Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5201

Department’s Position: We agree with

Lafarge and have made the necessary

changes in the computer program.

Comment 3: Lafarge maintains that

the Department erred in its calculation

of profit in the computer program when

it failed to use the information

submitted by Lafarge on the total cost of

manufacturing (COM). In addition,

Lafarge points out that the computer

program does not reflect the

Department’s intent, as stated in its

notice of preliminary results, to deduct

the cost of goods sold, along with selling

and movement expenses, from total

revenue in its calculation of profit.

Department’s Position: We did use the

COM information as submitted by

Lafarge in short tons, not metric tons. To

calculate profit for these final results we

converted the total home market costs to

total cost in short tons before adding it

to the U.S. total cost which Lafarge

reported in short tons.

We agree with Lafarge that the cost of

goods sold, along with selling and

movement expenses, should be

deducted from total revenue to calculate

constructed export price profit. We have

made this correction in our final results.

Comment 4: Lafarge states that the

Department should continue to remove

two zero quantity U.S. sales from the

data base because these observations

represent billing corrections and not

actual sales.

Department’s Position: We agree with

Lafarge and have not used these two

zero quantity U.S. sales in these final

results.

Final Results of Review

As a result of our review, we

determine that the following weightedaverage margin exists:

Manufacturer/ExporterPeriod of

review

Margin

(percent)

Lafarge Fondu

Inter’l Inc. ....... 06/15/94–

05/31/95

31.04

The Department shall determine, and

the Customs Service shall assess,

antidumping duties on all appropriate

entries. Individual differences between

export price and normal value may vary

from the percentage stated above. The

Department will issue appraisement

instructions directly to the Customs

Service.

Furthermore, the following deposit

requirements will be effective upon

publication of this notice of final results

of review for all shipments of calcium

aluminate flux from France within the

scope of the order entered, or

withdrawn from warehouse, for

consumption on or after the publication

date, as provided by section 751(a)(1) of

the Tariff Act: (1) The cash deposit rate

for the reviewed company will be the

rate listed above; (2) for previously

reviewed or investigated companies not

listed above, the rate will continue to be

the company-specific rate published for

the most recent period; (3) if the

exporter is not a firm covered in this

review, a prior review, or the original

less-than-fair-value (LTFV)

investigation, but the manufacturer is,

the cash deposit rate will be the rate

established for the most recent period

for the manufacturer of the

merchandise; and (4) for all other

producers and/or exporters of this

merchandise, the cash deposit rate of

37.93 percent, the ‘‘all others’’ rate

established in the LTFV investigation,

59 FR 5994, (February 9, 1994) shall

remain in effect until publication of the

final results of the next administrative

review.

This notice serves as a final reminder

to importers of their responsibility

under 19 CFR 353.26 to file a certificate

regarding the reimbursement of

antidumping duties prior to liquidation

of the relevant entries during this

review period. Failure to comply with

this requirement could result in the

Secretary’s presumption that

reimbursement of antidumping duties

occurred and subsequent assessment of

double antidumping duties.

Notification of Interested Parties

This notice also serves as a reminder

to parties subject to administrative

protective order (APO) of their

responsibility concerning the

disposition of proprietary information

disclosed under APO in accordance

with 19 CFR 353.34(d). Timely written

notification of return/destruction of

APO materials or conversion to judicial

protective order is hereby requested.

Failure to comply with the regulations

and the terms of an APO is a

sanctionable violation. Timely written

notification of the return/destruction of

APO materials or conversion to judicial

protective order is hereby requested.

This administrative review and notice

are in accordance with Section 751(a)(1)

of the Tariff Act (19 U.S.C. 1675(a)(1))

and 19 CFR 353.22.

Dated: January 27, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–2714 Filed 2–3–97; 8:45

am]1q01

BILLING CODE 3510–25–M

[C–122–825]

Final Negative Countervailing Duty

Determination and Final Negative

Critical Circumstances Determination:

Certain Laminated Hardwood Trailer

Flooring (LHF) From Canada

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce

EFFECTIVE DATE: February 4, 1997.

FOR FURTHER INFORMATION CONTACT:

David Boyland or Daniel Lessard, AD/

CVD Enforcement, Office I, Import

Administration, U.S. Department of

Commerce, Room 3099, 14th Street and

Constitution Avenue, NW., Washington,

DC 20230; telephone (202) 482–4198

and 482–1778, respectively.

FINAL DETERMINATION: The Department

determines that countervailable

subsidies are not being provided to

manufacturers, producers, or exporters

of LHF in Canada.

Case History

Since the publication of the

preliminary negative determination

(Preliminary Determination) in the

Federal Register (61 FR 59079,

November 20, 1996), the following

events have occurred.

Verification of the responses of the

Government of Canada (GOC), the

Government of Quebec (GOQ), Nilus

Leclerc, Inc. and Industries Leclerc, Inc.,

Erie Flooring and Wood Products (Erie),

Industrial Hardwoods Products, Ltd.

(IHP), and Milner Rigsby Co., Ltd.

(Milner) was conducted between

November 13 and 27, 1996.

Petitioner and respondents filed case

and rebuttal briefs on December 17,

1996, and December 23, 1996,

respectively. The hearing was held on

January 7, 1997.

