes From Canada, 67 FR 8781 (February 26, 2002). 

108. See the petitioners' case brief regarding West Fraser at 10; see
also the petitioners' case brief regarding Canfor at 10, the petitioners'
case brief regarding Slocan at 9, the petitioners' case brief regarding
Abitibi at 10, the petitioners' case brief regarding Weyerhaeuser at 10
and the petitioners' case brief regarding Tembec at 10. 

109. See the petitioners' case brief regarding regarding West Fraser at
12 and 15, the petitioners' case brief regarding Abitibi at 10, the
petitioners' case brief regarding Weyerhaeuser at 10, the petitioners'
case brief regarding Tembec at 11, the petitioners' case brief regarding
Canfor at 10 and the petitioners' case brief regarding Slocan at 10. 

110. See Slocan rebuttal brief at 5; see also Canfor rebuttal brief at 5,
Tembec rebuttal brief at 7, West Fraser rebuttal brief at 5, Weyerhaeuser
rebuttal brief at 5, BCLTC rebuttal brief at 5 and 6. 

111. See West Fraser rebuttal brief at 6. 

112. See Abitibi rebuttal brief at 16. 

113. See Abitibi rebuttal brief at 17; see also West Fraser rebuttal
brief at 9 and 10, BCLTC rebuttal brief at 6 and 7. 

114. See Abitibi rebuttal brief at 12. 

115. See Abitibi rebuttal brief at 13; see also West Fraser rebuttal
brief at 8 and 9. 

116. See Abitibi rebuttal brief at 13. 

117. See the petitioners' case brief regarding common issues at 3. 

118. Certain respondents had already submitted databases containing data
for similar merchandise, while others had not. Among those respondents
that had submitted data for similar merchandise, some had reported all
similar sales, while others had reported only selected similar sales. In
order to ensure consistency across all respondents, the Department
instructed all companies to submit home market sales on a uniform basis. 

119. Abitibi case brief at 30. 

120. U.H.F.C. v. United States, 916 F.2d 689 (Fed Cir. 1990). 

121. Weyerhaeuser case brief at 47. 

122. Abitibi case brief at 32. 

123. E.g., Tembec case brief at 37-38, including note 40; Slocan case
brief at 22-24. 

124. If comparison market prices are not used because they may be outside
the ordinary course of trade, the Department would never be able to
calculate value-based difmers. See Abitibi case brief at 35. 

125. Id. at 34; Tembec case brief at 37; West Fraser case brief at 23;
and Weyerhaeuser case brief at 50. 

126. Abitibi case brief at 35. 

127. Abitibi case brief at 37; see also Weyerhaeuser case brief at 49. 

128. Abitibi case brief at 38; see also Slocan case brief at 22; and
Weyerhaeuser rebuttal brief at 5. 

129. Weyerhaeuser case brief at 48. 

130. Id. at 49. 

131. West Fraser case brief at 27. 

132. Slocan case brief at 25. 

133. Slocan case brief at 28 - 29. 

134. Slocan case brief at 29. 

135. Slocan case brief at 30, note 12. 

136. Slocan case brief at 31. 

137. Abitibi rebuttal brief at 18. 

138. Id. 

139. The petitioners' rebuttal brief regarding common issues at 8,
characterizing the Preliminary Determination (66 FR 56062, 56066). 

140. The petitioners' rebuttal brief regarding common issues at 8; see
also Notice of Final Determination of Sales at Less Than Fair Value:
Nepheline Syenite from Canada, 57 FR 9237, 9240 (March 17, 1992). 

141. Id. at 12. 

142. Id. at 7. 

143. The petitioners' rebuttal brief regarding common issues at 9. 

144. The petitioners' rebuttal brief regarding common issues at 10; see
also Preliminary Determination at 57 FR 56062, 56066. 

145. The petitioners' rebuttal brief regarding common issues at 9. 

146. Id. at 11. 

147. Id. at 9. 

148. Slocan rebuttal brief at 19. 

149. Canfor rebuttal brief at 6. 

150. See Department of Commerce, Differences in Merchandise; 20% Rule,
Policy Bulletin 92.2 (July 29, 1992). 

151. See Antidumping Duties; Countervailing Duties; Final Rule, 62 FR
27296, 27370 (May 19, 1997) and section 351.411(b) of the Department's
regulations. 

152. The parties agreed that it was not appropriate to compare across
species. 

153. Abitibi rebuttal brief at 7. 

154. See, e.g., Certain Cut-to-Length Steel from Finland, 62 FR 18468,
18473 (April 1997). 

155. See Nepheline Syenite, 57 FR at 9240. 

156. See Abitibi case brief at 70; West Fraser Case Brief at 40; See also
Notice of Agreement; Monitoring and Enforcement Pursuant to Sections 301
and 306: Canadian Exports of Softwood Lumber, 61 FR 28626 (June 5, 1996)
(SLA). 

157. See Abitibi case brief at 71; Weyerhaeuser case brief at 55; See
also SLA. 

158. See Abitibi case brief at 70; West Fraser case brief at 40; See also
First Submission of the United States, December 30, 1998 at 8. 

159. See Abitibi case brief at 71. 

160. See Weyerhaeuser case brief at 56; See also Certain Cotton Yarn
Products from Brazil, 55 FR 3442 (February 1, 1990). 

161. See the petitioners' general issues rebuttal brief at 42; See also
SLA. 

162. SLA Article I.1. 

163. We note that, in Cotton Yarn Products from Brazil, we offset the net
countervailable subsidy rate by the amount of export taxes because the
taxes were specifically intended to offset the subsidies received. 

164. A board foot is any piece of wood that is 144 cubic inches in
volume, usually described as a piece of wood 12 inches long by 12 inches
wide by 1 inch thick. 14.7 billion board feet = 34,692,000 cubic meters. 

165. See Floral Trade Council v. United States, 41 F. Supp. 2d 319, 322
n.4 (Ct. Int'l Trade 1999) and FAG Italia v. United States, Ct. No. 97-02-
00260-S, slip-op. 00-154, (Ct. Int'l Trade 2000). 

166. Notice of Final Determination of Sales at Less Than Fair Value: Pure
Magnesium from Israel 66 FR 49349 (September 27, 2001) referencing "Issue
and Decision Memorandum " from Richard W. Moreland, Deputy Assistant
Secretary for Import Administration, to Faryar Shirzad, Assistant
Secretary for Import Administration, September 14, 2001, comment 6. 

167. See Notice of Final Determination of Sales At Less Than Fair Value:
Pure Magnesium from Israel, 66 FR, 49349 (September 27, 2001) referencing
"Issues and Decision Memorandum" from Richard W. Moreland, Deputy
Assistant Secretary for Import Administration, to Faryar Shirzad,
Assistant Secretary for Import Administration, comment 6. 

168. See Memorandum to Neal M. Halper through Michael P. Martin from
Taija Slaughter: Verification Report on the Cost of Production and
Constructed Value Data Submitted by Canfor Corporation; (February 4, 2002)
at 27-28. 

169. See Final Results of Antidumping Duty Administrative Review: Certain
Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products from Korea
62 FR 18404,18430 (April 15, 1997). 

170. See U.S. Department of Commerce Internal Memorandum from Peter S.
Scholl to Neal M. Halper, Case No. A-122-838 at 24-25 (January 29,
2002)("Cost Verification Report"). 

171. See ACAH case brief at 3. 

172. See BCLTC case brief at 20; OFIA/OLMA case brief at 7; Canfor case
brief at 11; and Weyerhaeuser case brief at 53. 

173. See Tembec case brief at 27. 

174. See West Fraser case brief at 37, see also Abitibi case brief at 89. 

175. See BCLTC case brief at 20; Abitibi case brief at 91; Canfor case
brief at 10; and Weyerhaeuser case brief at 51. 

176. See Abitibi case brief at 91. 

177. See Tembec case brief at 26; see also Abitibi case brief at 90. 

178. See BCLTC case brief at 20, and cite to Rust. v. Sullivan, 500 U.S.
173, 187 (1991); see also West Fraser case brief at 39, and cite to Cinsa,
S.A. de C.V. v. United States, 966 F. Supp. 1230, 1238 (Ct. Int'l. Trade
1997). 

179. See BCLTC case brief at 21, and cite to section 773(a) of the Act. 

180. See OFIA/OLMA case brief at 8. 

181. The terms European Community and European Union are used
interchangeably. 

182. See ACAH case brief at 2; BCLTC case brief at 20; OFIA/OLMA case
brief at 

7 and 8; Abitibi case brief at 87; Canfor case brief at 10; Slocan case
brief 56; Tembec case brief at 25; West Fraser case brief at 37and 38; and
Weyerhaeuser case brief at 51. 

