17498 Federal Register / Vol. 72, No. 67 / Monday, April 9, 2007 / Notices 

an individual rate for each exporter/ 

manufacturer of the subject 

merchandise. We preliminarily 

determine the total estimated net 

countervailable subsidy rates to be: 

Exporter/manufacturer 

Net subsidy 

rate 

(percent) 

Gold East Paper (Jiangsu) 

Co., Ltd. ............................ 20.35 

Shandong Chenming Paper 

Holdings Ltd. ..................... 10.90 

All Others .............................. 18.16 

In accordance with sections 703(d) 

and 705(c)(5)(A) of the Act, for 

companies not investigated, we have 

determined an ‘‘all others’’ rate by 

weighting the individual company 

subsidy rate of each of the companies 

investigated by each company’s exports 

of the subject merchandise to the United 

States, if available, or CFS exports to the 

United States. The all others rate does 

not include zero and de minimis rates 

or any rates based solely on the facts 

available. 

In accordance with sections 

703(d)(1)(B) and (2) of the Act, we are 

directing CBP to suspend liquidation of 

all entries of CFS from the PRC that are 

entered, or withdrawn from warehouse, 

for consumption on or after the date of 

the publication of this notice in the 

Federal Register, and to require a cash 

deposit or bond for such entries of 

merchandise in the amounts indicated 

above. 

ITC Notification 

In accordance with section 703(f) of 

the Act, we will notify the ITC of our 

determination. In addition, we are 

making available to the ITC all nonprivileged and non-proprietary 

information relating to this 

investigation. We will allow the ITC 

access to all privileged and business 

proprietary information in our files, 

provided the ITC confirms that it will 

not disclose such information, either 

publicly or under an administrative 

protective order, without the written 

consent of the Assistant Secretary for 

Import Administration. 

In accordance with section 705(b)(2) 

of the Act, if our final determination is 

affirmative, the ITC will make its final 

determination within 45 days after the 

Department makes its final 

determination. 

Public Comment 

Case briefs for this investigation must 

be submitted no later than one week 

after the issuance of the last verification 

report. Rebuttal briefs must be filed 

within five days after the deadline for 

submission of case briefs, pursuant to 19 

CFR 351.309(d)(1). A list of authorities 

relied upon, a table of contents, and an 

executive summary of issues should 

accompany any briefs submitted to the 

Department. Executive summaries 

should be limited to five pages total, 

including footnotes. 

Section 774 of the Act provides that 

the Department will hold a public 

hearing to afford interested parties an 

opportunity to comment on arguments 

raised in case or rebuttal briefs, 

provided that such a hearing is 

requested by an interested party. If a 

request for a hearing is made in this 

investigation, the hearing will 

tentatively be held two days after the 

deadline for submission of the rebuttal 

briefs, pursuant to 19 CFR 351.310(d), at 

the U.S. Department of Commerce, 14th 

Street and Constitution Avenue, NW., 

Washington, DC 20230. Parties should 

confirm by telephone the time, date, and 

place of the hearing 48 hours before the 

scheduled time. 

Interested parties who wish to request 

a hearing, or to participate if one is 

requested, must submit a written 

request to the Assistant Secretary for 

Import Administration, U.S. Department 

of Commerce, Room 1870, within 30 

days of the publication of this notice, 

pursuant to 19 CFR 351.310(c). Requests 

should contain: (1) The party’s name, 

address, and telephone; (2) the number 

of participants; and (3) a list of the 

issues to be discussed. Oral 

presentations will be limited to issues 

raised in the briefs. 

This determination is published 

pursuant to sections 703(f) and 777(i) of 

the Act. 

Dated: April 2, 2007. 

Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration. 

[FR Doc. E7–6498 Filed 4–6–07; 8:45 am] 

BILLING CODE 3510–DS–P 

DEPARTMENT OF COMMERCE 

International Trade Administration 

C–560–821 

Coated Free Sheet Paper from 

Indonesia: Notice of Preliminary 

Affirmative Countervailing Duty 

Determination 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

SUMMARY: The Department of Commerce 

(the Department) preliminarily 

determines that countervailable 

subsidies are being provided to 

producers and exporters of coated free 

sheet paper (CFS) in Indonesia. For 

information on the subsidy rates, see the 

‘‘Suspension of Liquidation’’ section of 

this notice. 

EFFECTIVE DATE: April 9, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Sean Carey, Jacqueline Arrowsmith, or 

Gene Calvert, AD/CVD Operations, 

Office 6, Import Administration, 

International Trade Administration, 

U.S. Department of Commerce, Room 

7866, 14th Street and Constitution 

Avenue, NW, Washington, DC 20230; 

telephone: (202) 482–3964, (202) 482–

5255, or (202) 482–3586, respectively. 

SUPPLEMENTARY INFORMATION: 

Background 

On November 20, 2006, the 

Department initiated a countervailing 

duty (CVD) investigation of CFS from 

Indonesia. See Notice of Initiation of 

Countervailing Duty Investigations: 

Coated Free Sheet Paper from the 

People’s Republic of China, Indonesia, 

and the Republic of Korea, 71 FR 68546 

(November 27, 2006) (Initiation Notice) 

(CFS Investigations). In the Initiation 

Notice, the Department set aside a 

period for all interested parties to raise 

issues regarding product coverage. The 

comments we received are discussed in 

the ‘‘Scope Comments’’ section below. 

On November 30, 2006, the Department 

issued a CVD questionnaire to the 

Government of Indonesia (GOI). The 

questionnaire informed the GOI that it 

was responsible for forwarding the 

questionnaire to producers/exporters of 

CFS. The Department also provided 

courtesy copies of the questionnaire to 

PT. Pabrik Kertas Tjiwi Kimia Tbk. (TK) 

and to PT. Pindo Deli Pulp and Paper 

Mills (PD), who the GOI identified as 

the sole producers/exporters of CFS 

from Indonesia. 

On December 29, 2006, the 

Department postponed the preliminary 

determination until March 30, 2007. See 

Coated Free Sheet Paper from 

Indonesia, the People’s Republic of 

China and the Republic of Korea: Notice 

of Postponement of Preliminary 

Determinations in the Countervailing 

Duty Investigations, 71 FR 78403 

(December 29, 2006). On January 25, 

2007, TK and PD (collectively, 

respondents), and the GOI submitted 

their questionnaire responses. On 

February 2 and February 12, 2007, the 

Department received comments from 

the petitioner regarding these 

questionnaire responses. On February 

16, 2007, the Department issued 

supplemental questionnaires to the GOI 

and to the respondents. The GOI and the 

respondents submitted their 


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1The Sierra Club does not have standing to file 

a subsidy allegation in accordance with sections 

702(b) and 771(9) of the Act; however the USW is 

an interested party in this proceeding pursuant to 

section 771(9)(D) of the Act and may submit 

subsidy allegations. 

supplemental responses on March 6, 

2007. 

On December 15, 2006, New Page 

Corporation, the petitioner, submitted 

two new subsidy allegations. The GOI 

and the respondents filed comments 

concerning these new allegations on 

December 26, 2006. On January 30, 

2007, the petitioner submitted 

additional information regarding the 

December 15, 2006 new subsidy 

allegations. On February 7, 2007, the 

Department received additional 

comments from the respondents 

regarding the petitioner’s January 30, 

2007 submission. 

On March 15, 2007, the Department 

determined that the requirements of 

section 702 of the Tariff Act of 1930, as 

amended (the Act) were met, and 

initiated an investigation of the 

following new subsidy allegations: (1) 

debt forgiveness through the GOI’s 

acceptance of allegedly worthless shares 

in the Sinar Mas Group/Asia Pulp & 

Paper Company’s (SMG/APP) affiliated 

bank as debt repayment; and, (2) debt 

forgiveness through the GOI allowing 

SMG/APP to repurchase its own debt at 

a steep discount through an affiliated 

company. For a complete discussion on 

the Department’s decision to initiate on 

these programs, see the Memorandum to 

Barbara E. Tillman, Director, Office of 

AD/CVD Enforcement VI, 

Countervailing Duty Investigation: 

Coated Free Sheet Paper from 

Indonesia; New Subsidy Allegations, 

dated March 15, 2007, which is on file 

in the Import Administration Central 

Records Unit (CRU), Room B–099 of the 

Commerce Department Building. 

The Department has not had sufficient 

time to gather the information necessary 

to analyze the countervailability of these 

two programs for purposes of this 

preliminary determination. However, 

after the Department has gathered and 

analyzed information from the GOI and 

respondents, we intend to issue an 

interim analysis describing our 

preliminary findings with respect to 

these programs before the final 

determination so that parties may have 

the opportunity to comment on our 

findings before the final determination. 