Scope of Investigation

The scope of this investigation

consists of certain edge-glued hardwood

flooring made of oak, maple, or other

hardwood lumber. Edge-glued

hardwood flooring is customized for

specific dimensions and is provided to

the consumer in ‘‘kits,’’ or pre-sorted

bundles of component pieces generally

ranging in size from 6’’ to 14’’ x 48’ to

57’ x 1’’ to 1(1/2)’’ for trailer flooring,

from 6’’ to 13’’ x 12’ to 28’ x 1(1/8)’’ to

1(1/2)’’ for vans and truck bodies, from

9’’ to 12(1/2)’’ x 8’ to 10’ x 1(7/8)’’ to

2(1/2)’’ for rail cars, and from 6’’ to 14’’

x 19’ to 48’ x 1(1/8)’’ to 1(3/8)’’ for

containers.

The merchandise under investigation

is currently classified, in addition to

various other hardwood products, under

subheading 4421.90.98.40 of the

Harmonized Tariff Schedule of the

United States (HTSUS). Edge-glued

hardwood flooring is commonly referred

to as ‘‘laminated’’ hardwood flooring by

buyers and sellers of subject
5202 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

merchandise. Edge-glued hardwood

flooring, however, is not a hardwood

laminate for purposes of classification

under HTSUS 4412.14. Although the

HTSUS subheading is provided for

convenience and Customs purposes, our

written description of the scope of this

proceeding is dispositive.

The Applicable Statute and Regulations

Unless otherwise indicated, all

citations to the statute are references to

the provisions of the Tariff Act of 1930,

as amended by the Uruguay Round

Agreements Act effective January 1,

1995 (the Act). References to the

Countervailing Duties: Notice of

Proposed Rulemaking and Request for

Public Comments, 54 FR 23366 (May 31,

1989) (Proposed Regulations), which

have been withdrawn, are provided

solely for further explanation of the

Department’s countervailing duty

practice.

Petitioner

The petition in this investigation was

filed by the Ad Hoc Committee on

Laminated Hardwood Trailer Flooring,

which is composed of the AndersonTully Company, Havco Wood Products

Inc., Industrial Hardwoods Products

Inc., Lewisohn Sales Company Inc., and

Cloud Corporation.

Period of Investigation (POI)

The period for which we are

measuring subsidies is calendar year

1995.

Ontario Companies

We have determined that three

producers of the subject merchandise

have received zero or de minimis

subsidies. Erie and IHP formally

requested that they be excluded from

any potential countervailing duty order.

Milner responded to our questionnaire.

IHP certified that the only subsidy it

received during the POI was consulting

services pursuant to the Industrial

Research Assistance Program (IRAP).

The GOC and Government of Ontario

also certified and we verified that this

was the only benefit IHP received. Even

assuming this assistance constituted a

countervailable subsidy, the benefit

would be de minimis.

Erie certified that it received no

countervailable subsidies. The GOC and

the Government of Ontario also certified

this. We verified that Erie received no

countervailable subsidies. Finally, we

verified that Milner did not receive

benefits during the POI.

The remainder of this notice deals

exclusively with Nilus Leclerc, Inc. and

Industries Leclerc, Inc.

Related Parties

In the present investigation, we have

examined affiliated companies (within

the meaning of section 771(33) of the

Act) whose relationship may be

sufficient to warrant treatment as a

single company with a single, combined

countervailing duty rate. In the

countervailing duty questionnaire,

consistent with our past practice, the

Department defined companies as

sufficiently related where one company

owns 20 percent or more of the other

company, or where companies prepare

consolidated financial statements. The

Department also stated that companies

may be considered sufficiently related

where there are common directors or

one company performs services for the

other company. According to the

questionnaire, where such companies

produce the subject merchandise or

where such companies have engaged in

certain financial transactions with the

company producing the subject

merchandise, the affiliated parties are

required to respond to our

questionnaire.

Nilus Leclerc Inc. was identified in

the petition as an exporter of LHF from

Canada. Nilus Leclerc Inc. is part of a

consolidated group, Groupe Bois Leclerc

(GBL). Nilus Leclerc, Inc. and Industries

Leclerc, Inc. are the only companies in

the group directly engaged in the

production of LHF. Because of the

extent of common ownership, we have

found it appropriate to treat these two

LHF producers as a single company

(Leclerc). As a consequence, we are

calculating a single countervailing duty

rate for both companies by dividing

their combined subsidies by their

combined sales.

In addition, certain separately

incorporated companies in the group

received subsidies. Where those

subsidies were tied to the production of

a corporation that is not directly

involved in the production of LHF, we

have not included those subsidies in our

calculations. Where the subsidies

benefitted the production of LHF and

other merchandise, we included those

subsidies in our calculations using the

sales of the relevant products in the

denominator of the ad valorem subsidy

rate calculations.

Export Subsidy Issue

Petitioner has alleged that the loans

provided by the Canada-Quebec

Subsidiary Agreement on Industrial

Development (Subsidiary Agreement)

and the Expansion and Modernization

Program sponsored by the Societe de

Developpement Industriel du Quebec

(SDI) are de facto export subsidies.

Petitioner argues that the programs

should be deemed to be export subsidies

because the approval of government

financing was ‘‘in fact contingent’’ on

exports to the United States. According

to petitioner, Leclerc’s project and the

government approval of the project were

entirely based on Leclerc’s plan to

export the vast majority of the

anticipated increased production to the

United States. Petitioner asserts that due

to the limited growth potential of the

LHF market in Canada, the U.S. export

market was the only viable market for

Leclerc’s expanded capacity. Without

the U.S. market, petitioner argues, there

would have been no need for expansion

or financing and thus, the government

approval of Leclerc’s project was, and

could only have been, ‘‘contingent’’ on

exports.