183. See Abitibi case brief at 87and 88; Canfor case brief at 10; and
West Fraser case brief 38. 

184. See OFIA/OLMA case brief at 8. 

185. See BCLTC case brief at 20 and 21; OFIA/OLMA case brief at 8;
Abitibi case brief at 92; and Slocan case brief at 56. 

186. See BCLTC case brief at 21, and cite to Murray v. Schooner Charming
Betsy, 6 U.S. 64, 118 (1804); OFIA/OLMA case brief at 16 and 17; Abitibi
case brief at 92; West Fraser case brief at 38; and Weyerhaeuser case
brief at 51. 

187. See OFIA/OLMA case brief at 8. 

188. See the petitioners' rebuttal brief at 43. 

189. See Id. at 45. The SAA addresses the effect of the report issued
under the WTO Dispute Settlement Understanding by the WTO Dispute
Settlement Panel and the Appellate Body. 

190. See Id. 

191. See Id. at 43; and cites to Section 735(c)(1)(B)(i)(I) and Sections
771(35)(A) and (B )of the Act. 

192. See Id. at 44, and cite to Issues and Decision Memorandum for Hot-
Rolled Carbon Steel Flat Products from the Netherlands, 66 Fed. Reg.
50,408 (final, 2001) (Netherlands Hot-Rolled Decision Memo). 

193. See the petitioners' rebuttal brief at note 116. 

194. See Id. 

195. See Id; see also Erie Railroad v. Tompkins, 304 U.S. 64 (1938). 

196. See the petitioners' rebuttal brief at 46; see also Netherlands Hot-
Rolled Decision Memo and Porcelain-on-Steel Cookware From Mexico: 13th
Administrative Review, No. USA-MEX-01-1904-02 (NAFTA Bi-national Panel
Review), at 53-54 (September 7, 2001). 

197. See 926 F. Supp. 1138, 1150-51 (Ct. Int'l Trade 1996). 

198. For a list of recent cases where the Department has applied its
zeroing practice see the petitioners' general issues rebuttal brief at
note 118. 

199. See Maritime case brief at 1. 

200. See Id. at 2; see also Notice of Preliminary Affirmative
Countervailing Duty Determination, Preliminary Affirmative Critical
Circumstances Determination, and Alignment of Final Countervailing Duty
Determination With Final Antidumping Duty Determination: Certain Softwood
Lumber Products From Canada,66 FR 43186, 40229 (August 17, 2001). 

201. See Maritime case brief at 6. 

202. See Id. 

203. See Id. at 7 and 8. 

204. See the petitioners' general issues rebuttal brief at 48. 

205. See Id. at 49; see also 19 CFR 351.204(e). 

206. See Abitibi rebuttal brief at 26. 

207. See Section 731 of the Act. 

208. See Section 732(a) of the Act. 

209. See Notice of Final Determination at Sales of Less than Fair Value:
Certain Pasta from Italy, 61 FR 30326 (June 14, 1996). 

210. See Abitibi case brief at 79. 

211. See Id. at notes 146, 148; See also Status International S.A. v. M&D
Maritime Ltd, 994 F. Supp. 182, 186 (S.D.N.Y. 1988); United States v.
Bestfoods (Bestfoods), 524 U.S. 51, 61 (Supreme Court 1998). In the
Bestfoods decision, Abitibi notes, the Supreme Court determined that
"'{i}n order to abrogate a common-law principle, the statute must speak
directly to the question addressed by the common law.'" 

212. See Abitibi case brief at 80. 

213. See Id. at 81; See also Nextwave Personal Communications Inc. v.
Federal Communication Commission, 254 F.3d 130, 133 (D.C. Cir. 2001). 

214. See Abitibi case brief at 81. 

215. See Id. at 82. 

216. See Id. at 82-83; See also FAG Kugelfischer Georg Schafer KgaA v.
United States, 932 F. Supp. 315, 322-4 (Ct. Int'l Trade 1996); Nihon
Cement Co. v. United States, 17 CIT 400, 1993 WL 185208 (Ct. Int'l Trade
1993). 

217. See Abitibi case brief at note 158; See also section
733(a)(1)(A)(ii) of the Act and 351.222(b)(2)(i)(C) of the Department's
regulations. 

218. See Abitibi case brief at note 159; See also section 771(7)(F)(ii)
of the Act and Amended Regulation Concerning the Revocation of Antidumping
and Countervailing Duty Orders, 64 FR 51236, 51238 (September 22, 1999). 

219. See Id. at 84. 

220. See Id. at 85; See also Abitibi's November 29, 2001 submission at
027. 

221. Abitibi notes that SSL pays Abitibi to perform some of its planing
and drying operations at an Abitibi mill, but Abitibi contends that the
Department's major input rule ensures that this arrangement does not
enable production or cost manipulation. 

222. The petitioners cite Queen's Flowers de Colombia v. United States,
881 F. Supp. 617, 622 (Ct Int'l Trade 1997) and Steel Concrete Reinforcing
Bars from the Republic of Korea, Issues and Decision Memorandum, 66 FR
33526 (June 2001). See the petitioners' rebuttal brief regarding Abitibi
at 2. 

223. The petitioners cite to the preamble to the Department's regulations
(62 FR 27296, 27345) for support. See the petitioners' rebuttal brief
regarding Abitibi at 3. They also note that, subsequent to the
promulgation of the Department's "potential manipulation" standard, the
CIT has upheld the Department's decision to collapse two entities. See
Koenig & Bauer-Albert AG v. United States, 90 F. Supp. 2d 1284, 1286-87
(Ct. Int'l Trade 2000); See also AK Steel Corp. v. United States, 34 F.
Supp 2d 756, 764 (Ct. Int'l Trade 2998), aff'd in part, rev'd in part, 203
F.3d 1330(Fed. Cir. 2000). 

224. See the petitioners' rebuttal brief regarding Abitibi at 5. 

225. See Memorandum from Amber Musser and Chris Riker to Bernard Carreau:
Collapsing of Respondent Abitibi-Consolidated Inc. with Scierie Saguenay
Ltee. (July 18, 2001). 

226. We note that our decision, with respect to the issue of affiliation,
in this investigation is consistent with our decision in Certain Hot-
Rolled Carbon Steel Flat Products from Taiwan (Hot Rolled). In Hot Rolled,
we found that China Steel Corporation (China Steel) and Yieh Loong
Enterprise Co. (Yieh Loong) were affiliated based on a significant
potential for manipulation and specifically noted that the Department's
regulations do not require past manipulation of prices or production to
have occurred. See Notice of Final Determination of Sales at Less Than
Fair Value: Certain Hot-Rolled Carbon Steel Flat Products from Taiwan, 66
FR 49618, September 28, 2001. Furthermore, despite the fact that China
Steel only had a minority interest in Yieh Loong, we found they were
affiliated due to the fact that China Steel was the largest shareholder in
Yieh Loong, China Steel's officers were two of the three members of Yieh
Loong's board of directors, and the operations of the two companies are
closely intertwined. See "Issues and Decision Memorandum for the
Antidumping Investigation of Certain Hot-Rolled carbon Steel Flat Products
from Taiwan" from Joseph A. Spetrini, Deputy Assistant Secretary,
Enforcement Group 3, to Faryar Shirzad, Assistant Secretary for Import
Administration, September 17, 2001, Comment 1. Thus, we find that
determining affiliation in these types of investigations is a highly fact
dependent process and not one completely controlled by the Act or the
Department's regulations, although these sources provide guidance. 

227. For support, Abitibi cites sections 773(e)(2)(A) and 773(b)(3)(B) of
the Act; Issues and Decision Memorandum for the Antidumping Investigation
of Honey from Argentina (October 4, 2001) (Honey from Argentina); and
Notice of Final Determination of Sales at Less Than Fair Value: Extruded
Rubber Thread from Indonesia, 64 FR 14690 (March 26, 1999). 

228. See Issues and Decision Memorandum for the Antidumping Duty
Administrative Reviews on Large Newspaper Printing Presses and Components
Thereof, Whether Assembled or Unassembled, from Germany (February 26,
2001) (LNPPs from Germany); Silicon Metal From Brazil: Final Results of
Antidumping Duty Administrative Review and Determination Not To Revoke in
Part, 62 FR1970 (January 14, 1997); Issues and Decision Memorandum fro the
Administrative Review of Circular Welded Non-Alloy Steel Pipe from the
Republic of Korea (April 11, 2001); Issues and Decision Memorandum for the
Administrative Review of Brass Sheet and Strip from Canada (June 15,
2000); and Notice of Final Results and Partial Rescission of Antidumping
Duty Administrative Review: Certain Pasta From Turkey, 63 FR 68429
(December 11, 1998). 