On March 9, 2007, the United Steel, 

Paper and Forestry, Rubber 

Manufacturing, Energy, Allied and 

Industrial Service Workers International 

Union, AFL–CIO-CLC (‘‘USW’’) and the 

Sierra Club filed an additional new 

subsidy allegation, contending that 

illegal logging in Indonesia results in 

additional countervailable subsidies to 

Indonesian producers/exporters of 

CFS.1 In the submission, the USW 

acknowledges that the allegation is 

untimely in accordance with section 

351.301(d)(4)(i)(A) of the Department’s 

regulations. However, the USW cites 

section 351.311 of the Department’s 

regulations, which addresses instances 

in which the Department discovers a 

practice that appears to provide a 

countervailable subsidy during a 

countervailing duty investigation. As 

noted by the USW, under section 

351.311(b) of the Department’s 

regulations, the Department may 

include such a subsidy program in its 

investigation as long as sufficient time 

remains before the scheduled final 

determination. On March 21, 2007, 

respondents submitted comments 

regarding the USW allegation, arguing 

that it should be rejected as untimely 

filed. 

With respect to the USW allegation, 

although it is untimely, we note that we 

are already investigating the provision 

of standing timber for less than adequate 

remuneration. If, during the course of 

our investigation, we find that cross–

owned companies in the CFS 

production chain harvested pulp logs 

for which no stumpage or reforestation 

fees were paid, or less than the required 

fees were paid, we would include any 

such subsidy benefits in the calculation 

of any subsidy rate for these pulp logs 

in accordance with our stumpage 

subsidy calculation methodologies. 

On March 19, 2007, the petitioner 

submitted comments for the Department 

to consider for purposes of the 

preliminary determination. On March 

23, 2007, petitioner filed a few 

additional pre–preliminary 

determination comments. At the request 

of the Department, the petitioner refiled 

this submission on March 26, 2007. On 

March 26, 2007, petitioner requested 

that the final determination of this 

countervailing duty investigation be 

aligned with the final determination in 

the companion antidumping duty 

investigations in accordance with 

section 705(a)(1) of the Act. We will 

address this request in a separate 

Federal Register notice. 

On March 26, 2007, respondents filed 

pre–preliminary determination 

comments. With respect to these 

comments, they were filed too late to be 

fully considered for purposes of this 

preliminary determination, but we note 

that they identify a number of issues we 

are already addressing in the ‘‘Subsidies 

Valuation’’ and ‘‘Analysis of Programs’’

sections below. Respondents also filed 

rebuttal comments to petitioner’s 

additional pre–preliminary 

determination comments on March 27 

and 28, 2007. In addition, on March 28, 

2007, the USW submitted additional 

comments concerning its March 9, 2007 

new subsidy allegation and 

respondents’ March 21, 2007 comments 

on its new subsidy allegation. We did 

not have sufficient time to review these 

submissions for purposes of this 

preliminary determination. 

Scope of the Investigation 

The merchandise covered by this 

investigation includes coated free sheet 

paper and paperboard of a kind used for 

writing, printing or other graphic 

purposes. Coated free sheet paper is 

produced from not–more-than 10 

percent by weight mechanical or 

combined chemical/mechanical fibers. 

Coated free sheet paper is coated with 

kaolin (China clay) or other inorganic 

substances, with or without a binder, 

and with no other coating. Coated free 

sheet paper may be surface–coated, 

surface–decorated, printed (except as 

described below), embossed, or 

perforated. The subject merchandise 

includes single- and double–side-coated 

free sheet paper; coated free sheet paper 

in both sheet or roll form; and is 

inclusive of all weights, brightness 

levels, and finishes. The terms ‘‘wood 

free’’ or ‘‘art’’ paper may also be used to 

describe the imported product. 

Excluded from the scope are: (1) 

Coated free sheet paper that is imported 

printed with final content printed text 

or graphics; (2) base paper to be 

sensitized for use in photography; and 

(3) paper containing by weight 25 

percent or more cotton fiber. 

Coated free sheet paper is classifiable 

under subheadings 4810.13.1900, 

4810.13.2010, 4810.13.2090, 

4810.13.5000, 4810.13.7040, 

4810.14.1900, 4810.14.2010, 

4810.14.2090, 4810.14.5000, 

4810.14.7040, 4810.19.1900, 

4810.19.2010, and 4810.19.2090 of the 

Harmonized Tariff Schedule of the 

United States (HTSUS). While HTSUS 

subheadings are provided for 

convenience and customs purposes, our 

written description of the scope of this 

investigation is dispositive. 

Scope Comments 

In accordance with the preamble to 

the Department’s regulations (see 

Antidumping Duties; Countervailing 

Duties, 62 FR 27296, 27323 (May 19, 

1997) (Preamble)), in our Initiation 

Notice we set aside a period of time for 

parties to raise issues regarding product 


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coverage, and encouraged all parties to 

submit comments within 20 calendar 

days of publication of the Initiation 

Notice. 

On December 18, 2006, the 

respondents submitted timely scope 

comments in the antidumping duty 

investigation of CFS from Indonesia. On 

January 12, 2007, the Department 

requested that the respondents file these 

comments on the administrative record 

of the CFS Investigations. See 

Memorandum from Alice Gibbons to 

The File, dated January 12, 2007. On 

January 12, 2007, the respondents re–

filed these comments on the 

administrative record of the CFS 

Investigations. On January 19, 2007, the 

petitioner filed a response to these 

comments. 

The respondents requested that the 

Department exclude from its 

investigations cast–coated free sheet 

paper. The Department analyzed this 

request, together with the comments 

from the petitioner, and determined that 

it is not appropriate to exclude cast–

coated free sheet paper from the scope 

of these investigations. See the 

Memorandum to Stephen J. Claeys, 

Deputy Assistant Secretary for Import 

Administration, Request to Exclude 

Cast–Coated Free Sheet Paper from the 

Antidumping Duty and Countervailing 

Duty Investigations on Coated Free 

Sheet Paper, dated March 22, 2007, on 

file in the CRU. 

Injury Test 

Because Indonesia is a ‘‘Subsidies 

Agreement Country’’ within the 

meaning of section 701(b) of the Act, the 

International Trade Commission (ITC) is 

required to determine whether imports 

of the subject merchandise from 

Indonesia materially injure, or threaten 

material injury to a United States 

industry. On December 15, 2006, the 

ITC transmitted its preliminary 

determination to the Department. See 

Coated Free Sheet Paper from China, 

Indonesia, and Korea: Investigation Nos. 

701–TA–444–446 (Preliminary) and 

731–TA–1107–1109 (Preliminary), 

USITC Publication 3900 (December 

2006). On December 29, 2006, the ITC 

published its preliminary determination 

that there is a reasonable indication that 

an industry in the United States is 

materially injured by reason of allegedly 

subsidized imports from China, 

Indonesia, and Korea of subject 

merchandise. See Coated Free Sheet 

Paper China, Indonesia, and Korea, 71 

FR 78464. 

Period of Investigation 

The period of investigation (POI) for 

which we are measuring subsidies is 

January 1, 2005 through December 31, 

2005, which corresponds to the most 

recently completed fiscal year for the 

respondents. See section 351.204(b)(2) 

of the Department’s regulations. 

Subsidies Valuation 

Cross–Ownership 

Information on the record indicates 

the name SMG/APP is commonly used 

to refer to a group of forestry/logging 

companies, pulp producers, and paper 

producers linked by varying degrees of 

common ownership involving the 

Widjaja family. The respondents in this 

investigation, TK and PD, have reported 

affiliations with each other through a 

parent holding company Purinusa 

Ekapersada (Purinusa); with two pulp 

producers (PT. Lontar Papyrus Pulp and 

Paper Industry (Lontar) and PT. Indah 

Kiat Pulp and Paper Tbk. (IK)); and with 

five forestry/logging companies (Arara 

Abadi (AA), Wira Karya Sakti (WKS), 

PT. Satria Perkasa Agung (SPA), PT. 

Riau Abadi Lestrari (RAL), and PT. 

Finnantara Intiga (FI)). 

The Department’s regulations at 

section 351.525(b)(6)(vi) state that 

cross–ownership exists between two or 

more corporations where one 

corporation can use or direct the 

individual assets of the other 

corporation(s) in essentially the same 

ways it can use its own assets. This 

section of the Department’s regulations 

states that this standard will normally 

be met where there is a majority voting 

ownership interest between two 

corporations or through common 

ownership of two (or more) 

corporations. The Preamble to the 

Department’s regulations further 

clarifies the Department’s cross–

ownership standard. See Countervailing 

Duties 63 FR 65347, 65401 (CVD 

Preamble). 