In rebuttal, respondents maintain that

the approval of government financing

was not ‘‘contingent’’ on exports and

that Leclerc’s export potential was

merely one aspect of the government

officials’ overall assessment of the

commercial viability of the expansion

project. According to respondents, the

absence of provisions in the loan

agreements which condition the receipt

of the loan on exports or consider the

failure to achieve a particular level of

export performance as a default of the

loan demonstrate that the programs

were not ‘‘contingent’’ upon export

performance. Furthermore, respondents

invoke the second sentence of note 4 of

Article 3.1(a) of the SCM which states:

‘‘The mere fact that a subsidy is

accorded to enterprises which export

shall not for that reason alone be

considered to be an export subsidy

within the meaning of (Article 3.1(a)).’’

Respondents contend that this provision

makes it clear that the mere fact that

Leclerc exported to the United States or

projected future exports should not

transform the government financing into

an export subsidy.

While we have closely analyzed this

issue, as discussed below, when we

examine the programs as domestic

subsidies, the rate for these programs is

de minimis. Our analysis also shows

that, even if we were to find these

programs to be export subsidies, the

total countervailing duty rate calculated

for Leclerc during the POI would be de

minimis. Therefore, we have not

addressed the issue of whether these

two programs are export subsidies.

Creditworthiness

In our Preliminary Determination, we

treated Leclerc as ‘‘creditworthy’’ in

1993, 1994, and 1995. This decision was

based on information provided by

Leclerc indicating that it had received
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5203

commercial financing or that

commercial banks had agreed to provide

it with long-term financing in each of

those years. For this final determination,

we are continuing to treat Leclerc as

creditworthy in 1993 and 1994 because

it received comparable loans from

commercial banks in those years. (For a

further discussion of the comparability

issue, see ‘‘Comparability’’ of

Commercial Loans Received section

below.) However, based on further

information gathered at verification

regarding 1995, we have determined

that the case-specific circumstances

surrounding the commercial financing

agreed to and actually received in that

year indicate that this financing is not

dispositive evidence of Leclerc’s

creditworthiness. Accordingly, we have

analyzed Leclerc’s financial condition

and prospects in 1995 to determine

whether the company was creditworthy

in that year. Based on our analysis, we

have determined that Leclerc was

uncreditworthy in 1995 (see January 24,

1997 memorandum from David R.

Boyland, Import Compliance Specialist,

AD/CVD Enforcement, Office 1, to

Susan H. Kuhbach, Acting Deputy

Assistant Secretary, AD/CVD

Enforcement, Group 1).

‘‘Comparability’’ of Commercial Loans

Received

In 1993 and 1994, Leclerc obtained

commercial loans. The receipt of such

loans must be considered both in the

context of the uncreditworthiness

allegation and selection of the

appropriate benchmark to use in

measuring the countervailable benefit

from the government loans received. In

1995, Leclerc reached an agreement

with a commercial source to receive

long-term financing. The circumstances

surrounding the 1995 financing are such

that we have disregarded this financing

as dispositive evidence of

creditworthiness or as a possible

benchmark. We now turn to the receipt

by Leclerc of commercial loans in 1993

and 1994.

Section 355.44(b)(6)(i) of the Proposed

Regulations states that the receipt of

comparable long-term financing is

normally dispositive evidence that a

company is creditworthy. Section

775(5)(E)(ii) of the Act—a new provision

added by the URAA—requires that

when selecting a benchmark loan to

compare to the government loan for

purposes of measuring the potential

benefit, the Department must select a

loan comparable to one the company

could obtain commercially. We have

determined that the commercial loans

received by Leclerc are sufficiently

comparable to the government loans to

constitute dispositive evidence that the

company was creditworthy in 1993 and

1994. However, we have determined

that the commercial loans received are

not sufficiently comparable to measure

accurately any countervailable benefits

received from the government loans.

When the Department examines

whether a company is creditworthy, it is

essentially attempting to determine if

the company in question could obtain

commercial financing. The analysis of

whether a company is creditworthy

examines whether the company

received comparable commercial loans

and, if necessary, the overall financial

health and future prospects of the

company. Such an analysis is ‘‘often

highly complex’’ (see the preamble to

the Proposed Regulations at 23370,

citing the Subsidies Appendix at

18019.) The fundamental question

however, is a general one; namely: was

the company’s financial health such that

it did not have meaningful access to

long-term commercial loans?

Given the difficult question posed by

a creditworthy inquiry and our policy of

seeking guidance from the judgments of

the commercial markets, the Department

has historically relied heavily upon the

receipt of comparable commercial loans

as dispositive evidence that the

company at issue is creditworthy. The

‘‘comparability’’ of any commercial

loans received has essentially been

determined by examining whether longterm loans (not guaranteed by the

government) were received from

commercial sources in the same year as

the government loans. (See for example,

Final Affirmative Countervailing Duty

Determinations: Certain Steel Products

from Italy 58 FR 37327, 37329 (July 9,

1993) and Final Affirmative

Countervailing Duty Determinations:

Certain Carbon Steel Products from

Austria 50 FR 33369, 33372 (August 9,

1985).) If the commercial loans received

were judged comparable on this basis,

the receipt of such loans has been

considered dispositive evidence that the

company was creditworthy. Based on

our traditional interpretation of

‘‘comparable’’ in the creditworthy

context, the commercial loans received

by Leclerc were comparable to the

government loans it received.