229. See E.I. Dupont De Nemours & Company v. the United States, Slip 98-7
at 16 (Ct. Int'l Trade 1998). 

230. See, e.g., Notice of Final Determination of Sales at Less Than Fair
Value: Certain Hot-Rolled Carbon Steel Flat Products From Kazakhstan, 66
FR 50397 (October 3, 2001). 

231. See section 773(f)(1)(A) of the Act. 

232. See Notice of Final Determination of Sales at Less Than Fair Value:
Fresh Atlantic Salmon From Chile, 63 FR 31411, (June 9, 1998) (Salmon from
Chile) and Final Determination of Sales at Less Than Fair Value: New
Minivans From Japan, 57 FR 21937 (May 26, 1992). 

233. See, Memorandum from LaVonne Jackson to Neal Halper, Verification
Report on the Cost of Production and Constructed Value Data Submitted by
Abitibi Consolidated Inc., January 22, 2001, pp. 8, and 32 ("Cost
Verification Report"). 

234. See, footnote 3 of Abitibi's audited consolidated financial
statements, appendix A-12 of Abitibi's June 22, 2001 section A response. 

235. See Honey from Argentina and Salmon from Chile. 

236. See, e.g., LNPPs from Germany. 

237. See, e.g., Salmon from Chile. 

238. See Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan ("SRAMs from
Taiwan"), 63 FR 8909 (February 23, 1998). 

239. See Issues and Decision Memorandum from the Administrative Review of
Stainless Steel Bar from Japan ("Stainless Steel Bar from Japan"), (March
14, 2000). 

240. See Aramid Fiber from the Netherlands: Cost of Production Analysis
for Final Results of Review Memorandum (September 25, 1996). 

241. See Issues and Decision Memorandum for the Antidumping Duty
Administrative Review of Persulfates from the People's Republic of China
(August 14, 2001) and Notice of Final Determination of Sales at Less Than
Fair Value: Stainless Steel Wire Rod From Sweden, 63 FR 40449 (July 29,
1998). 

242. See Aramid Fiber Formed of Poly Para-Phenylene Terephthalamide From
the Netherlands; Final Results of Antidumping Administrative Review
("Aramid Fiber from the Netherlands"), 64 FR 61822 (November 15, 1999). 

243. See e.g., SRAMs from Taiwan, and Porcelain-on-Steel Cookware From
Mexico: Notice of Final Results of Antidumping Duty Administrative Review
(POS Cookware from Mexico), 62 FR 25908 (May 12, 1997). 

244. See SRAMs from Taiwan, POS Cookware from Mexico, and Final
Determination of Sales at Less Than Fair Value: Oil Country Tubular Goods
from Austria, 60 FR 33551 (June 28, 1995). 

245. See Dupont De Nemours & Company v. United States, Slip Op. 99-47
(Ct. Int'l Trade 1999). 

246. See E.I. Dupont De Nemours & Company v. the United States, Slip 98-7
at 16 (Ct. Int'l Trade 1998). 

247. See the petitioners' case brief regarding Canfor at 24 and 25. 

248. See Id. at 23 for specific Federal Register cites used by the
petitioners to support the use of adverse facts available. 

249. See Canfor rebuttal brief at 14, and cite to the Department's
simplified reporting requirements letter to Kaye Scholer LLP from Gary
Taverman, Office Director, Group II, Office V (June 26, 2001). 

250. See Canfor rebuttal brief at 11. 

251. See Id. at 13. 

252. See Id. at 15. 

253. See Id. 

254. See Id. at 17; see also Notice of Preliminary Affirmative
Countervailing Duty Determination, Preliminary Affirmative Critical
Circumstances Determination, and Alignment of Final Countervailing Duty
Determination With Final Antidumping Duty Determination: Certain Softwood
Lumber Products From Canada, 66 FR 43186 (August 17, 2001) (CVD Prelim). 

255. See Canfor rebuttal brief at 17. 

256. See Id. at 19, see also Antidumping Questionnaire at B-7. 

257. See Canfor rebuttal brief at 19. 

258. See Id. at note 12. 

259. See Id. at 16, and cite to Canfor's section A response at Exhibit A-
16, page 31 (June 22, 2001); see also Canfor's November 19, 2001
submission at Exhibit A-16, page 27. 

260. See Kaye Scholer LLP's submission on behalf of Canfor dated May 3,
2001, at 10; see also Kaye Scholer LLP's submission on behalf of Canfor
dated May 21, 2001, at 3; Kaye Scholer LLP's submission on behalf of
Canfor dated June 8, 2001, at 3; and Kaye Scholer LLP's submission on
behalf of Canfor dated 

June 20, 2001. 

261. See the petitioners' submission of May 11, 2001 at 16. 

262. See the petitioners' submission of June 8, 2001 at 14. 

263. See Kaye Scholer LLP's submission on behalf of Canfor dated June 25,
2001, at 9-11. 

The petitioners objected to that request in their submission of July 2,
2001. The Department met with Canfor on 

July 3, 2001, to discuss its exclusion requests for fascia, furring
strips and trim blocks, and on July 17, 2001, 

the Department denied Canfor's request to exempt those products from
reporting. 

264. See the petitioners' case brief at 31, see also Notice of Final
Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and
Strip in Coils From Germany, 64 FR 30,740 (June 8, 1999) (Stainless Coils
from Germany). 

265. See Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909
(February 23, 1998); see also Notice of Final Determination of Sales at
Less Than Fair Value: Certain Steel Concrete Reinforcing Bars From Turkey,
62 FR 9737 (March 4, 1997); 

and Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Round Wire from Taiwan, 64 FR 17336 (April 9, 1999). 

266. See Asociacion Colombiana de Exportadores de Flores v. United
States, 6 F. Supp. 2d 865, 879 (Ct. Int'l Trade 1998) and Notice of Final
Determination of Sales At Less Than Fair Value: Steel Concrete Reinforcing
Bars from Korea, 66 FR 33526 (June 22, 2001) referencing "Issues and
Decision Memorandum from Bernard Carreau, Deputy Assistant Secretary for
Import Administration to Faryar Shirzad, Assistant Secretary for Import
Administration, at comment 7. 

267. See, e.g. Notice of Final Results of Antidumping Duty Administrative
Review of Silicon Metal from Brazil, 64 FR 6305, 6311 (February 9, 1999). 

268. See the petitioners' case brief regarding Canfor at page 31. 

269. See the petitioners' case brief regarding Canfor at page 31. 

270. See Canfor's rebuttal brief at page 26. 

271. S ee Canfor's rebuttal brief at page 26. 

272. See Slocan case brief at 67. 

273. See the petitioners' rebuttal brief regarding Slocan at 6. 

274. See the petitioners' rebuttal brief regarding Slocan at 6 and 7;
see, also 19 CFR 351.401(c) (2001). 

275. See the petitioners' rebuttal brief regarding Slocan at 8. 

276. See the petitioners' case brief regarding Slocan at 22. 

277. See the petitioners' case brief regarding Slocan at 23; see also
Florex v. United States, 705 F. Supp. 582, 588, 13 CIT 28, 33 (Ct. Int'l
Trade 1988) and Persico Pizzamiglio v. United States, 16 CIT 299(Ct. Int'l
Trade 1994). 

278. See Slocan rebuttal brief at 10. 

279. See Slocan rebuttal brief at 10. 

280. See the petitioners' case brief regarding Slocan at 25; see also
Notice of Final Determination of Sales at Less Than Fair Value: Certain
Cut-to-Length Carbon Steel Plate from South Africa, 62 FR 61747 (November
19, 1997). 

281. See Slocan rebuttal brief at 13. 

282. See Slocan rebuttal brief at 13. 

283. See the petitioners' case brief regarding Slocan at 26; see also the
Department's sales verification report at 2. 

284. See the petitioners' case brief regarding Slocan at 25 and 26. 

285. See Slocan rebuttal brief at 13. 

286. See petitioners' rebuttal brief regarding Slocan at 2. 

287. See petitioners' rebuttal brief regarding Slocan at 4. 

288. See Memorandum from Christopher Smith to Bernard Carreau, Deputy
Assistant Secretary, Group II, regarding ministerial error allegations, at
2 (January 11, 2002).