According to the CVD Preamble, 

relationships captured by the cross–

ownership definition include those 

where the interests of two corporations 

have merged to such a degree that one 

corporation can use or direct the 

individual assets (including subsidy 

benefits) of the other corporation in 

essentially the same way it can use its 

own assets (including subsidy benefits). 

The cross–ownership standard does not 

require one corporation to own 100 

percent of the other corporation. 

Normally, cross–ownership will exist 

where there is a majority voting 

ownership interest between two 

corporations or through common 

ownership of two (or more) 

corporations. In certain circumstances, a 

large minority voting interest (for 

example, 40 percent) or a ‘‘golden 

share’’ may also result in cross–

ownership. See CVD Preamble at 63 FR 

65401. 

As such, the Department’s regulations 

make it clear that we must examine the 

facts presented in each case in order to 

determine whether cross–ownership 

exists. If we find that cross–ownership 

exists between TK and PD, the 

producers/exporters under 

investigation, and among and across the 

companies within the input supply 

chain, we will treat all companies as 

one company, and calculate a single rate 

for any countervailable subsidies that 

we identify and measure, in accordance 

with section 351.525(b)(6) of the 

Department’s regulations. 

Further, in accordance with section 

351.525(b)(6)(iv) of the Department’s 

regulations, if the Department 

determines that the suppliers of inputs 

primarily dedicated to the production of 

paper products are cross–owned with 

the producers/exporters under 

investigation, then the Department 

treats subsidies provided to the input 

producers as subsidies conferred on the 

production of the finished product. 

In this investigation, we are 

examining whether the two producers/ 

exporters of the subject merchandise, 

TK and PD, are cross–owned with one 

another, and with their input suppliers 

as outlined in section 351.352(b)(6)(iv) 

of the Department’s regulations. The 

alleged subsidies we are investigating 

are conferred on the forestry/logging 

companies which harvest and sell pulp 

logs, which in turn are sold to the pulp 

producers that supply the paper 

producers/exporters. Therefore, we 

must examine whether cross–ownership 

exists among and across the suppliers of 

pulp logs, the pulp producers, and the 

CFS producers/exporters. 

Based on information on the record, 

we preliminarily determine that cross–

ownership exists, in accordance with 

section 351.525(b)(6)(vi) of the 

Department’s regulations, among and 

across the following companies 

involved in the production and sale of 

the subject merchandise: the respondent 

paper producers/exporters, TK and PD; 

pulp producers, Lontar and IK; and the 

forestry and logging companies, AA, 

WKS, RAL, SPA, and FI. Since much of 

our analysis supporting this conclusion 

involves business proprietary 

information, a full discussion of the 

bases for our preliminary determination 

is set forth in the Memorandum to 

Barbara E. Tillman, Director, AD/CVD 

Operations, Office 6, Cross–Ownership, 

dated March 29, 2007 (Cross–Ownership 

Memo), a public version of which is on 

file in the CRU. 


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In addition to the five cross–owned 

forestry/logging companies identified 

above, we are also preliminarily finding 

that certain additional timber suppliers 

from which pulp logs were purchased 

during the POI are cross–owned. In the 

questionnaire responses, respondents 

reported that some of the five cross–

owned forestry/logging companies 

identified above also purchased pulp 

logs from unaffiliated timber suppliers. 

The Department examined the 

information provided in the 

questionnaire responses about these 

reportedly unaffiliated timber suppliers, 

and conducted additional independent 

research concerning these timber 

suppliers. See Cross–Ownership Memo 

for a full discussion of the Department’s 

analysis and research. In addition, the 

Department examined information 

about these reportedly unaffiliated 

timber suppliers, and supporting 

documentation, provided by petitioner. 

After analyzing all of this information 

and documentation, we find that the 

information and documentation 

supports a preliminary finding that 

certain of these timber suppliers are 

cross–owned with the SMG/APP Group. 

Since the names of these suppliers are 

business proprietary, a complete 

discussion of the bases for our 

preliminary finding that these 

additional timber suppliers are also 

cross–owned with the other companies 

in the production chain is provided in 

the Cross–Ownership Memo. 

Attribution of Subsidies Provided to 

Cross–Owned Input Suppliers 

As discussed above, the Department’s 

regulations at section 351.525(b)(6)(iv) 

state that if there is cross–ownership 

between an input supplier and a 

downstream producer, and production 

of the input product is primarily 

dedicated to production of the 

downstream product, the Secretary will 

attribute subsidies received by the input 

producer to the combined sales of the 

input and downstream products 

produced by both corporations 

(excluding the sales between the two 

corporations). 

The respondents, TK and PD, have 

argued that they do not have to respond 

for AA, WKS, RAL, SPA, and FI because 

the input products in question, logs, are 

not ‘‘primarily dedicated to the 

production of CFS’’ and therefore, do 

not meet the standard in accordance 

with section 351.525(b)(6)(iv) of the 

Department’s regulations. See 

respondents’ March 2, 2007 response at 

page 3. The respondents state that they 

believe the Department should conduct 

its ‘‘primarily dedicated analysis’’ with 

respect to the Indonesian economy as a 

whole, and that its analysis should 

determine whether facts on the record 

support the conclusion that timber and 

other resources under the Forestry 

Program are primarily dedicated to the 

production of CFS. Additionally, the 

respondents state that the Department 

should give ‘‘proper weight and 

consideration to the word primarily,’’

arguing that the word is defined as 

‘‘chiefly’’ or ‘‘in the first place.’’ See 

respondents’ March 6, 2007 response at 

page 28. 

The respondents claim that they, and 

their affiliated companies, produce a 

variety of products such as pulp, 

photocopier paper, and tissue, as well as 

CFS, and that timber accounts for 

roughly 25 percent of all Indonesian 

industry groupings, ranging from paper 

to furniture to chemical products. 

Therefore, the respondents conclude, 

the primarily dedicated test would not 

be met even if the Department were to 

perform its analysis specifically for the 

group of companies to which the 

respondents belong. Id. 

The Department has previously 

addressed the issue regarding pulp logs 

as input products in the production of 

pulp and paper products in the Notice 

of Preliminary Affirmative 

Countervailing Duty Determination: 

Certain Lined Paper Products from 

Indonesia, 71 FR 7524, 7527–28 

(February 13, 2006) (Lined Paper 

Prelim). In Lined Paper Prelim, the 

Department determined that harvested 

pulp logs, and the pulp they are used to 

produce, are input products primarily 

dedicated to the downstream product 

within the meaning of section 

351.525(b)(6)(iv) of the Department’s 

regulations. In Lined Paper Prelim, the 

Department determined that ‘‘the issue 

is not whether the potentially 

subsidized inputs are used exclusively 

or nearly exclusively for the production 

of the subject merchandise. Rather, it is 

a question of whether the inputs are 

primarily dedicated to the production of 

the downstream product.’’

In Final Affirmative Countervailing 

Duty Determination and Final Negative 

Critical Circumstances Determination: 

Certain Lined Paper Products from 

Indonesia, 71 FR 47174 (August 16, 

2006) (Lined Paper Final), and 

accompanying Issues and Decision 

Memorandum at Comment 3, the 

Department remained consistent with 

its preliminary determination, and 

determined that the logs harvested by 

the logging companies and sold to the 

pulp producers are primarily dedicated 

to the production of pulp and, thus, to 

the production of the downstream 

product, paper, which included certain 

lined paper products, the subject 

merchandise in that case. 

In the instant case, pulp logs 

harvested by the cross–owned forestry/ 

logging companies are processed into 

pulp by pulp producers Lontar and IK. 

This pulp is consumed by the 

respondents, TK and PD, to make paper 

and paper products including the 

subject merchandise, CFS. Because the 

pulp logs are primarily dedicated to the 

production of pulp and, ultimately, to 

the production of paper products, it is 

reasonable to conclude that a subsidy to 

pulp logs also benefits pulp and paper 

production where all of the companies 

involved are cross–owned. 

Based on the information on the 

record, we preliminarily determine that 

the production of pulp logs are an input 

product that is primarily dedicated to 

the production of pulp and paper 

products, including CFS. See Cross–

Ownership Memo. In accordance with 

section 351.525(b)(6)(iv) of the 

Department’s regulations, any subsidies 

found will be attributed to the 

appropriate combined sales of the 

products produced by the cross–owned 

companies, excluding any inter–

company sales. 