We see no reason to change the policy

of relying on commercial loans or

defining comparability as outlined

above, because it answers the general

question posed by an

uncreditworthiness allegation.

Specifically, it provides the most direct

evidence that a company could obtain

loans from commercial sources. If a

company is able to obtain such

financing, the marketplace has judged

that the company at issue is

creditworthy. As noted above, in such

instances, the Department will normally

defer to the decision of the market. The

fact that the commercial loans received

may differ from the government loans

with respect to certain terms such as the

level of security does not necessarily

speak directly to the question of

whether the company was creditworthy.

Because of the facts of this particular

case, specifically the presence of the

private sector in the financing of

Leclerc’s expansion, and the otherwise

general nature of the creditworthy

analysis as outlined above, we do not

believe that the differences in other

terms between Leclerc’s commercial

loans and its government loans are great

enough to warrant a departure from the

Department’s normal practice of finding

the receipt of commercial loans to be

dispositive evidence that a company is

creditworthy. Therefore, we determine

that Leclerc was creditworthy in 1993

and 1994.

In contrast, we do not believe that

Leclerc’s commercial loans are

appropriate for use as benchmarks for

purposes of the more exacting exercise

of measuring the benefit from the

government loans received by Leclerc.

As noted above, the statute, as recently

amended by the URAA, requires that

when selecting a benchmark interest

rate to compare to the government

interest rate for purposes of measuring

the potential benefit, the Department

must select a commercial loan

comparable to one the company could

actually obtain on the market. The

selection of the benchmark interest rate

under the new statute seeks to answer

a very specific question; namely: what

is the benefit provided by the specific

government loans in question? In this

context, the Department must take into

account, to the extent possible,

differences in terms between the

government loans and the commercial

loans offered for comparison purposes

which may substantially affect the

accuracy of the benefit calculated.

When comparing the terms of the SDI

and Subsidiary Agreement loans with

Leclerc’s commercial loans, differences

emerge with respect to the level of

security. Because we believe that the

level of security can significantly affect

the interest rate charged by a

commercial lender, selection of

benchmark financing with markedly

different levels of security may distort

the measurement of the countervailable

benefit.

Although the specific terms of

Leclerc’s loans are proprietary, we

learned on verification that SDI takes on

more risk than commercial banks and
5204 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

that there are significant differences

with respect to the extent to which

commercial and SDI loan values could

be recovered in the event of Leclerc’s

default. Because of the differences

between the commercial loans and the

SDI and Subsidiary Agreement loans,

we have chosen a benchmark interest

rate which generally reflects the level of

security exhibited by the government

loans.

Although we have chosen a

benchmark which generally reflects the

significant terms of the governmentprovided loans, we have not adjusted

for minor differences in terms or any

differences which cannot be reasonably

be quantified because such an analysis

is not practicable and would not have a

meaningful impact on our analysis. We

consider such adjustments to be

appropriate only to the extent that they

reflect significant differences in terms

and the record provides a reasonable,

practicable basis for doing so.

Subsidies Valuation Information

Benchmarks for Long-term Loans and

Discount Rates: We have calculated the

long-term benchmark interest and

discount rate in 1993, 1994, and 1995

based on company-specific debt

received by Leclerc. We used this debt

to estimate the appropriate benchmark

interest rate in 1993–1995. For 1995, we

added a risk premium, as described in

section 355.44(b)(6)(D)(iv) of the

Proposed Regulations to establish the

uncreditworthy benchmark interest and

discount rate.

Allocation Period: In the past, the

Department has relied upon information

from the U.S. Internal Revenue Service

on the industry-specific average useful

life of assets to determine the allocation

period for nonrecurring subsidies (see

General Issues Appendix (GIA) attached

to the Final Affirmative Countervailing

Duty Determination: Certain Steel

Products from Austria (58 FR 37217,

37226; July 9, 1993). However, in British

Steel plc. v. United States, 879 F. Supp.

1254 (CIT 1995) (British Steel), the U.S.

Court of International Trade (the Court)

ruled against this allocation

methodology. In accordance with the

Court’s remand order, the Department

calculated a company-specific

allocation period for nonrecurring

subsidies based on the average useful

life (AUL) of non-renewable physical

assets. This remand determination was

affirmed by the Court on June 4, 1996.

See British Steel, 929 F. Supp. 426, 439

(CIT 1996).

The Department has decided to

acquiesce to the Court’s decision and, as

such, we intend to determine the

allocation period for nonrecurring

subsidies using company-specific AUL

data where reasonable and practicable.

In this case, the Department has

determined that it is reasonable and

practicable to allocate all nonrecurring

subsidies received prior to, or during,

the POI using Leclerc’s AUL of 18 years.

FOB/CIF Adjustment

The Department has deducted costs

associated directly with the

transportation of subject merchandise

from Leclerc’s U.S. sales to determine

the correct FOB value for denominator

purposes (see GIA at 37236, 37237).

While the majority of these costs were

originally reported by respondents,

additional information obtained at

verification has been incorporated

where appropriate.