289. See Final Results of Antidumping Duty Administrative Review: Certain
Preserved Mushrooms from Indonesia, 66 FR 36754 (July 13, 2001)
referencing " Issues and Decision Memorandum" from Richard Moreland,
Deputy Assistant Secretary for Import Administration to Bernard Carreau,
fulfilling the Duties of Assistant Secretary for Import Administration,
comment 8. 

290. Tool Steel from the Federal Republic of Germany; Correction to Early
Determination of Antidumping Duty, 51 FR 10071, 10072 (March 24, 1986) and
Final Results of Antidumping Duty Administrative Review of Solid Urea from
the Former German Democratic Republic, 62 FR 61271 (November 17, 1997). 

291. Notice of Final Determination of Sales at Less than Fair Value;
Certain Hot-Rolled Carbon Flat Products from the Netherlands, 66 FR 50408
(October 3, 2001). 

292. Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909, 8930
(February 23, 1998). 

293. See Notice of Final Results of Antidumping Duty Administrative
Review: Oil Country Tubular Goods from Mexico, 66 FR 15832 (May 15, 2001),
referencing "Issues and Decision Memorandum" from Joseph A. Spetrini,
Deputy Assistant Secretary for Import Administration, to Bernard T.
Carreau, fulfilling the duties of Assistant Secretary for Import
Administration, comment 5; Notice of Final Determination of Sales At Less
Than Fair Value; Certain Hot-Rolled Carbon Steel Flat Products from
Thailand, 66 FR 49622 (September 28, 2001), referencing "Issue and
Decision Memorandum " from Joseph A. Spetrini, Deputy Assistant Secretary
for Import Administration, to Faryar Shirzad, Assistant Secretary for
Import Administration, comment 7; Notice of Final Determination of Sales
at Less Than Fair Value; Stainless Steel Round Wire from Canada, 64 FR
17324, 17333 (April 9, 1999); and Notice of Final Determination of Sales
at Less Than Fair Value; Fresh Atlantic Salmon from Chile, 63 FR 31411,
31433 (June 9, 1998). 

294. See Notice of Final Determination of Sales at Not Less Than Fair
Value; Low Enriched Uranium from the United Kingdom, Germany and the
Netherlands 66 FR 65886 (December 21, 2001) referencing "Issue and
Decision Memorandum " from Bernard T. Carreau, Deputy Assistant Secretary
for Import Administration, to Faryar Shirzad, Assistant Secretary for
Import Administration, comment 23. 

295. See West Fraser case brief at 42-43. 

296. See Id. at 44. 

297. See Id. at 44-45. 

298. See West Fraser sales verification report (January 22, 2002) at 24-
27. 

299. See the petitioners' case brief regarding West Fraser at 22. 

300. See Id., at 23. 

301. See Id., at 24. 

302. See West Fraser sales verification report, Document 9 of
verification Exhibit 1 and verification Exhibit 13. 

303. See Weyerhaeuser case brief at 58. 

304. See the petitioners' case brief regarding Weyerhaeuser at 25. 

305. See the Department's verification agenda at 2. 

306. See the petitioners' case brief regarding Weyerhaeuser at 26. 

307. See Weyerhaeuser rebuttal brief at 16. 

308. See Weyerhaeuser rebuttal brief at Exhibit 1. 

309. See the petitioners' case brief at 29-30, citing the Department's
sales verification report at 42. 

310. See Id. at 30. 

311. See Id. at 30-31. 

312. See Weyerhaeuser rebuttal brief at 20 and 21. 

313. See Id. 

314. See Id. at 38. 

315. See the petitioners' case brief at 31-32. 

316. See Id. at 32-33. 

317. See Weyerhaeuser's Second Supplemental Response at 17. 

318. See Weyerhaeuser case brief at 78; see also Weyerhaeuser's rebuttal
brief at 29. 

319. See the petitioners' case brief regarding Weyerhaeuser at 35. 

320. See Id. at 36. 

321. See Id. 

322. See Weyerhaeuser's rebuttal brief at 29. 

323. See Id. at 27. 

324. See Id. at 28. 

325. See Id. 

326. See Id. 

327. See Id. at 29. 

328. See Id. 

329. See the petitioners' case brief regarding Weyerhaeuser at 37. 

330. See Weyerhaeuser rebuttal brief at 30. 

331. We note that section 776(a) of the Act directs the Department to use
facts available if:

(1) necessary information is not available on the record, or (2) an
interested party or any other person (A) withholds information that has
been requested by the administering authority or the Commission under this
title, (B) fails to provide such information by the deadlines for
submission of the information or in the form and manner requested, subject
to subsections (c)(1) and (e) of section 782, (C) significantly impedes a
proceeding under this title, or (D) provides such information but the
information cannot be verified as provided in section 782(i). 

332. See Weyerhaeuser sales verification report at 42. 

333. See Notice of Final Results of Antidumping Duty Administrative
Review: Certain Forged Steel Crankshafts From the United Kingdom (October
21, 1996). 

334. See the Department's Sales Verification Report regarding
Weyerhaeuser at page 28. 

335. See Weyerhaeuser's second supplemental B and C questionnaire, dated
December 5, 2001 at page 14. 

336. See Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909
(February 23, 1998); see also Notice of Final Determination of Sales at
Less Than Fair Value: Certain Steel Concrete Reinforcing Bars From Turkey,
62 FR 9737 (March 4, 1997); and Notice of Final Determination of Sales at
Less Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336
(April 9, 1999). 

337. See the petitioners' case brief regarding Weyerhaeuser at 21-23. 

338. See January 18, 2002 letter to the Department. 

339. See the petitioners' cite to Mitsui & Co. v. United States, 18
C.I.T. 185, 201 (Ct. Int'l Trade 1994) for the proposition that "parties
mus be given a reasonable and meaningful opportunity to participate ...." 

340. See the petitioners' case brief at 23. 

341. Note the differentiation between WBM-U.S., located in the United
States, and WBM, located in Canada. 

342. See the petitioners' case brief regarding Weyerhaeuser at 34. 

343. See Id. at 33 and 34. 

344. See Id. at 34, see also cites to the Final Determination of Certain
Cold-Rolled Carbon Steel Flat Products from Korea, 63 Fed. Reg. 781, 802
(1998) (Cold-Rolled from Korea) and Fabrique De Fer Charlerois S.A. v.
United States, Slip-Op 01-140 at 11 (Ct. Int'l Trade) (December 4, 2001)
(Fabrique). 

345. See Weyerhaeuser rebuttal brief at 25; see also cite to February 4,
2002 Weyerhaeuser Sales Verification Report at 38 and 56. 

346. See Id. at 26. 

347. See Id. 

348. See Weyerhaeuser rebuttal brief at 27. 

349. See Miller & Chevalier's section B and C questionnaire response on
behalf of Weyerhaeuser, dated 

July 23, 2001, at C-36. 

350. See Final Determination of Certain Cold-Rolled Carbon Steel Flat
Products from Korea, 

63 Fed. Reg. (1998). 

351. See the petitioners' case brief regarding Weyerhaeuser at 40. 

352. See Weyerhaeuser rebuttal brief at 31. 

353. See Notice of Final Determination of Sales at Less Than Fair Value:
Static Random Access Memory Semiconductors From Taiwan, 63 FR 8909
(February 23, 1998); see also Notice of Final Determination of Sales at
Less Than Fair Value: Certain Steel Concrete Reinforcing Bars From Turkey,
62 FR 9737 (March 4, 1997); and Notice of Final Determination of Sales at
Less Than Fair Value: Stainless Steel Round Wire from Taiwan, 64 FR 17336
(April 9, 1999). 

354. See the February 4, 2002 Weyerhaeuser Verification Report at 49; see
also Exhibits F-8 and F-9. 

355. See Weyerhaeuser case brief at 78. 

356. See Id. at 77. 

357. See the petitioners' case brief at 27, quoting Florex v. United
States, 705 F. Supp. 582, 588 (Ct. Int'l Trade 1988). 

358. See the petitioners' cite to Notice of Final Determination of Sales
at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from
South Africa, 61 FR 61731, as precedent. 

359. See Weyerhaeuser case brief at 79; see also February 4, 2002
Weyerhaeuser Sales Verification Report at 45. 

360. Cost Verification Report at page 3. 

361. See Stainless Steel Bar From India, 65 Fed. Reg. 48965 (Dep't
Commerce 2000), that practice was recently affirmed in AK Steel Corp., 34
F. Supp.2d at 765 ; see also section 773(b)(3) of the Act (costs include
material costs used in producing the foreign like product). 

362. See, e.g., Koyo Seiko Co. v. United States 92 F.3d 1162, 1165 (Fed.
Cir. 1996); Cultivos Miramonte, S.A. v. United States 980 F. Supp. 1268,
1270 (Ct. Int'l Trade 1997). 