Loan Benchmarks 

In measuring the benefit from loan 

programs, section 351.505(a)(1) of the 

Department’s regulations provides that a 

‘‘benefit exists to the extent that the 

amount the firm pays on the 

government–provided loan is less than 

the amount the firm would pay on a 

comparable commercial loan(s) that the 

firm could actually obtain on the 

market.’’ In section 351.505(a)(2)(ii), the 

Department’s regulations address the 

selection of a commercial loan as the 

appropriate basis for comparison, 

stating ‘‘the Secretary normally will use 

a loan taken out by the firm from a 

commercial lending institution or a debt 

instrument issued by the firm in a 

commercial market.’’ TK and PD have 

not provided sufficient information 

regarding actual financing they (or the 

other cross–owned companies) obtained 

at the same time that the loans under 

examination were obtained and thus we 

are unable to rely on the companies’

own financing experience as the basis 

for our loan interest rate benchmark. 

Therefore, we are guided by section 

351.505(a)(3)(ii) of the Department’s 

regulations, which states, ‘‘{i}f the firm 

did not take out any comparable 

commercial loans during the period . . 

. the Secretary may use a national 

average interest rate for comparable 

commercial loans.’’ Accordingly, to 

measure the loan benefits, we have used 

as our benchmark the rate charged by 


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private national banks for ‘‘Investment’’

(long–term loans) as shown in the Bank 

of Indonesia Interest Rates Table 39 

‘‘Commerical Bank Credits In Ruppiah 

by Group of Commercial Banks,’’ in 

Exhibit 19 of the GOI’s January 24, 2007 

response and in Exhibit 8 of the 

respondents’ January 24, 2007 response, 

for the years in which the loans were 

approved. 

The petitioner alleged that the 

Indonesian companies were 

uncreditworthy beginning in 2001 and 

thereafter. The Department initiated on 

this allegation. See Initiation Checklist: 

Coated Free Sheet Paper from 

Indonesia, dated November 20, 2006 

(Initiation Checklist), a public version of 

which is on file in the CRU. Because the 

loans under investigation were all 

approved prior to 2001 (the earliest year 

for which the Department initiated an 

uncreditworthiness investigation), we 

have not analyzed the creditworthiness 

of the respondents and their cross–

owned suppliers and, consequently, we 

have not added a risk premium to the 

benchmark for long–term loans as 

provided for in section 351.505(a)(3)(iii) 

of the Department’s regulations. 

Analysis of Programs 

I. Programs Preliminarily Determined 

To Be Countervailable 

A. GOI Provision of Standing Timber for 

Less than Adequate Remuneration 

According to the GOI, it controls and 

administers over 57 million hectares of 

public harvestable forest land, which 

accounts for virtually all the harvestable 

forest land in Indonesia. See GOI’s 

January 25, 2007 response at pages 4 

and 13. Record information shows that 

timber can be harvested from the GOI 

land under two main types of licenses: 

licenses to harvest timber in the natural 

forest, known as ‘‘HPH’’ licenses, and 

licenses to establish, and harvest from, 

plantations, which are known as ‘‘HTI’’

licenses. See the GOI’s January 25, 2007 

response at page 5. Respondents and the 

GOI reported that AA, WKS, SPA, RAL 

and FI are affiliated forestry/logging 

companies which harvested pulp logs 

during the POI from plantations under 

HTI licenses. Id. at page 11; see also 

respondents’ January 25, 2007 response 

at pages 19–20. As discussed above in 

the ‘‘Cross–Ownership’’ section, the 

Department has preliminarily 

determined that these forestry/logging 

companies are cross–owned with pulp 

producers IK and Lontar, and with CFS 

producers/exporters TK and PD. In 

addition, as discussed above in the 

‘‘Cross–Ownership’’ section, we have 

found, for purposes of this preliminary 

determination, certain forestry/logging 

companies from whom AA and WKS 

purchased pulp logs during the POI to 

be cross–owned with the companies in 

the production chain. As such, the 

Department is including all of these 

cross–owned forestry/logging 

companies in our analysis of whether 

the GOI has provided standing timber 

for less than adequate remuneration. 

The GOI provided the laws that 

outline the types of fees and royalties 

assessed for the harvest of standing 

public timber in Indonesia. Id. at 

Exhibit 7. Specifically, the GOI stated 

that HTI license holders pay an initial 

license fee at the granting of each 

concession. In addition, these HTI 

license holders pay ‘‘cash stumpage 

fees’’ known as PSDH royalty fees 

which are paid per unit of timber 

harvested (usually a per ton or per cubic 

meter unit of measure). The PSDH rate 

in effect during the POI for acacia 

harvested from plantations was five 

percent in accordance with Regulation 

59/1998. Id. at Exhibit 7. Regulation 74/ 

1999 increased the PSDH rate for all 

timber harvested from the natural forest 

from six percent to ten percent, the rate 

in effect during the POI. Id.; see also 

GOI’s March 6, 2007 response at page 5. 

These percentage rates are multiplied by 

the reference prices set by the GOI for 

each type of wood harvested to 

determine the PSDH fee a company 

should pay per unit of timber harvested. 

See the GOI’s January 25, 2007 response 

at page 15. There were two sets of 

reference prices in effect during the POI. 

The first was in effect until February 3, 

2005; the second published set of 

reference prices was put into effect on 

February 4, 2005. Id. at Exhibit 7 under 

Regulations 436/MPP/Kep/7/2004 and 

18/M/Kep/2005, respectively. 

According to the GOI, the reference 

prices reflect the market prices for each 

type of log sold in Indonesia. Id. at page 

15. 

In addition to the PSDH fee, a per unit 

Rehabilitation Fee (dana reboisasi or 

DR) is paid for timber harvested from 

the natural forest and remained the 

same throughout the POI. Id. at page 13; 

see also the GOI’s January 25, 2007 

response at Exhibit 7 for the fee paid 

during the POI under Regulation 92/ 

1999. The GOI stated that HTI license 

holders are not subject to the DR when 

‘‘the wood harvested comes from their 

own plantation assets.’’ Id. at page 6. 

However, respondents reported that for 

pre–existing timber that is cleared 

within the plantation boundaries to 

allow new planting on the plantations, 

they ‘‘pay PSDH and DR fees on timber 

that is harvested during clearing 

exercises.’’ See respondents’ March 6, 

2007 response at page 14. As stated 

above, all five of the forestry/logging 

companies reported in the questionnaire 

response as being affiliated with 

respondents, harvested from their own 

plantations. They harvested acacia, 

mixed tropical hardwood (MTH) 

chipwood, and smaller volumes of MTH 

pulp logs. 

The GOI initially reported that 

numerous products, both timber and 

non–timber, are harvested from public 

land owned by the GOI. See GOI’s 

January 25, 2007 response at page 4; 

however, the GOI did not report the 

number of industries that had rights to 

harvest standing timber. In our 

supplemental questionnaire, we 

requested that the GOI identify for the 

years 2002 through 2005, every 

company, and the industry in which it 

was classified, that applied for and was 

approved or rejected for either an HPH 

or HTI license. See the Department’s 

February 16, 2007 Supplemental 

Questionnaire at 2. The GOI did provide 

a list of company names but did not 

identify the company’s industry 

classification. We also requested that 

the GOI identify the Indonesian 

industrial classifications for companies 

that harvest timber and consume timber 

as a primary input. Id. at 2. In response, 

the GOI stated that the following five 

industries used standing timber either 

through consumption of timber as a 

primary input or through products that 

are produced with timber: the wood and 

wood products, paper and paper 

products, publishing and printing, 

chemical, and furniture industries. See 

GOI’s March 6, 2006 response at page 6 

and Exhibit Supp–5. 

Although we are concerned that in its 

supplemental questionnaire response 

the GOI broadened the scope of our 

question by adding in industries that do 

not harvest timber or consume timber as 

a primary input, we are relying on the 

GOI’s statement that five industries are 

provided standing timber by the GOI for 

purposes of this preliminary 

determination. We also asked the GOI to 

identify the total number of industries 

in Indonesia at the same level of 

industrial classification in which the 

GOI placed the industries that harvest or 

consume timber. See the Department’s 

February 16, 2007 Supplemental 

Questionnaire at 2. In response, the 

information provided by the GOI 

identifies a total of 23 industries at the 

level of large and medium 

manufacturing activities. See the GOI’s 

March 6, 2006, response at page 6 and 

Exhibit Supp–5. Therefore, even relying 

on the GOI’s statement that five 

industries use this program, these five 

industries constitute a limited group of 

industries within the universe of 23 


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industries identified by the GOI. 

Accordingly, we preliminarily 

determine that provision of standing 

timber by the GOI is de facto specific in 

accordance with section 771(5A)(D)(iii) 

of the Act. 