Based upon the responses to our

questionnaires and the results of

verification, we determine the

following:

I. Analysis of Direct Subsidies

A. Programs Determined to Be

Countervailable

1. Canada-Quebec Subsidiary

Agreement on Industrial Development

This Subsidiary Agreement, which

spans five years, was jointly funded by

the GOC and GOQ on March 27, 1992.

Under this agreement, the GOC and

GOQ established a program to improve

the competitiveness and vitality of the

Quebec economy by providing financial

assistance, through the initial joint

funding of the agreement, to companies

for major industrial projects. The

following four types of activities are

eligible for contributions: (1) capital

investment projects, (2) product or

process development projects involving

a major investment or leading to a

capital investment, (3) studies required

to assess the feasibility of an investment

project, and (4) municipal infrastructure

required for a major capital investment

project.

Leclerc received a long-term interestfree loan under the Subsidiary

Agreement. Although the Subsidiary

Agreement was jointly funded, the loan

received by Leclerc was provided by the

GOC from its portion of the joint

funding.

We have determined that the loan

received by Leclerc constitutes a

countervailable subsidy within the

meaning of section 771(5) of the Act. It

is a direct transfer of funds from the

GOC providing a benefit in the amount

of the difference between the

benchmark interest rate and the zero

interest rate paid by Leclerc.

We analyzed whether the Subsidiary

Agreement is specific ‘‘in law or in

fact,’’ within the meaning of section

771(5A) of the Act. Funds paid out by

the GOC under this program are limited

to companies in a particular region of

Canada (i.e., the Province of Quebec)

and, hence, regionally specific under

section 771(5A)(D)(iv) of the Act.

To calculate the countervailable

benefit conferred on Leclerc, we used

the 1995 uncreditworthy benchmark

interest rate described above and

followed our fixed-rate, long-term loan

methodology (see January 24, 1997,

Memorandum from Team to Susan H.

Kuhbach, Acting Deputy Assistant

Secretary, AD/CVD Enforcement, Group

1). We then divided the benefit

attributable to the POI by Leclerc’s LHF

sales in the POI. (See Comment 12.) On

this basis, we determine the

countervailable subsidy for this program

to be 0.29 percent ad valorem for

Leclerc.

2. Industrial and Regional Development

Program (IRDP)

The IRDP was created by the

Industrial and Regional Development

Act and Regulations in 1983 and was

administered by the Canadian

Department of Regional Industrial

Expansion. It was terminated on June

30, 1988. No new applications for IRDP

projects were accepted after that date.

The goals of IRDP were to achieve

economic development in all regions of

Canada, promote economic

development in those regions in which

opportunities for productive

employment are exceptionally

inadequate, and improve the overall

economy in Canada. To accomplish

these objectives, financial support in the

form of grants, contributions and loans

were provided to companies for four

major purposes: (1) establishing,

expanding, modernizing production; (2)

promoting the marketing of products or

services; (3) developing new or

improved products or production

processes, or carrying on research in

respect thereof; and (4) restructuring so

as to continue on a commercially viable

basis.

Under this program, all of Canada’s

260 census districts were classified into

one of four tiers on the basis of the

economic development of the region.

The most economically disadvantaged

regions comprised Tier IV; the most

advanced regions were classified as Tier

I.

Those districts classified as Tiers III

and IV were authorized to receive the

highest share of assistance under IRDP

(as a percentage of assistance per

approved project); those in Tiers I and

II received the lowest. For example, a

grant toward the eligible costs of
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5205

modernizing or significantly increasing

the production of companies in Tiers I

and II could not exceed 17.5 percent of

the capital costs of the project, while in

Tiers III and IV grants could cover up to

25 percent of eligible costs.

Nilus Leclerc Inc. was located in a

Tier III district when it received three

grants under this program. We have

determined that the grants received by

Leclerc constitute a countervailable

subsidy within the meaning of section

771(5) of the Act. The grants are direct

transfers of funds from the GOC and

confer a benefit in the amount of the

portion of the grant that is in excess of

the most favorable, nonspecific level of

benefits (i.e., Tiers I and II). (See section

355.44(n) of the Department’s Proposed

Regulations regarding programs with

varying levels of benefits.) Also, IRDP

grants are regionally specific within the

meaning of section 771(5A) of the Act

because the preferential levels of

benefits (i.e., contributions to Tiers III

and IV) are limited to companies in

particular regions of Canada. This is

consistent with our prior determination

in the Final Affirmative Countervailing

Duty Determination: Certain Fresh

Atlantic Groundfish from Canada, 51

FR 10041, 10045 (March 24, 1986).

We have treated these grants as ‘‘nonrecurring’’ subsidies based on the

analysis set forth in the Allocation

section of the GIA at 37226. In

accordance with our past practice, we

have allocated over time those grants

which exceeded 0.5 percent of the

company’s sales in the year of receipt.

To calculate the countervailable

subsidy, we used our standard grant

methodology. For those grants which

were tied to the production of both LHF

and residential flooring, we divided the

benefit attributable to the POI by the

total sales of Leclerc and Planchers

Leclerc (the company in the Leclerc

group that produces residential flooring)

during the same period. Otherwise, for

those grants which benefited only the

production of LHF, we divided the

benefit attributable to the POI by

Leclerc’s LHF sales during the same

period. On this basis, we determine the

countervailable subsidy for this program

to be 0.04 percent ad valorem for

Leclerc.