363. See Memorandum to: Neal Halper, Director, Office of Accounting -
Verification Report on the Cost of Production and Constructed Value Data
Submitted by Weyerhaeuser Company Ltd. and attached cost verification
exhibit 52. 

364. Id. at 3. 

365. See Intermediate Accounting, Welsch, Zlatkovich, and Harrision, 6th
Edition (1982) at 414. 

366. Gray Portland Cement and Clinker from Mexico (Gray Portland Cement
and Clinker from Mexico, 58 Fed. Reg. 47253, 47257 (Dep't Commerce 1993)
(final)), they argue that the Department calculated an amount for
depletion stating: "{I}n this case, following Mexican GAAP would result in
an inaccurate measurement of cost since the mine depletion expenses would
not be included as part of COP, yet all costs incurred must be reflected
in COP." 

367. See Weyerhaeuser's Section A response at exhibit A-15, pages 53 and
63 of Annual Report. 

368. See, e.g., Issues and Decision Memorandum for the Final Results of
the Antidumping Duty Administrative Review and Final Determination Not to
Revoke in Part: Canned Pineapple Fruit from Thailand, 65 Fed. Reg. 77851,
Comment 12 (December 13, 2000) (cost included in G&A should arise from the
company's operations at issue); Issues and Decision Memorandum for the
Final Determination in the Antidumping Duty Investigation of Expandable
Polystyrene Resins From the Republic of Korea, 65 Fed. Reg. 69284, Comment
7 (November 16, 2000) (Department excluded certain selling expenses
because these costs do not relate to the cost of production); and Issues
and Decision Memorandum for the 1998-1999 Administrative Review of Oil
Country Tubular Goods from Mexico: Final Results of Antidumping Duty
Administrative Review, 66 Fed. Reg. 15832, Comment 5 (March 21, 2001)
("there is no bright-line definition in the Act of what a G&A expense is
or how the G&A expense rate should be calculated, the Department has, over
time, developed a consistent and predictable practice for calculating and
allocating G&A expenses. This consistent and predictable method is to
calculate the rate based on the company-wide G&A costs incurred by the
producing company"). 

369. See, e.g., Brass Sheet and Strip from Canada: Final Results of
Antidumping Duty Administrative Review, 65 FR 37520 (June 15, 2000) (the
Department found that respondent's allocation of an appropriate portion of
its corporate parent's G&A expenses to the production of subject
merchandise was reasonable and representative. The Department further
explained that it used consolidated cost of sales to allocate the parent
G&A expenses.); Porcelain-on-Steel Cookware from Mexico, 66 Fed. Reg.
12,926 (March 1, 2001) (Final AR) (Department stated that "Our preferred
methodology, as set out in section 773(e) of the Act, is to base the G&A
factor on the actual amounts incurred and realized by the specific
exporter or producer being examined in the review." The Department also
explained that would double-count costs if it included subsidiary G&A
expenses that had already been accounted for elsewhere.). 

370. See Weyerhaeuser's Section A Response, Exh. A-15, page 53 of Annual
Report. 

371. See, e.g., Pasta from Italy: Final Results of Antidumping Duty
Administrative Review, 65 FR 77852 (December 13, 2000) (the Department
stated that "When calculating ratios, the denominator in the ratio and the
amount to which the ratio is applied must be on the same basis. To do
otherwise misstates the results.). 

372. See, e.g., Fresh Cut Roses From Colombia, 60 Fed. Reg. 6980, 7016
(Dep't Commerce 1995) (final); and Certain Cut-to-Length Steel Plate From
Germany, 61 Fed. Reg. 13834, 13837 (Dep't Commerce 1996) (final). 

373. See Weyerhaeuser's Section A Response, Exhibit A-15, page 53 of
Annual Report. 

374. See Steel Wire Rod From Canada, 63 Fed. Reg. 9182, 9190 (Dep't
Commerce 1998) (final). 

375. See, e.g., Certain Corrosion-Resistant Carbon Steel Flat Products
and Certain Cut-to-Length Carbon Steel Plate From Canada, 62 Fed. Reg.
18448, 18465 (Dep't Commerce 1997) (final). 

376. See, e.g., Certain Corrosion-Resistant Carbon Steel Flat Products
and Certain Cut-to-Length Carbon Steel Plate From Canada, 62 Fed. Reg.
18448, 18465 (Dep't Commerce 1997) (final). 

377. See Id. 

378. See, e.g., Certain Preserved Mushroom from Indonesia, 66 Fed. Reg.
36,754, Comment 6 (July 13, 2001) (Final AR) (Department stated that
"other income" consisted of overpayment of sales, income from mushrooms
"repeat" (scrap), income from sales of scrap compost, fees from
production, and reimbursement ("finality") from employee. Consistent with
past reviews, we consider this type of income to be of a general nature,
arising from the company's operations. Therefore, we have continued to
allow it as an offset to G&A."). 

379. The Department bases its determination of whether the merchandise,
as described in the petition, constitutes a single class or kind of
merchandise on an evaluation of the criteria set forth in Diversified
Products Corp. v. United States (Diversified Products), which look to
differences in the: (1) general physical characteristics of the
merchandise, (2) the expectations of the ultimate purchaser, (3) ultimate
uses of the merchandise, (4) channels of trade in which the merchandise
moves, and (5) manner in which the product is advertised or displayed. 572
F. Supp. 883, 889 (CIT 1983) (codified in the Department's Regulations at
19 CFR 351.225 (2001)). 

380. See Memorandum to Bernard T. Carreau, Deputy Assistant Secretary,
Group II, Class or Kind Determinations and Consideration of Certain Scope
Exclusion Requests, March 12, 2002 (March 12 Scope Memo) at 2. See e.g.,
case brief regarding scope and class or kind issues from Abitibi (March
15, 2002) (Abitibi's scopebrief) at 8, case brief regarding scope and
class or kind issues from Tembec (March 15, 2002) (Tembec's scope brief)
at 1-2 (noting that Tembec incorporated by reference its earlier
submissions on scope issues), case brief regarding scope and class or kind
issues from Weyerhaeuser (March 15, 2002) (Weyerhaeuser's scope brief) at
8. The Department notes that other parties submitted briefs on this issues
which contained similar arguments. 

381. See March 12 Scope Memo at 2-4. 

382. See Id. at 3. 

383. Sections 702(c)(2) and 732(a)(1) of the Act. 

384. Section 731(1) of the Act. The relief sought would apply to all
subject merchandise that is within the scope of the investigations. See
Section 731(2) of the Act. 

385. See 19 CFR 351.225(k)(1) (2001). See also Eckstrom Industries, Inc.
v. United States, 254 F.3d 1068, 1071-72 (Fed. Cir. 2001) (citing Smith
Corona Corp. v. United States, 915 F.2d 683, 685 (Fed. Cir. 1990)). 

386. See generally Final Determination of Sales at Less Than Fair Value:
Certain Carbon Alloy Steel Wire Rod from Japan, Comment 1, 59 FR 5987, 988-
989 (Feb. 9, 1994). 

387. Minebea Co. v. U.S., 782 F. Supp. 117, 120 (CIT 1992); see also
Sundstrand Corporation v. U.S., 890 F. Supp. 1100 (CIT 1995)("The
determination as to whether a product is covered by an antidumping duty
investigation is one which the ITA must make with ample deference to the
intent of the petition."); Mitsubishi Electric Corp. v. U.S., 700 F. Supp.
538, 555 (CIT 1988) aff'd, 898 F.2d 1577, 1583 (Fed. Cir. 1990) ("The ITA
has the authority to define and/or clarify what constitutes the subject
merchandise to be investigated as set forth in the petition containing the
intent of petitioner expressed in as specific and definite terms,
descriptions, and language as reasonably expected of petitioner. . . .") 

388. See Notice of Initiation of Antidumping Duty Investigations: Spring
Table Grapes From Chile and Mexico, 66 FR 26831, 26833 (2001). See also 19
C.F.R.  351.225(k) (2001). 

389. See Torrington Co. v. U.S., 745 F. Supp. 718 (CIT 1990)(The
Department's determination to segregate the merchandise, i.e.,
antifriction bearings, into five classes or kinds was supported by
substantial evidence); see also, High Information Content Flat Panel
Displays and Display Glass Therefor from Japan: Final Determination;
Recission of Investigation and Partial Dismissal of Petition, 56 FR 32376
(July 1991) (Department determined that the petitioner's characterization
of all high information content flat panel displays as a single class or
kind was overly broad and, thus, the Department segregated the flat panel
displays into four separate classes or kinds based on the type of
technology). 