We also preliminarily determine that 

the provision of standing timber 

provides a financial contribution as 

described in section 771(5)(D)(iii) of the 

Act (provision of goods or services other 

than general infrastructure). Pursuant to 

section 771(5)(E)(iv) of the Act, a benefit 

is conferred when the government 

provides a good or service for less than 

adequate remuneration. Section 

771(5)(E) of the Act further states that 

‘‘the adequacy of remuneration shall be 

determined in relation to prevailing 

market conditions for the good or 

service being provided . . . in the 

country which is subject to the 

investigation or review. Prevailing 

market conditions include price, 

quality, availability, marketability, 

transportation, and other conditions of . 

. . sale.’’

Section 351.511(a)(2) of the 

Department’s regulations sets forth the 

basis for identifying comparative 

benchmarks for determining whether a 

government good or service is provided 

for less than adequate remuneration. 

These potential benchmarks are listed in 

hierarchical order by preference: (1) 

market prices from actual transactions 

within the country under investigation; 

(2) world market prices that would be 

available to purchasers in the country 

under investigation; or (3) an 

assessment of whether the government 

price is consistent with market 

principles. This hierarchy reflects a 

logical preference for achieving the 

objectives of the statute. 

The most direct means of determining 

whether the government required 

adequate remuneration is by 

comparison with private transactions for 

a comparable good or service in the 

country. Thus, the preferred benchmark 

in the hierarchy is an observed market 

price for the good, in the country under 

investigation, from a private supplier 

(or, in some cases, from a competitive 

government auction) located either 

within the country, or outside the 

country (the latter transaction would be 

in the form of an import). This is 

because such prices generally would be 

expected to reflect most closely the 

commercial environment of the 

purchaser under investigation. 

Thus, in accordance with the first 

preference in the hierarchy, to 

determine the existence and extent of 

the benefit, we would need to identify 

an observed market stumpage price from 

a private supplier in Indonesia. The GOI 

reported that there were only 233,811 

hectares of private forest land and that 

it does not maintain information on the 

value of any private sales of standing 

timber in Indonesia. See the GOI’s 

March 6, 2007 response at page 3. We 

preliminarily determine that there are 

no market–determined stumpage fees in 

Indonesia upon which to base a ‘‘first 

tier’’ benchmark. This is consistent with 

our finding in Lined Paper Final at 

‘‘Benchmark for Stumpage’’ section. As 

noted above, the GOI has not provided 

any information on the sale of either 

privately–owned standing timber in 

Indonesia, or the stumpage fees charged 

by private timber companies. See the 

GOI’s March 6, 2007 response at page 3. 

Nor has the Department been able to 

identify such information from any 

other available source. Accordingly, the 

Department has no private stumpage 

data in Indonesia that could even be 

evaluated for purposes of a ‘‘first tier’’

benchmark. 

The ‘‘second tier’’ benchmark, 

according to the regulations, relies on 

world market prices that would be 

available to the purchasers in the 

country in question, though not 

necessarily reflecting prices of actual 

transactions involving that particular 

producer. In selecting a world market 

price under this second approach, the 

Department will examine the facts on 

the record regarding the nature and 

scope of the market for that good to 

determine if that market price would be 

available to an in–country purchaser. As 

discussed in the CVD Preamble, the 

Department will consider whether the 

market conditions in the country are 

such that it is reasonable to conclude 

that a purchaser in the country could 

obtain the good or service on the world 

market. For example, a European price 

for electricity normally would not be an 

acceptable comparison price for 

electricity provided by a Latin American 

government, because electricity from 

Europe in all likelihood would not be 

available to consumers in Latin 

America. However, as another example, 

the world market price for commodity 

products, such as certain metals and 

ores, or for certain industrial and 

electronic goods commonly traded 

across borders, could be an acceptable 

comparison price for a government–

provided good, provided that it is 

reasonable to conclude from record 

evidence that the purchaser would have 

access to such internationally traded 

goods. See CVD Preamble at 63 FR 

65377. 

We have insufficient evidence of 

world market prices for standing timber 

on the record of this investigation. This 

finding is also consistent with Lined 

Paper. Respondents have provided 

information regarding stumpage rates in 

the United States and have argued that 

the Department should use U.S. 

stumpage rates as a benchmark, 

consistent with our determination in 

Notice of Final Affirmative 

Countervailing Duty Determination and 

Final Negative Critical Circumstances 

Determination: Certain Softwood 

Lumber Products From Canada, 67 FR 

15545 (April 2, 2002) (‘‘Lumber’’) and 

accompanying Issues and Decision 

Memorandum at section ‘‘C.I.B.’’

However, respondents have not 

demonstrated that the types of U.S. 

timber they are suggesting for 

comparison purposes are grown in 

similar conditions as those in Indonesia 

and are similar to the species harvested 

in Indonesia as pulpwood. These were 

all important factors which supported 

the Department’s decision to use U.S. 

stumpage prices in Lumber. Id. Based on 

the record in this investigation, we 

preliminarily determine that U.S. 

stumpage prices do not satisfy the 

‘‘second tier’’ benchmark requirements. 

In the alternative, respondents have 

also provided information on Malaysian 

stumpage rates for acacia, one of the 

species used to produce pulp and paper 

products in Indonesia. However, the 

information respondents provided is a 

study commissioned by them for 

purposes of this investigation and 

consists of a statement of opinion that 

includes no supporting documentation 

to establish the authenticity of the 

figures used to calculate this benchmark 

rate. Even if this study were 

independent and the data in it 

supported, the respondents have not 

addressed how these Malaysian 

stumpage rates are representative of 

rates that would be available to a 

purchaser in Indonesia. Consequently, 

these data do not provide an appropriate 

basis for a ‘‘second tier’’ benchmark. 

Since we are not able to conduct our 

analysis under the ‘‘second tier’’ of the 

regulations, consistent with the 

hierarchy, we are preliminarily 

measuring the adequacy of 

remuneration by assessing whether the 

government price is consistent with 

market principles. This approach is set 

forth in section 351.511(a)(2)(iii) of the 

Department’s regulations and is 

explained further in the CVD Preamble 

at 65378: ‘‘Where the government is the 

sole provider of a good or service, and 

there are no world market prices 

available or accessible to the purchaser, 

we will assess whether the government 

price was set in accordance with market 

principles through an analysis of such 

factors as the government’s price–setting 

philosophy, costs (including rates of 


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return sufficient to ensure future 

operations), or possible price 

discrimination.’’ The regulations do not 

specify how the Department is to 

conduct such a market principle 

analysis. By its nature the analysis 

depends upon available information 

concerning the market sector at issue 

and, therefore, must be developed on a 

case–by-case basis. 

The GOI has not provided information 

or documentation which demonstrates 

that the stumpage fees it charges are 

established in accordance with market 

principles. Although the PSDH rates are 

established as a percentage of the 

reference price of logs, we cannot 

conclude that the log reference price is 

reflective of market principles or is a 

market–determined price. The GOI 

reported that the reference price is 

normally determined by a weighted–

average of both the Indonesian domestic 

and export prices for logs. However, 

since a log export ban is in place, the 

reference price is currently determined 

solely from domestic prices. See GOI’s 

January 25, 2007 response at page 15. 

Through its ownership of virtually all of 

Indonesia’s harvestable forests, the GOI 

has complete control over access to the 

timber supply. In addition, the ban on 

the export of logs affects the price for 

logs. Id. at Exhibit 7 under Regulations 

1132/Kpts–II/2001 and 292/MPP/Kep/ 

10/2001; see also GOI’s March 6, 2007 

response at Exhibit Supp–12 and the 

paper by the Centre for Strategic and 

International Studies on 

‘‘Competitiveness and Efficiency of the 

Forest Product Industry in Indonesia’’

(noting a study on page 6 that the 

‘‘stumpage value was reduced by 33% 

under the log export ban policy.’’). As 

such, the reference prices for logs 

cannot be considered market–based. 

Thus, we preliminarily determine that 

the stumpage fees charged by the GOI 

which are charged as a percentage of a 

non–market determined reference price 

are not based on market principles. 

Since the government price was not 

set in accordance with market 

principles, we looked for an appropriate 

proxy to determine a market–based 

stumpage benchmark. It is generally 

accepted that the market value of timber 

is derivative of the value of the 

downstream products. The species, 

dimension and growing condition of a 

tree largely determine the downstream 

products that can be produced from a 

tree; the value of a standing tree is 

derived from the demand for logs 

produced from that tree and the demand 

for logs is in turn derived from the 

demand for the products produced from 

these logs. See e.g., Notice of Final 

Results of Countervailing Duty 

Administrative Review and Rescission 

of Certain Company–Specific Reviews: 

Certain Softwood Lumber Products 

From Canada, 69 FR 75917 (December 

20, 2004), and accompanying Issues and 

Decision Memorandum at pages 16–18. 