3. SDI: Expansion and Modernization

Program

Firms in Quebec can participate in the

Expansion and Modernization Program

by meeting a requirement that ‘‘the

project (for which financing is

requested) is aimed at markets outside

Quebec.’’ An alternative requirement for

receiving assistance is that the market in

Quebec is inadequately served by

businesses in Quebec and that the

supported production is expected to

replace imported goods into Quebec.

Under either requirement, the market

for the products to be supported must

have an expected growth rate that is

above the average for the manufacturing

sector in Canada. In addition to these

requirements, which are contained in

the regulations governing Expansion

and Modernization Program, the GOQ

has stated that firms receiving SDI loans

must also receive financing from

commercial sources.

Loans under this program can be

provided to companies involved in:

manufacturing, recycling, computer

services, software or software package

design and publishing, contaminated

soils remediation, the operation of a

research laboratory, and the production

of technical services for clients outside

of Quebec. The regulations for this

program further indicate that businesses

in other categories may be considered

‘‘in exceptional cases.’’ The assistance

may be used to cover the following

types of expenditures: (1) capital

investments; (2) the purchase and

introduction of a new technology; (3)

the acquisition of information

production or management equipment;

(4) investments for project-related

training; and (5) other training

investments related to project start-up.

Leclerc obtained loans under SDI’s

Expansion and Modernization Program

in 1993, 1994, and 1995. (For further

information regarding how we treated

the 1995 loan, see Comment 17.) These

loans were part of a larger package of

commercial and government financing

used to increase Leclerc’s productive

capacity.

We have determined that the 1993

and 1994 loans received by Leclerc

constitute countervailable subsidies

within the meaning of section 771(5) of

the Act. They are a direct transfer of

funds from the GOQ providing a benefit

in the amount of the difference between

the benchmark interest rate and the

interest rate paid by Leclerc.

Based on our review of the eligibility

criteria, we determine that the program

is not de jure specific. However, as in

our Preliminary Determination, we have

concluded that this program is in fact

specific.

Although loans were given to a large

number and wide variety of users under

this program, the level of financing

obtained by the wood products

industries group and by Leclerc was

disproportionate. In 1993 and 1994, the

wood products industries group was

consistently among the largest

beneficiaries under the program.

Leclerc’s share of financing as a

percentage of total authorized financing

was also large relative to the shares

received by other users. Taken together,

these facts support a determination that

the assistance received by Leclerc was

disproportionate in 1993 and 1994.

In order to calculate the benefit from

long-term variable rate loans, the

Department normally calculates the

difference during the POI between the

amount of interest paid on the

subsidized loan and the amount of

interest that would have been paid on

a comparable commercial loan.

However, in this case, the loans given

under the Expansion and Modernization

Program include premia payments by

Leclerc and stock options for SDI. In

addition, the SDI loans have variable

repayment schedules. Therefore, our

normal methodology for long-term loans

which focuses only on differences in

interest rates would not provide an

accurate measure of the benefit received

by Leclerc. In order to account for the

value of the premia and the variable

repayment schedule, we have estimated

a repayment schedule for the SDI loan

and compared the amount Leclerc

would repay under that schedule with

the amount Leclerc would repay under

a comparable commercial loan. Because

of the difficulty of assigning a value to

the stock options, we have not included

them in our calculations. We note that

if we were to include the stock options,

the amount of the benefit conferred by

these loans would be even less. Given

that we have reached a negative

countervailing duty determination, it is

not important that our subsidy

calculation reflects the lower benefit

amount.

We next determined the grant

equivalent of these loans, i.e., the

present value of the difference between

what would be paid under the

commercial loan and the SDI loan, using

the discount rates described in the

Subsidies Valuation Information section

above. We used the life of the SDI loan

as the allocation period because of the

variable repayment schedule on the SDI

loans. The benefit allocated to the POI

was then divided by Leclerc’s total sales

of subject merchandise during the POI.

Using this methodology, we determine

the countervailable subsidy from the

Expansion and Modernization Program

to be 0.24 percent ad valorem.

4. Export Promotion Assistance Program

(APEX)

Under the APEX program, the GOQ

shares certain costs incurred by a

Quebec company in the penetration of

new foreign markets. Such costs include

missions to develop new markets or

negotiate ‘‘industrial agreements,’’
5206 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

participate in trade fairs outside of

Canada, adapt products to new export

markets, prepare bids with the

assistance of consultants, prepare

marketing studies as well as strategies to

enter foreign markets, and hire an

international marketing expert to

develop the firm’s export sales (see

Preliminary Countervailing Duty

Determinations: Pure and Alloy

Magnesium From Canada 56 FR 63927,

63931 (December 6, 1991)).

At the Preliminary Determination, the

Department considered APEX to be a

non-used program based on the

questionnaire responses received. Prior

to the start of verification, however, the

GOQ stated, and we confirmed, that

Leclerc in fact used this program (see

December 10, 1996 GOQ Verification

Report at 12.)

Because receipt of benefits under this

program is contingent upon export

performance, we determine that it is an

export subsidy within the meaning of

771(5A)(B) of the Act. We have also

determined that the grants received by

Leclerc constitute a countervailable

subsidy within the meaning of section

771(5) of the Act because they are direct

transfers of funds from the GOQ and

confer a benefit to Leclerc in the amount

of the face value of the grant. We have

treated the grant as a ‘‘non-recurring’’

subsidy based on the analysis set forth

in the Allocation section of the GIA at

37226. We have allocated the benefit

over the AUL of Leclerc’s nonrenewable physical assets using the

grant allocation formula outlined in

section 355.49 (b)(4)(3) of the

Department’s Proposed Regulations.