390. Notice of Final Determination of Sales at Less Than Fair Value:
Large Newspaper Printing Presses and Components Thereof, Whether Assembled
or Unassembled, from Japan, 61 FR 38139, 38140 (July 1996); Notice of
Preliminary Results of Antidumping Duty Administrative Review; Cellular
Mobile Telephones and Subassemblies from Japan, 53 FR 19318 (May 1988). 

391. See Notice of Preliminary Affirmative Countervailing Duty
Determination, Preliminary Affirmative Critical Circumstances
Determination, and Alignment of Final Determination With Final Antidumping
Duty Determination: Certain Softwood Lumber Products From Canada (CVD
Prelim), 66 FR 43186-43188 (August 17, 2001); Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of Final
Determination: Certain Softwood Lumber Products From Canada (AD Prelim),
66 FR 56062, 56078 (November 6, 2001); and Amendment to Preliminary
Determination of Sales at Less Than Fair Value and Postponement of Final
Determination: Certain Softwood Lumber Products From Canada; Amendment to
Preliminary Affirmative Countervailing Duty Determination, Preliminary
Affirmative Critical Circumstances Determination, and Alignment of Final
Determination With Final Antidumping Duty Determination: Certain Softwood
Lumber Products From Canada (Amended Prelim), 67 FR 6230 (February 11,
2002). See also Memorandum to Bernard T. Carreau from Maria MacKay, on
Antidumping and Countervailing Duty Investigations on Softwood Lumber from
Canada: Amendment to the Language of the Scope Description (January 18,
2002); Memorandum to Bernard T. Carreau from Maria MacKay, Gayle Longest,
David Layton on Scope Clarification in the Antidumping and Countervailing
Duty Investigations on Softwood Lumber from Canada (October 30, 2001);
Memorandum to Bernard T. Carreau from Maria MacKay on Scope Exclusions in
the Antidumping and Countervailing Duty Investigations on Softwood Lumber
from Canada (August 9, 2001) which are on public file in the CRU, room B-
099 of the main Commerce building. 

392. For example, Weyerhaeuser submitted arguments that Western red cedar
constitutes a separate class or kind of merchandise and should be excluded
from the investigations. See joint case brief from Weyerhaeuser and USRCMA
(March 15, 2002) (Weyerhaeuser and USRCMA joint scope brief) at 18. As
discussed in the March 12 Scope Memo where we presented our preliminary
class or kind findings, the WRC arguments are illustrative of the
different individual arguments proffered by the parties based upon the
Diversified Products criteria. Other products argued on this basis were,
Eastern white cedar, Eastern white pine, shop and better grade lumber,
Southern yellow pine, and yellow cedar. This list is not exhaustive. 

393. See March 12 Scope Memo. 

394. See Id., Appendices I and II. An example of how we analyzed scope
exclusion request is illustrated by looking at WRC. 

395. See Notice of Initiation of Antidumping Duty Investigation: Certain
Softwood Lumber Products from Canada, 66 FR 21328, 329 (Apr. 30, 2001). 

396. See Memorandum to Bernard T. Carreau from Maria MacKay, Gayle
Longest, David Layton, Scope Clarification in the Antidumping and
Countervailing Duty Investigations on Softwood Lumber from Canada (October
30, 2001). 

397. The Department acknowledges that Abitibi, Tembec, the Governments of
Canada and Quebec, the Ontario Lumber Association and others raised
similar concerns with respect to process and the adequacy of the
proceedings. 

398. See 19 U.S.C. 1673b(c)(1) (section 731(c)(1) of the Act). See also
19 C.F.R.  351.205(b)(2). 

399. See Weyerhaeuser's and USRCMA's joint brief at 3-4. 

400. See Weyerhaeuser's and USRCMA's joint brief at 1. 

401. NEC Corp. v. United States, 151 F.3d 1361, 1370 (Fed Cir. 1998). 

402. See rebuttal brief on scope and class or kind issues from the
petitioners (March 18, 2002) (petitioners rebuttal scope brief) at 2. 

403. See Id. at 2-3. 

404. See Id. at 2. 

405. See Id. at 2. The Department notes that the record for new factual
information related to scope closed on January 7, 2002. 

406. See Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Certain Softwood Lumber
Products From Canada, 66 FR 56062, 56063 (Nov. 6, 2001). 

407. See Amendment to Preliminary Determination of Sales at Less Than
Fair Value: Certain Softwood Lumber Products from Canada; Amendment to
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, 67 FR 6230, 6231 (Feb 11,
2002), (408) 

408. See Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Certain Softwood Lumber
Products From Canada, 66 Fed Reg 56062, 56063 (Nov. 6, 2001). 

409. Unfortunately, due to statutory deadlines, the Department could not
grant the requests of some parties to extend the briefing and hearing
period. 

410. See section 774 (a)(1) of the Act. 

411. See Section 774 (b) of the Act. See also 19 C.F.R.  351.301(The
Department recognizes that the regulations state that a hearing will
'ordinarily . . . be held two days after scheduled date for submission of
rebuttal briefs' (19 C.F.R.  351.310(d)(1)), but in the present
investigations because the deadline for submitting factual information had
passed and the fact that parties extensively briefed the scope issues, the
Department deviated from its ordinarily followed procedure). 

412. See Section 782(g) of the Act. 

413. See January 30, 2002 Letter from IA Office Director to Interested
Parties on antidumping briefing schedule. 

414. See Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Certain Softwood Lumber
Products From Canada, 66 FR 56062, 56078 (Nov. 6, 2001). 

415. See Notice of Preliminary Determination of Sales at Less Than Fair
Value and Postponement of Final Determination: Certain Softwood Lumber
Products From Canada, 66 FR 56062, 56078 (Nov. 6, 2001). 

416. See factual information deadline letter. 

417. See January 30, 2002 Letter from IA Office Director to Interested
Parties on antidumping briefing schedule. 

418. See generally March 12 Scope Memo. 

419. See Id. 

420. For several products, the requesters were seeking separate class or
kind treatment on the basis of marketing channels and price. See Id at 33. 

421. See, Kerr-McGee Chemical Corp. v. United States, 985 F. Supp. 1166,
1179-181, aff'd without opinion, 185 F.3d 884 (Fed. Cir. 1999)(finding
that changing the source of the surrogate value for determining normal
value between the preliminary and final determinations did not violate
procedural process), Taiyuan Heavy Machinery Import and Export Corp. v.
United States, Slip Op. 99-103, 1999 Ct. Int'l. Trade Lexis 138 at 8 (CIT
Oct. 6, 1999) (finding that irregularities in the Department's enforcement
of its regulations does not violate and procedural benefits afforded,
unless a party can demonstrate that it was substantially prejudiced by the
Departments actions), Comment 1- Brake Rotors From the People's Republic
of China: Final Results and Partial Rescission of Fourth New Shipper
Review and Rescission of Third Antidumping Duty Administrative Review, 66
FR 27063 (May 16, 2001) (finding that the Department did not violate 'due
process' when it failed to disclose to parties evidence used to select
certain entries for purposes of verification by Customs). But see, Nippon
Steel Corp. v. United States, 118 F. Supp. 2d 1366, 1371-1373 (CIT
2000)(finding that the Department did violate due process when it violated
the terms of the statute by failing to place on the record ex parte
memoranda discussing ex parte meetings between the Department and the
petitioner until 'on or about the day of the final determination' and
thereby denied the respondents an opportunity to examine and comment on
the factual data contained in the memoranda before the final decision-
making was complete), Wieland-Werke AG, Langenberg Kupfer v. United
States, 4 F. Supp. 2d 1207 (CIT 1998)(finding that the Department obtained
factual information after the record closed and used such information in
its decision-making for the final determination without allowing the
parties to comment on it). Neither of these situations exist in the
present case because the Department provided the parties with ample time
to consider and respond to arguments raised by the parties, present oral
argument on these topics, and did so before the final determination.




We disagree with any parties arguing that the Department's action in the
present case are similar to Nippon Steel, where the CIT determines that
the Department violated the statute by failing to place evidence of ex
parte memoranda on the record until the day of the final determination,
Nippon Steel is distinguishable from the Softwood Lumber investigations
for two reasons. First, unlike in Nippon Steel, the Department complied
with the terms of the Act, which required that the Department hold a
hearing before the final, provide notice to the parties, and stop
accepting factual information in a reasonable period of time before the
final so that parties could comment on the information prior to the
final.(422) 

422. See Section 782(g) of the Act. (423) 

423. See FR notice stating last day for factual information. [insert
date]. ' ' 

424. See e.g. Koyo Seiko Co., Ltd. v United States, 834 F. Supp. 1401,
1403 (CIT 1993) 

425. See case brief regarding scope and class or kind issues from the
Government of Canada (March 15, 2002) (GOC scope brief) at 1. 