As a result of the geographic 

proximity and the similarities of forest 

conditions, climate, and tree species 

between Indonesia and Malaysia, we 

have selected Malaysian pulp log export 

prices as the most appropriate basis for 

evaluating whether Indonesian 

stumpage is priced consistent with 

market principles. See section 

351.511(a)(2)(iii) of the Department’s 

regulations; see also Preliminary 

Affirmative Countervailing Duty 

Determination on Coated Free Sheet 

Paper from Indonesia: Analysis 

Memorandum on Calculations for PT. 

Pabrik Kertas Tjiwi Kimia Tbk and PT. 

Pindo Deli Pulp and Paper Mills 

(Preliminary Analysis Memo), dated 

March 29, 2007. This is consistent with 

our finding in Lined Paper Final. 

Furthermore, neither party has argued 

that Malaysian pulpwood is not suitable 

for comparison purposes. These export 

transactions reflect prices resulting from 

private transactions between Malaysian 

pulp log sellers and pulp log buyers in 

the international market; thus, they 

represent market–determined prices. 

Accordingly, we are using the value of 

pulp log exports from Malaysia during 

the POI, as reported in the ‘‘World 

Trade Atlas,’’ as the starting point for 

determining whether the GOI is 

providing standing timber for less than 

adequate remuneration. 

To determine which Malaysian export 

statistics to include in the benchmark, 

we evaluated the suggestions submitted 

by the parties regarding Malaysian log 

export prices for several types and 

species of logs. The respondents have 

reported that acacia and MTH are the 

types of timber that were harvested from 

HTI plantations for pulp and paper 

production in Indonesia and that AA, 

WKS, SPA, RAL, and FI harvested either 

one or both of these types of pulpwood 

from plantations. See respondents’

March 6, 2007 questionnaire response at 

Exhibit Supp–10; see also Cross–

Ownership Memo on timber purchased 

by AA and WKS from the suppliers that 

we have preliminarily determined are 

also cross–owned. For acacia, none of 

the parties suggested using anything 

other than the value of acacia pulp log 

exports from Malaysia. No record 

information suggests that exports of 

acacia pulp logs are not the appropriate 

basis to use as the starting point for 

determining whether the GOI is 

providing acacia pulpwood for less than 

adequate remuneration. 

For MTH, respondents suggested that 

we rely on export data for three 

categories of pulpwood, one of which is 

identified as light hardwood pulpwood 

and the other two as light hardwood 

pulpwood of the species batai and 

meransi. Petitioner has suggested that 

we use the same benchmark for MTH 

that we used in Lined Paper Final, 

which was based on the value of exports 

of sawlogs, veneer logs, and other wood 

of the species kapur, keruin, ramin, and 

other tropical woods. We do not find it 

appropriate to use the export values of 

the types of logs used in the Lined Paper 

Final, as suggested by petitioner, 

because those log types included saw 

logs and veneer logs, as adverse facts 

available in that case. In addition, we 

have preliminarily determined not to 

include the batai and meransi categories 

of pulp logs suggested by respondents 

because they have not demonstrated 

that these particular types of wood are 

harvested as pulpwood in Indonesia. If 

the GOI can demonstrate that these 

other types of wood are harvested as 

pulpwood in Indonesia, we will 

consider including them in any 

calculation of the Malaysian export 

values in the final determination. 

Therefore, for purposes of this 

preliminary determination, we have 

decided to use Malaysian exports of 

light hardwood pulpwood, of a type not 

elsewhere specified (HTS 4403.99.195) 

as the starting point for determining 

whether the GOI is providing MTH pulp 

logs and chipwood for less than 

adequate remuneration. 

Using the Malaysian export data for 

acacia and light hardwood pulpwood, 

we calculated two unit values: one to 

use for acacia pulp logs and one to use 

for MTH chipwood and pulp logs. See 

Preliminary Analysis Memo. To derive a 

market–based benchmark price for 

Indonesian stumpage, we then adjusted 

the Malaysian export log prices to 

remove the Indonesian costs of 

extraction (harvesting) of the standing 

timber. To determine the Indonesian 

harvesting costs (including a reasonable 

amount for profit associated with 

extraction), we used information 

contained in ‘‘Addicted to Rent: 

Corporate and Spatial Distribution of 

Forest Resources in Indonesia; 

Implications of Forest Sustainability 

and Government Policy.’’ This study, 

which was submitted as Exhibit V–8 of 

the October 31, 2006 petition, provided 

the only independent source that 

specifies extraction costs and profit in 

Indonesia. The amounts in this report 

are $17 for extraction costs and $5 for 

profit in connection with extraction. 

Both the petitioner and the 

respondents have argued (albeit for 


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2Because the Malaysian export values are 

reported in ringgits and the Indonesian stumpage 

fees are in rupiahs, and because the sales values 

reported by IK, Lontar, TK and PD were in U.S. 

dollars, we have converted all values into U.S. 

dollars using the annual average exchange rate for 

the POI reported in the International Monetary 

Fund Statistics. In addition, where it was necessary 

to convert between tons and cubic meters, we used 

a conversion factor reported in the Food and 

Agriculture Organization of the United Nations’

‘‘Forest Products Yearbook 2003’’ which we have 

placed on the record in the Preliminary Analysis 

Memo. 

different reasons and for different 

adjustments) that the Department could 

use the forestry/logging companies’

reported actual costs for harvesting to 

adjust the Malaysian log export prices. 

However, for purposes of this 

preliminary determination, we have 

decided not to use these actual costs. 

We may consider using these actual 

costs for the final determination if the 

GOI can demonstrate that it has a 

system in place to evaluate exactly 

which costs are legitimately considered 

to be harvesting and extraction costs, 

and that it has evaluated how to 

distinguish the types of costs relevant to 

harvesting on plantations versus the 

natural forest, and that it has a system 

in place to distinguish the costs of 

extraction on plantations versus other 

plantation development and 

maintenance costs. 

Based on our analysis of the 

information on the record, as well as our 

own research which shows that acacia 

is grown on plantations in Malaysia just 

as it is in Indonesia, we preliminarily 

determine that no other adjustments 

(other than the extraction costs and the 

profit associated with extraction) are 

necessary to the Malaysian export prices 

to derive a market–based stumpage 

price in Indonesia. See Preliminary 

Analysis Memo. 

We then compared this derived 

market–based stumpage price to the 

stumpage fees paid by respondents’

cross–owned forestry/logging 

companies.2 Where possible, we used 

the reported PSDH royalty fees and the 

relevant DR reforestation fees that the 

respondents’ cross–owned forestry/ 

logging companies reported paying 

during the POI for each of the types of 

Indonesian pulp logs (acacia and MTH) 

harvested during the POI. See 

respondents’ March 6, 2007 response at 

Exhibit Supp–10. For MTH chipwood 

and pulp logs (the GOI defines 

chipwood as timber of any length whose 

diameter is less than 29 centimeters), 

respondents reported payments of both 

PSDH and DR; for acacia, respondents 

only reported payments of PSDH 

because DR fees are not required on 

these logs which are harvested from the 

plantation. Id. at page 16. 

To determine the existence and extent 

of the benefit for acacia and MTH on a 

per–unit basis, we compared the actual 

payment of PSDH fees by AA, WKS, 

SPA, RAL and FI on accacia to the 

benchmark stumpage fee derived from 

the Malaysian export prices for accacia 

pulp logs. We then compared, where 

possible, the actual PSDH fees and DR 

fees paid by AA, WKS, SPA, RAL and 

FI on MTH chipwood and pulp logs, to 

the corresponding derived stumpage 

benchmark for MTH pulpwood. 

Respondents claimed that the 

Department should make adjustments to 

these actual stumpage payments to the 

GOI for a number of harvesting costs, 

taxes and annual license fees that the 

companies incur. We have already 

factored in, as a deduction from the 

Malaysian export prices, an amount for 

total harvesting costs. The GOI has 

provided no basis for making an 

adjustment for taxes. While an 

adjustment for an annual licensing fee 

may be warranted, the GOI did not 

provide any information on what those 

annual licensing fees are and the 

companies did not report what they 

paid in annual licensing fees during the 

POI. 

Based on the comparison of the per–

unit stumpage fees actually paid on 

each type of wood with the market–

derived stumpage benchmark, we 

determine that the GOI provided 

standing timber for less than adequate 

remuneration. We then multiplied the 

difference between the actual fee paid 

on a per–unit basis and the benchmark 

stumpage rate, by multiplying this per–

unit stumpage benefit for each type of 

wood by the reported volume of each 

type of wood that was harvested and 

sold to IK and Lontar during the POI for 

these five forestry/logging companies. 