The benefit allocated to the POI was

then divided by Leclerc’s total export

sales during the POI. Using this

methodology, we determine the

countervailable subsidy from the APEX

program to be 0.00 percent ad valorem.

B. Program Determined To Be Not

Countervailable, But Which Was Not

Considered At The Preliminary

Determination

Program for the Development of Human

Resources (PDHR) of the Societe

Quebecoise de Developpement de la

Main-d’Oeuvre (SQDM)

Prior to the start of verification, the

GOQ reported that Leclerc received

assistance under the Program for the

Development of Human Resources

(PDHR) which is administered by

SQDM. PDHR was created in 1992 for

the purpose of assisting businesses to

develop or adapt their human resource

programs to protect and maintain

existing jobs and to support the creation

of new jobs. The program is available to

all commercial enterprises, workers’

unions, other groups of workers and

nonprofit organizations located in

Quebec. The only eligibility criterion is

that a company is conducting business,

or in the process of establishing a

business, in Quebec or is in the process

of doing so. The program focuses on

assisting small and medium-size

businesses: (1) with human resources

management and development needs;

(2) facing a difficult employment

situation; and (3) active in priority

economic sectors at the local, regional

and provincial levels.

The financial assistance generally

covers 50 percent of the costs of the

company’s human resource projects

with a maximum cap of $200,000 per

year for up to three years. In general,

funds may be used for: ‘‘hiring an expert

responsible for analyzing the manpower

situation at the company; paying the

wages of employees involved in human

resource activities; other expenses

related to training activities for human

resource development and/or hiring a

training coordinator or a human

resource manager.’’ We verified that

Leclerc received a grant under this

program during the POI.

We analyzed whether the program is

specific ‘‘in law or in fact,’’ within the

meaning of section 771(5A)(D)(i) and

(iii) of the Act. Based upon our review

of the eligibility criteria for the program,

we determine that this program is not de

jure specific.

We next examined whether the

program is de facto specific. During the

POI, we verified that assistance under

the program was distributed over a large

number and wide variety of users

representing virtually every industry

and commercial sector found in Quebec.

Based on this information, we have

determined that the program is not

specific based on the number of users.

We also examined evidence regarding

the usage of the program and found that

neither Leclerc nor the wood products

industry was a dominant user or

received a disproportionate share of

benefits distributed under this program.

Because the number of users is large and

there is no dominant or

disproportionate use of the program by

Leclerc, we do not reach the issue of

whether administrators of the program

exercised discretion in awarding

benefits. Thus, we conclude that this

program is not specific and has not

conferred a countervailable subsidy on

Leclerc.

C. Programs Determined To Be Not

Countervailable Which Were Considered

At The Preliminary Determination

Based on verification, we continue to

find these programs not countervailable

for the same reasons identified in the

preliminarily determination.

1. ‘‘Programme d’appui a la reprise’’

(PREP) program

2.Decentralized Fund for Job Creation

Program of SQDM

3. Export Development Corporation

(EDC)

4. Hydro-Quebec Electrotechnology

Implementation Program

5. Societe de placement dans

l’enterprise quebecoise (SPEQ)

D. Programs Determined to Be Not Used

Based on the information provided in

the responses and the results of

verification, we determine that the

following programs were not used:

1. Capital Gains Exemptions

2. Regional Investment Tax Credits

3. Performance Security Services

through the Export Development

Corporation

4. Working Capital for Growth from the

Business Development Bank of

Canada (BDC)

5. St. Lawrence Environmental

Technology Development Program

(ETDP)

6. Program for Export Market

Development

7. Canada-Quebec Subsidiary

Agreement on the Economic

Development of Quebec

8. Quebec Stumpage Program

9. Programs Provided by the Industrial

Development Corporation (SDI)

Article 7 Assistance

Export Assistance Program

Business Financing Program

Research and Innovation Activities

Program

10. Private Forest Development Program

(PFDP)

II. Analysis of Upstream Subsidies

The petitioner alleged that Leclerc

receives upstream subsidies through its

purchase of lumber from suppliers

which harvest stumpage from Quebec’s

public forest (‘‘allegedly subsidized’’

suppliers). Section 771A(a) of the Act,

defines upstream subsidies as follows:

The term ‘‘upstream subsidy’’ means any

subsidy * * * by the government of a

country that:

(1) Is paid or bestowed by that government

with respect to a product (hereinafter referred

to as an ‘‘input product’’) that is used in the

manufacture or production in that country of

merchandise which is the subject of a

countervailing duty proceeding;

(2) In the judgment of the administering

authority bestows a competitive benefit on

the merchandise; and
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5207

(3) Has a significant effect on the cost of

manufacturing or producing the

merchandise.

Each of the three elements listed

above must be satisfied in order for the

Department to find that an upstream

subsidy exists. The absence of any one

element precludes the finding of an

upstream subsidy. As discussed below,

we determine that a competitive benefit

is not bestowed on Leclerc through its

purchases of allegedly subsidized

lumber. Therefore, we have not

addressed the first and third criteria.