426. See Torrington Co. v. U.S., 745 F. Supp. 718, 722 (CIT 1990). 

427. See March 12 Scope Memo at 2-5. 

428. March 12 Scope Memo at 24. 

429. See Weyerhaueser and USRCMA joint scope brief. The source cited is
Josefina Gonzalez, Growth, Properties and Uses of Western Red Cedar,
Forintek Canada Corp. Special Publication No. SP-37 (1997) at 23. An
extract of this publication is provided in a letter from Weyerhaeuser (May
21, 2001) (Weyerhaeuser 5/21/01 letter) at Exhibit 3. 

430. Weyerhaueser and USRCMA joint scope brief at 10. 

431. See letter from the petitioners, June 18, 2001 at 9 and letter from
Weyerhaeuser (July 20, 2001) (Weyerhaeuser 7/20/01 letter) at 4-5. 

432. Weyerhaueser and USRCMA joint scope brief at 10. 

433. Weyerhaueser and USRCMA joint scope brief at 6. 

434. Petitioners rebuttal scope brief at 24. 

435. Id. at 25. 

436. Weyerhaeuser 5/21/01 letter at 9 and 11 and Weyerhaeuser 7/20/01
letter at 15 and 16. 

437. March 12 Scope Memo at 25-26. 

438. Id. at 26. 

439. Id. 

440. Id. 

441. Id. at 27. 

442. Id. 

443. See Id. and Weyerhaeuser and USRCMA joint scope brief at 15. 

444. Petitioners rebuttal scope brief at 26 and Exhibit 1,"Uses of
Various Species of Softwood Lumber." See also letter petitioners, December
6, 2001 (petitioners 12/6/01 letter) at 3. 

445. Petitioners 12/6/01 letter at 3. 

446. See Weyerhaeuser 5/21/01 letter at 15-17 and Weyerhaeuser 7/20/01
letter at 16 and attachment 10. 

447. Petitioners rebuttal scope brief at 27. See also petitioners 12/6/01
letter at 3. 

448. See attachment to letter from the petitioners, October 24, 2001. 

449. Petitioners 12/6/01 letter at 3. 

450. See e.g. Weyerhaueser and USRCMA joint scope brief at 8. 

451. Hearing Transcript, March 19, 2002, at 35, 38-39. 

452. Weyerhaueser and USRCMA joint scope brief at 12. 

453. March 12 Scope Memo at 25-26. 

454. Weyerhaeuser 5/21/01 letter at attachment 3. 

455. Letter from the Government of Quebec, May 21, 2001 (GOQ 5/21/01
letter), at 11and attachments 1 and 2. 

456. Petitioners 6/18/01 letter at 17. 

457. Id. 

458. See e.g. GOQ 5/21/01 letter at 14-16. 

459. The Government of Canada also supports a finding of a separate class
or kind for EWC, but does not claim that it should be excluded from the
scope of the investigations on that basis. See case brief regarding scope
and class or kind issues from the Government of Canada, March 15, 2002
(GOC scope brief) at 5, 7-8. The QLMA requested that EWC be excluded from
the scope of the investigations but did not request a determination for a
separate class or kind of merchandise. See case brief regarding scope and
class or kind issues from the QLMA (March 15, 2002) (QLMA scope brief). 

460. See case brief regarding scope and class or kind issues from the
Government of Quebec, (March 15, 2002) (GOQ scope brief) at 12. 

461. See Id. at 13. 

462. See Id. at 15. 

463. See petitioners rebuttal scope brief at 33-35. 

464. See Id. at 34. 

465. See March 12 Scope Memo at 28-29. 

466. The QLMA also requests that EWP be excluded from the scope of the
investigations (QLMA scope brief). However, the question of a separate
class or kind for this species is not briefed in that submission.
Furthermore, the QLMA requests that three additional softwood lumber
species be excluded from the scope of these investigations: Eastern
Hemlock, red pine, and larch. The QLMA argues that there is a "lack of
intent" on the part of the petitioners to include these species in the
scope, "evidenced by their failure to specifically address them" in the
petition. (QLMA scope brief at 6) The petitioners claim that these species
were specifically included in the scope under HTSUS Heading 4407.10.00.
(Petitioners rebuttal scope brief at 17) In its March 12 Scope Memo, the
Department determined that all of these species were in the scope of the
investigations and that a single class or kind encompassed all of the
subject merchandise. (March 12 Scope Memo at 6) In the absence of any
further justification on the part of the requesters since the preliminary
determination, the Department stands by that decision in this final
determination. 

467. See Tembec scope brief at 2-3 and OFIA/OLMA scope brief at 2. 

468. See GOQ scope brief at 19. See also Tembec scope brief at 7 and the
case brief regarding scope and class or kind issues from OFIA and OLMA
(March 15, 2002) (OFIA/OLMA scope brief) at 6. 

469. See letter from Tembec regarding scope and class or kind, March 12,
2002, at 6. 

470. See OFIA/OLMA scope brief at 7-8, Tembec scope brief at 9, and GOQ
scope brief at 13. 

471. See GOQ scope brief at 18-19. 

472. See petitioners rebuttal scope brief at 21-22. 

473. See Id. at 29-32. 

474. See Id. at 29-30. 

475. See March 12 Scope Memo at 29-31. 

476. See the petitioners 6/18/01 letter at attachment 15 (U.S. Customs
Ruling HQ960703 (Aug. 26, 1997)). 

477. See, e.g., Id. at 41 fn. 150. 

478. See Abitibi's May 21, 2001 letter at Annex 4. 

479. Id. 

480. Id. 

481. Id. 

482. March 12 Scope Memo at 32. 

483. See Tembec scope brief at 6 fn 5. 

484. See 19 U.S.C. 1671a(b)(1) or 1673a(b)(1) respectively 

485. The petitioners response is to Tembec and Abitibi since Tembec's
response represents the views of both themselves and Abitibi. See footnote
8. 

486. See letter from Tembec, May 21, 2001 (Tembec 5/21/01 letter). 

487. Anderson also presents several arguments in support of a scope
exclusion for used railroad ties. Anderson argues that used railroad ties
should be excluded because they were exempt from quotas and fees under the
SLA and because new railroad ties were exempt under the SLA. (Anderson
Case Brief, March 6, 2002 at 16-21) Regardless of whether these
assertions, which the petitioners strongly question, actually were the
case, the scope of the current proceedings is not in any way tied to the
scope under the now expired SLA. (Petitioners letter, October 23, 2001 at
4-5) Anderson also contends that the petitioners did not intend to include
used railroad ties in its petition. (Anderson Case Brief, March 6, 2002 at
24-26) The petitioners state that this is untrue and the Department has
found no evidence on the record that would support Anderson's contention.
(Petitioners letter, October 23, 2001 at 6) With specific regard to the
countervailing duty case, Anderson also suggests that the original
manufacture of the used railroad ties may have predated the alleged
subsidies because they were produced in the 1950's and 1960's. (Anderson
Case Brief, March 6, 2002 at 26) However, the petitioners counter that
Canadian subsidies date from the beginning of the 20th century.
(Petitioners letter, December 6, 2001 at 6) Finally, Anderson claims that
used railroad ties should be excluded from the scope of these
investigations because they should be reclassified as wood, waste and
scrap (HTSUS 4401.30.40) and because they should be consistent with new
railroad ties (HTSUS 4406), both of which are outside the scope. (Anderson
Case Brief, March 6, 2002 at 14-16, 27) If Anderson believes that the
current classification for used railroad ties is inappropriate, it may
wish to follow the appropriate procedures in pursuing new rulings from the
U.S. Customs Service. To the extent that the product is currently
classified under HTSUS 4407.10.00, all used railroad ties are covered
under the scope of these investigations. Because the petitioners do not
agree to the exclusion of this product and no "overarching" reasons were
presented for the exclusion, we determined that used railroad ties remain
within the scope of these proceedings. 

488. Letter from Lindal, July 9, 2001. 

489. Letter from Lindal, November 14, 2001. 

490. Letter from Lindal, March 15, 2002. 

491. Letter from the petitioners, December 6, 2001 at 8. 

492. Petitioners scope rebuttal at 36. 

493. See letter from ISPA and Sinclar, dated December 3, 2001. 

494. See petitioners 12/6/01 letter. 

495. See letter from John Durant, Director, Commercial Rulings Division,
to Melissa Skinner, Director, Office VI, dated October 30, 2001. 