For the pulp logs purchased by AA 

and WKS from the additional suppliers 

that we have preliminarily determined 

are cross–owned (see ‘‘Cross–

Ownership’’ section above), we did not 

have information about the actual 

stumpage and DR fees paid. We 

calculated the amount of the stumpage 

paid for acacia by multiplying the 

volume of acacia pulp logs produced by 

these suppliers which was purchased by 

AA and WKS, by the PSDH that would 

have been charged by the GOI during 

the POI. The MTH stumpage payments 

were calculated by multiplying the 

volume of MTH pulp logs produced by 

these suppliers which was purchased by 

AA and WKS, by the PSDH that would 

have been charged by the GOI during 

the POI, plus the DR fee charged on 

MTH pulp logs that would have been 

charged by the GOI during the POI. We 

compared the resulting calculated 

stumpage and DR fees paid by pulp log 

type, to the appropriate benchmark. We 

multiplied the resulting difference by 

the volume of pulp logs sold to AA and 

WKS by these cross–owned pulp log 

suppliers to determine the benefit. 

Since we have preliminarily 

determined that the forestry/logging 

companies are cross- owned with the 

pulp and paper producers and that the 

pulp logs produced by these cross–

owned forestry/logging companies are 

primarily dedicated to the production of 

the downstream products (see ‘‘Cross–

Ownership’’ section above), we 

preliminarily find that the GOI’s 

provision of timber for less than 

adequate remuneration provides a 

countervailable subsidy to TK/PD. To 

determine the subsidy rate, we first 

summed all of the benefit amounts 

calculated for the cross–owned forestry/ 

logging companies. We then divided the 

aggregate benefit by the sum of the 

external sales values of TK, PD, IK, and 

Lontar (i.e., total FOB sales values 

minus any cross–owned inter–company 

sales), adjusted, where possible, for 

sales returns, claims, and discounts. We 

have not included in the denominator 

any external sales of the cross–owned 

forestry/logging companies because, as 

discussed above, we are capturing in the 

benefit calculation only pulp logs that 

were harvested/produced by the cross–

owned forestry/logging companies that 

were sold to IK and Lontar. This 

calculation yields a countervailable 

subsidy rate of 21.23 percent ad valorem 

for the combined entity TK/PD. 

Although the Department initiated an 

investigation of whether the GOI ban on 

log exports provides a countervailable 

subsidy to the respondents, we 

determine that the issue of the 

countervailability of the log export ban 

need not be reached for purposes of this 

preliminary determination. First, the 

only source of pulp logs for IK and 

Lontar, the cross–owned pulp producers 

which supplied pulp to TK and PD 

during the POI, was from the cross–

owned forestry/logging companies. 

Respondents stated that ‘‘IK and Lontar 

did not purchase timber from any 

supplier other than AA and WKS during 

the POI.’’ See respondents’ March 6, 

2007 response at page 10. Second, we 

have preliminarily found that IK’s and 

Lontar’s total supply of pulp logs is 

roughly equivalent to the total quantity 

of pulp logs harvested by AA and WKS, 

plus the quantity of pulp logs purchased 

by AA and WKS from cross–owned 

forestry/logging companies in the CFS 

production chain. As such, we find it 

reasonable to conclude for purposes of 


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this preliminary determination that IK’s 

and Lontar’s supply of pulp logs was 

exclusively sourced from the production 

of these cross–owned companies. 

Because we would not attribute to the 

downstream cross–owned pulp and 

paper producers a benefit that 

encompasses a quantity of pulp logs that 

is greater than the quantity of pulp logs 

actually produced and sold by the 

cross–owned forestry/logging 

companies to the downstream 

producers, we need not evaluate 

whether the remaining purchases by AA 

and WKS of pulp logs from unaffiliated 

suppliers are benefitting from a subsidy 

through the log export ban. 

Furthermore, because we have used 

export prices of pulp logs from Malaysia 

as the starting point for deriving a 

market–based stumpage benchmark, the 

amount of any benefit to the combined 

entity TK/PD that might be found in an 

evaluation of the log export ban is 

included in the calculation for the 

provision of standing timber for less 

than adequate remuneration. Thus, 

because the total quantity of pulp logs 

produced by the cross–owned forestry 

logging companies in the production 

chain captures the total quantity of pulp 

logs sold by the cross–owned forestry/ 

logging companies to IK and Lontar, the 

entire amount of any countervailable 

subsidy is subsumed under the 

‘‘Provision of Standing Timber for Less 

than Adequate Remuneration’’ program, 

noted above. 

B. Subsidized Funding for Reforestation 

(Hutan Tanaman Industria or HTI 

Program): ‘‘Zero Interest’’ Rate Loans 

The GOI reported that ‘‘zero interest’’

rate loans were available to some 

holders of HTI licenses; such licenses 

are issued for harvesting timber from 

plantations. The GOI has reported that 

there are three types of plantations in 

Indonesia: (1) Privately owned, (2) 

voluntary HTI joint ventures, and (3) 

compelled HTI joint ventures for the 

purpose of implementing transmigration 

policy. Of these three types of 

plantations, only HTI joint ventures 

could apply for zero–interest rate loans. 

The GOI reported that the loaned 

amounts came from the DR Fund. The 

HTI joint venture could apply for zero–

interest loans from the DR Fund for the 

establishment phase of the plantation. 

According to the GOI, loan amounts 

were payable to the joint venture in 

increments based on the amount of 

harvesting done each year and the total 

amount of the loan could not exceed 

32.5 percent of the calculated plantation 

costs. The GOI required that the private 

party guarantee the loan repayment in 

full. In 2000, the GOI discontinued 

funding joint ventures through the DR 

Fund loan programs, although existing 

joint ventures which had previously 

obtained loans through the DR Fund 

would receive loan disbursements and 

would be required to make loan 

payments as required by loan 

agreements finalized before 2000. 

The respondents reported that of the 

cross–owned forestry/logging 

companies (see ‘‘Cross–Ownership’’

section above), only RAL (a compelled 

joint venture) and FI (a voluntary joint 

venture) received ‘‘zero interest’’ loans 

prior to 2000 that remained outstanding 

during the POI. These loans provide a 

financial contribution as described in 

section 771(5)(D)(i) of the Act, as a 

direct transfer of funds in the form of 

loans. The loans give rise to a benefit in 

the amount of the difference between 

the amount of interest the borrowers 

actually paid and the amount of interest 

the borrowers would have paid on a 

comparable commercial loan under 

section 771(5)(E)(ii) of the Act. The loan 

program is specific within the meaning 

of section 771(5A)(D)(i) of the Act, 

because participation in the program is 

limited to HTI joint venture plantations. 

Therefore, we preliminarily determine 

that these loans confer countervailable 

subsidies. 

To calculate the benefit (the amount 

of the interest savings), we applied the 

benchmark interest rate described in the 

‘‘Loan Benchmarks’’ section above to 

the average loan balance outstanding 

during the POI for both RAL and FI. We 

then divided the amount of interest 

savings by the total external sales values 

of all the cross–owned companies in the 

production chain (i.e., total FOB sales 

values minus any cross–owned inter–

company sales), adjusted, where 

possible, for sales returns, claims, and 

discounts. Thus, we preliminarily 

determine the countervailable subsidy 

from the HTI zero–interest rate loan 

program to be 0.01 percent ad valorem 

for the combined entity TK/PD. 

II. Programs Preliminarily Determined 

To Be Not Used 

A. Subsidized Funding for Reforestation 

(Hutan Tanaman Industria or HTI 

Program): Commercial Rate Loans 

Neither TK, PD, nor any of their 

cross–owned suppliers reported 

receiving loans under this program. 

Therefore, we preliminarily determine 

that this program was not used. 

B. Subsidized Funding for Reforestation 

(Hutan Tanaman Industria or HTI 

Program): Government Capital Infusions 

into Joint Venture Forest Plantation 

The respondents reported that RAL 

and FI, both HTI joint ventures, received 

captial infusions in the 1990s under this 

program. However, petitioner’s 

unequityworthiness allegation, and the 

Department’s subsequent initiation, 

addressed the companies’

unequityworthiness from 2001 through 

the POI (see Initiation Checklist). 

Because the capital infusions were 

provided prior to 2001, we have not 

examined whether the GOI provision of 

capital to joint venture forest 

plantations provides a countervailable 

subsidy. Therefore, we preliminarily 

determine that this program was not 

used. 

Verification 

As provided in section 782(i)(1) of the 

Act, we intend to conduct verification of 

the GOI’s and respondents’

questionnaire responses following the 

issuance of the preliminary 

determination. 

Suspension of Liquidation 

In accordance with section 

703(d)(1)(A)(i) of the Act, we have 

calculated a single subsidy rate for the 

two cross–owned producers/exporters 

of the subject merchandise. We 

preliminarily determine the total 

countervailable subsidy rate to be: 

Producer/exporter Rate 

PT. Pabrik Kertas Tjiwi Kimia 

Tbk/ PT. Pindo Deli Pulp and 

Paper Mills .............................. 21.24 % 

All Others .................................... 21.24 % 

In accordance with sections 703(d) 

and 705(c)(5)(A) of the Act, we have set 

the ‘‘all others’’ rate as the rate for TK/ 

PD because it is the only producer/ 

exporter investigated. 

In accordance with sections 

703(d)(1)(B) and (2) of the Act, we are 

directing U.S. Customs and Border 

Protection (CBP) to suspend liquidation 

of all entries of the subject merchandise 

from Indonesia, which are entered or 

withdrawn from warehouse, for 

consumption on or after the date of the 

publication of this notice in the Federal 

Register, and to require a cash deposit 

or the posting of a bond for such entries 

of the merchandise in the amounts 

indicated above. This suspension will 

remain in effect until further notice. 

ITC Notification 

In accordance with section 703(f) of 

the Act, we will notify the ITC of our 


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 72, No. 67 / Monday, April 9, 2007 / Notices 17507 

1A public version of this and all public 

Department memoranda is on file in the Central 

Records Unit (‘‘CRU’’), room B–099 in the main 

building of the Commerce Department. 

2A public version of this memorandum is 

available in the CRU. 

determination. In addition, we are 

making available to the ITC all non–

privileged and non–proprietary 

information relating to this 

investigation. We will allow the ITC 

access to all privileged and business 

proprietary information in our files, 

provided the ITC confirms that it will 

not disclose such information, either 

publicly or under an administrative 

protective order, without the written 

consent of the Assistant Secretary for 

Import Administration. 

In accordance with section 705(b)(2) 

of the Act, if our final determination is 

affirmative, the ITC will make its final 

determination within 45 days after the 

Department makes its final 

determination. 

Notification of Parties 

In accordance with section 351.224(b) 

of the Department’s regulations, we will 

disclose to the parties the calculations 

for this preliminary determination 

within five days of its announcement. 

Unless otherwise notified by the 

Department, interested parties may 

submit case briefs within 50 days of the 

date of publication of the preliminary 

determination in accordance with 

section 351.309(c)(i) of the Department’s 

regulations. As part of the case brief, 

parties are encouraged to provide a 

summary of the arguments not to exceed 

five pages and a table of statutes, 

regulations, and cases cited pursuant to 

section 351.309(c)(2) of the 

Department’s regulations. Rebuttal 

briefs, which must be limited to issues 

raised in the case briefs, must be filed 

within five days after the case briefs are 

filed in accordance with section 

351.309(d) of the Department’s 

regulations. 

In accordance with section 351.310 of 

the Department’s regulations, we will 

hold a public hearing, if requested, to 

afford interested parties an opportunity 

to comment on this preliminary 

determination. Individuals who wish to 

request a hearing of the Department’s 

regulations must submit a written 

request pursuant to section 351.310(c) 

within 30 days of the publication of this 

notice in the Federal Register to the 

Assistant Secretary for Import 

Administration, U.S. Department of 

Commerce, Room 1870, 14th Street and 

Constitution Avenue, NW, Washington, 

DC 20230. Pursuant to section 

351.310(c) of the Department’s 

regulations, parties will be notified of 

the schedule for the hearing and parties 

should confirm by telephone the time, 

date, and place of hearing 48 hours 

before the scheduled time. Requests for 

a public hearing should contain: (1) 

party’s name, address, and telephone 

number; (2) the number of participants; 

and, (3) to the extent practicable, an 

identification of the arguments to be 

raised at the hearing. 

This determination is issued and 

published pursuant to sections 703(f) 

and 777(i) of the Act. 

Dated: March 29, 2007. 

David M. Spooner, 

Assistant Secretary for Import 

Administration. 

[FR Doc. E7–6499 Filed 4–6–07; 8:45 am] 

BILLING CODE 3510–DS–S 

DEPARTMENT OF COMMERCE 

International Trade Administration 

[C–580–857] 

Coated Free Sheet Paper From the 

Republic of Korea: Preliminary 

Affirmative Countervailing Duty 

Determination 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

SUMMARY: The Department of Commerce 

(‘‘the Department’’) preliminarily 

determines that countervailable 

subsidies are being provided to 

producers and exporters of coated free 

sheet paper (‘‘CFS paper’’) from the 

Republic of Korea (‘‘Korea’’). For 

information on the estimated subsidy 

rates, see the ‘‘Suspension of 

Liquidation’’ section of this notice. 

EFFECTIVE DATE: April 9, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Maura Jeffords or Kristen Johnson, AD/ 

CVD Operations, Office 3, Import 

Administration, U.S. Department of 

Commerce, Room 4014, 14th Street and 

Constitution Avenue, NW., Washington, 

DC 20230; telephone: (202) 482–3146 

and (202) 482–4793, respectively. 

SUPPLEMENTARY INFORMATION:

Background 

On October 31, 2006, the Department 

received the petition filed in proper 

form by NewPage Corporation 

(‘‘petitioner’’). This investigation was 

initiated on November 20, 2006. See 

Notice of Initiation of Countervailing 

Duty Investigations: Coated Free Sheet 

Paper from the People’s Republic of 

China, Indonesia, and the Republic of 

Korea, 71 FR 68546 (November 27, 

2006) (‘‘Initiation Notice’’), and 

accompanying Initiation Checklist for 

CVD Petition on CFS paper from Korea 

(November 20, 2007) (‘‘Initiation 

Checklist’’).1 On December 19, 2006, 

petitioner timely requested a 65-day 

postponement of the preliminary 

determination for this investigation. On 

December 22, 2006, the Department 

postponed the deadline for the 

preliminary determination by 65 days to 

no later than March 30, 2007, in 

accordance with section 703(c)(1)(A) of 

the Tariff Act of 1930, as amended (‘‘the 

Act’’). See Coated Free Sheet Paper from 

Indonesia, the People’s Republic of 

China and the Republic of Korea: Notice 

of Postponement of Preliminary 

Determinations in the Countervailing 

Duty Investigations, 71 FR 78403 

(December 29, 2006). 

Due to the large number of producers 

and exporters of CFS paper in Korea, we 

determined that it is not possible to 

investigate each producer or exporter 

individually and selected four 

producers/exporters of CFS paper to be 

mandatory respondents: EN Paper Mfg. 

Co., Ltd. (‘‘EN Paper’’) (formerly Shinho 

Paper Co., Ltd. (‘‘Shinho Paper’’)), 

Kyesung Paper Co., Ltd. (‘‘Kyesung’’), 

Moorim Paper Co. Ltd. (‘‘Moorim’’) 

(formerly Shinmoorim Paper Mfg. Co., 

Ltd.), and Hansol Paper Co., Ltd. 

(‘‘Hansol’’) (collectively, 

‘‘respondents’’). See Memorandum from 

the Team, through Office Director 

Melissa Skinner, to Deputy Assistant 

Secretary Stephen J. Claeys: Regarding 

Respondent Selection (December 4, 

2006) (‘‘Respondent Selection Memo’’).2

On December 6 and 8, 2006, 

respondents submitted comments on 

our Respondent Selection Memo, in 

which they argued that the Department 

should select an additional mandatory 

respondent. On December 20, 2006, we 

responded to respondents’ comments, 

stating that we would not deviate from 

our original decision to investigate four 

mandatory respondents in the instant 

investigation. See Memorandum from 

Program Manager Eric B. Greynolds, 

through Office Director Melissa Skinner, 

to Deputy Assistant Secretary Stephen J. 

Claeys: Regarding Response to 

Comments from Interested Parties 

Regarding Respondent Selection 

(December 20, 2006) (‘‘Second 

Respondent Selection Memorandum’’). 

On December 14, 2006, we issued our 

initial questionnaire to the Government 

of Korea (‘‘the GOK’’) and requested that 

the GOK forward the relevant sections 

of the initial questionnaire to the 

mandatory respondents. 

On December 14, 2006, petitioner 

submitted a new subsidy allegation. On 

January 3, 2007, we declined to initiate 


sroberts on PROD1PC70 with NOTICES