496. See letter from GOQ on Scope and Class or Kind Comments in the
Antidumping and Countervailing Duty Investigations: Certain Softwood
Lumber Products from Canada, dated March 15, 2002. Jones & Jones, L.L.C
(J&J)(497) 

497. See letter from Jones & Jones LLC, dated September 24, 2001. - 

498. See petitioners rebuttal scope brief at 36. 

499. See Id. at 5-10. See also petitioners scope brief at 3. 

500. See Memorandum to Bernard T. Carreau from Maria MacKay, Gayle
Longest, David Layton on Scope Clarification in the Antidumping and
Countervailing Duty Investigations on Softwood Lumber from Canada (October
30, 2001). 

501. See QLMA scope brief at 3. 

502. See Abitibi scope brief at 8. 

503. See Tembec scope brief at 10 and fn 11. 

504. See Id. at 10-12. 

505. See Id. At 10 and OFIA/OLMA scope brief at 8. 

506. See Id. 

507. See Id. 

508. See section 732(c)(4)(E) of the Act. 

509. March 12 Scope Memo at 4. 

510. See case brief regarding scope and class or kind from The Government
of Canada, the Canadian Provinces and Territories, and Canadian industry
associations (March 15, 2002) at 8. 

511. See Id. at 10-11. 

512. 19 C.F.R. 351.255(k). The petition also met the petition
requirements under 19 C.F.R. 351.202. 

513. Id. 

514. See 19 C.F.R. 351.202(b)(5). 

515. See Id. 

516. See Notice of Preliminary Affirmative Countervailing Duty
Determination, Preliminary Affirmative Critical Circumstances
Determination, and Alignment of Final Determination With Final Antidumping
Duty Determination: Certain Softwood Lumber Products From Canada (CVD
Prelim), 66 FR 43186-43188 (August 17, 2001); Notice of Preliminary
Determination of Sales at Less Than Fair Value and Postponement of Final
Determination: Certain Softwood Lumber Products From Canada (AD Prelim),
66 FR 56062, 56078 (November 6, 2001); and Amendment to Preliminary
Determination of Sales at Less Than Fair Value and Postponement of Final
Determination: Certain Softwood Lumber Products From Canada; Amendment to
Preliminary Affirmative Countervailing Duty Determination, Preliminary
Affirmative Critical Circumstances Determination, and Alignment of Final
Determination With Final Antidumping Duty Determination: Certain Softwood
Lumber Products From Canada (Amended Prelim), 67 FR 6230 (February 11,
2002); Notice of Correction to Amendment to Preliminary Determination of
Sales at Less Than Fair Value and Postponement of Final Determination:
Certain Softwood Lumber Products From Canada; Amendment to Preliminary
Affirmative Countervailing Duty Determination, Preliminary Affirmative
Critical Circumstances Determination, and Alignment of Final Determination
With Final Antidumping Duty Determination: Certain Softwood Lumber
Products From Canada, 67 FR 8227 (February 22, 2002). 

517. See March 12 Scope Memo. 

518. See March 12 Scope Memo. 

519. See letter from Deringer Logistics Consulting Group (December 6,
2001). 

520. See petitioners' letter, December 20, 2001. 

521. See letter from Dakwakada Forest Products, dated June 4, 2001. 

522. S ee petitioners' letter, June 27, 2001, at 68. 

523. See letter from Shibley Righton dated May 18, 2001. 

524. See petitioners' letter, June 27, 2001, at 48. 

525. See letter by Cando Contracting Ltd. to the Department, dated May
17, 2001. 

526. See letter from Deringer Logistic Consulting Group, dated November
29, 2001. 

527. See petitioners' letter, June 8, 2001, at 6. 

528. See petitioners' letter, December 6, 2001, at 6. 

529. See letter (undated) received by the Department on May 21, 2001; and
letter dated August 16, 2001. 

530. See petitioners' letter, June 27, 2001 at 65, October 1, 2001 at 16. 

531. See letter by the Brightwood Corporation dated November 30, 2001. 

532. BWI claims that only "after the antidumping ruling was announced,
one domestic supplier offered to produce a small volume at 20% above the
prevailing price." See BWI letter, November 30, 2001. 

533. See Weldwood letters, May 21, 2001 and August 17, 2001. 

534. See petitioners' letter, June 27, 2001, at 36 and 44. 

535. See Weldwood letter, May 21, 2001, at 3. 

536. See petitioners' letter, June 27, 2001, at 38. 

537. See letter from Sundance Forest Industries, Ltd., May 29, 2001. 

538. See petitioners' letter, June 27, 2001, at 76. 

539. See Louisiana Pacific Corporation letters of May 21 and July 3, 2001. 

540. See petitioners' letters, June 27, 2001, at 49-50 and July 17, 2001,
at 3-4. 

541. See Comment 52, Class or Kind of Products in this memo. 

542. See Letter from Alberta Spruce Industries, Ltd. dated May 21, 2001.
See also Letter from Sundance Forest Industries, Ltd. dated May 29, 2001. 

543. Letter from Sundance Forest Industries, Ltd. dated May 29, 2001. 

544. See Petitioners' letter, June 27, 2001, at 69 and 71, and October 1,
2001, at 16. 

545. See comment 53 of this memorandum. 

546. See Weldwood letter, May 21, 2001. 

547. See Petitioners' letter, June 27, 2001 at 39-40, 43 and September
13, 2001, at 19-20. 

548. See letters from Alliance Forest Products Inc., May 21, 2001, at 5-6
and August 17, 2001, at 2-3. 

549. See petitioners' letter, June 27, 2001, at 30 and September 13,
2001, at 13. 

550. See letters from Bridgeside Higa dated May 21, 2001and September 10,
2001. 

551. See petitioners' letter, June 27, 2001, at 64 and October 1, 2001 at
page 16. 

552. See letter from Sundance Forest Industries and SunPlus Specialty
Wood undated (received by the Department on May 29, 2001). 

553. See petitioners' letter, June 27, 2001 at 73. 

554. See letter from Cahan Wood Products Ltd, September 6, 2001. 

555. See petitioners' letter, October 1, 2001, at 17. 

556. See letter from Greenwood Forest Products dated May 17, 2001. 

557. See petitioners' letter, June 8, 2001 at 7. 

558. See letter from Sundance Forest Industries and SunPlus Specialty
Wood undated (received by the Department on May 29, 2001). 

559. See Woodtone submissions dated May 21, 2001, June 11, 2001, and
August 16, 2001. 

560. See petitioners' letter, June 27, 2001 at 73. 

561. See petitioners' letter, September 13, 2001 at 7-8. 

562. See Id. at pages 3-5. 

563. petitioners' submission dated October 23, 2001 at page 10. 

564. See Weldwood letter, dated May 21, 2001. 

565. See Weldwood letter, June 27, 2001 at 37. 

566. See Weldwood submission, May 21, 2001, at 3. 

567. See petitioners' letter, June 27, 2001, at 41. 

568. See letters from Shakertown 1992, Inc., dated September 20, 2001 and
an October 15, 2001. 

569. See letter (undated) received by the Department on May 21, 2001 and
letter (undated) received by the Department on August 16, 2001. See also
letter from Sundance, undated (received by the Department on May 29,
2001). 

570. See petitioners' letter June 27, 2001 at 69, October 1, 2201, at 13,
and October 23, 2001, at 3. 

571. See petitioners' letter, June 27, 2001 at 69 and October 1, 2001, at
15. 

572. Undated submission received by the Department on May 21, 2001;
additional submission dated August 16, 2001. 

573. See petitioners' letter, June 27, 2001, at 66-67 and October 1,
2001, at 16. 

574. Undated submission received by the Department on May 21, 2001;
additional submission dated August 16, 2001. 

575. See petitioners' letter June 27, 2001, at 67. 

576. See letter from Tembec, dated May 21, 2001 at 19. 

577. See petitioners' letter, letter dated June 27, 2001at 23. 

578. AD Prelim at 56063. 

579. Amended Prelim at 6231. 

580. See letter from Universal Reel and Recycling Inc., dated May 18,
2001. 

581. See petitioners' letter June 27, 2001 at 69. 

582. See letter from Sundance Forest Industries and SunPlus Specialty
Wood undated (received by the Department on May 29, 2001). 

583. See petitioners' letter June 27, 2001 at 72. 

584. See letters from Weldwood dated May 21, 2001 and August 17, 2001. 

585. See petitioners' letter, June 27, 2001 at 43.