Competitive Benefit

In determining whether subsidies to

the upstream supplier(s) confer a

competitive benefit within the meaning

of section 771A(a)(2) on the producer of

the subject merchandise, section

771A(b) directs that:

* * * a competitive benefit has been

bestowed when the price for the input

product * * * is lower than the price that the

manufacturer or producer of merchandise

which is the subject of a countervailing duty

proceeding would otherwise pay for the

product in obtaining it from another seller in

an arms-length transaction.

The Department’s Proposed

Regulations offer the following

hierarchy of benchmarks for

determining whether a competitive

benefit exists:

* * * In evaluating whether a competitive

benefit exists pursuant to paragraph (a)(2) of

this section, the Secretary will determine

whether the price for the input product is

lower than:

(1) The price which the producer of the

merchandise otherwise would pay for the

input product, produced in the same country,

in obtaining it from another unsubsidized

seller in an arm’s length transaction; or

(2) a world market price for the input

product.

In this instance, Leclerc purchases the

input product, lumber, from numerous

unsubsidized (i.e., suppliers which do

not harvest stumpage from Quebec’s

public forest), unrelated suppliers in

Canada. Therefore, we have used the

prices charged to Leclerc by these

suppliers as the benchmark.

We compared the prices paid by

Leclerc to its ‘‘allegedly subsidized’’

suppliers with the prices paid to

unsubsidized suppliers on a product-byproduct and aggregate basis (see October

10, 1996, November 6, 1996 and January

24, 1997, Memoranda from Team to

Susan H. Kuhbach, Acting Deputy

Assistant Secretary, Group 1, AD/CVD

Enforcement). Based on our comparison

of these prices, we found that the price

of ‘‘allegedly subsidized’’ lumber was

generally equal to or exceeded the price

of unsubsidized lumber. Therefore, we

have determined that Leclerc did not

receive an upstream subsidy.

Critical Circumstances

The petitioner alleged that critical

circumstances exist with respect to

imports of subject merchandise. Because

we have reached a negative final

determination, this issue is moot.

Interested Party Comments

Comment 1 (1995 Commercial

Financing)

Petitioner disagrees with the

Department’s use of a 1995 financing

arrangement between Leclerc and a

commercial entity as a benchmark, as

well as dispositive evidence of Leclerc’s

creditworthiness. Petitioner bases its

claim on the fact that Leclerc did not

actually receive the loan in 1995, nor

did it meet the preconditions for

receiving financing under the

arrangement. Petitioner points out that

section 355.44(b)(6)(i) of the

Department’s Proposed Regulations

requires the receipt of a comparable

long-term commercial loan for

dispositive evidence of

creditworthiness.

Leclerc states that it received and

accepted a loan offer from a commercial

source in 1995 and that the agreement

was binding on both parties. Leclerc

notes that the Department’s November

13, 1996 Creditworthy Analysis

Memorandum emphasized the fact that

the Department’s primary interest in

considering the presence of commercial

financing in the context of a

creditworthiness inquiry is whether a

company had access to such financing.

According to Leclerc, the 1995 financing

arrangement shows that the company

had access to long-term funds from

commercial sources.

Finally, regarding use of the 1995

financing arrangement as a benchmark,

Leclerc and the GOQ state that the

statute focuses on a ‘‘comparable

commercial loan that the recipient

could actually obtain on the market’’

(emphasis added). Because the 1995

financing arrangement reflects financing

that Leclerc could have obtained, the

circumstances surrounding the

agreement should not disqualify it as a

benchmark.

DOC Position

We disagree with respondents. As

described in the December 10, 1996

Leclerc Verification Report, the

circumstances surrounding the 1995

financing arrangement do not support

the argument that this financing

arrangement should be considered

dispositive evidence of Leclerc’s

creditworthiness. These circumstances

also indicate that the 1995 financing

arrangement does not reflect an

appropriate benchmark interest rate.

(Note: The details of the 1995 financing

arrangement are business proprietary

(see January 24, 1997 memorandum

from David R. Boyland, Import

Compliance Specialist, AD/CVD

Enforcement, Office 1, to Susan H.

Kuhbach, Acting Deputy Assistant

Secretary, Group 1, AD/CVD

Enforcement).)

Comment 2 (Creditworthiness)

In addition to arguing that the

commercial and government loans are

not comparable for purposes of

determining Leclerc’s creditworthiness,

petitioner asserts that other evidence

indicates that Leclerc was not

creditworthy when it received the

government financing under

investigation. Petitioner argues that

Leclerc’s financial ratios during 1993,

1994, and 1995 would have been clearly

unacceptable to a private lender.

Petitioner further asserts that the

Department must consider the expanded

repayment obligations of the enlarged

Leclerc operation, as opposed to simply

determining whether the company

historically met its financial obligations.

Petitioner argues that, in addition to

being unable to meet its future financing

costs with its cash flow, specific aspects

of Leclerc’s financial position in 1995

indicate that the company was not

meeting its financial obligations in that

year. According to petitioner, other

factors such as Leclerc’s decision to

abandon several of its LHF production

lines in 1995 also indicate that the

company was not in a position to cover

its financial obligations.

Citing the Final Affirmative

Countervailing Duty Determination:

Fresh and Chilled Atlantic Salmon from

Norway, 51 FR 10041 (March 24, 1986)

and section 355.44(b)(6)(i) of the

Department’s Proposed Regulations,

Leclerc argues that creditworthiness

cannot be judged retrospectively and

that the Department can only consider

creditworthiness at the time the loans

were actually made. Leclerc cites

positive information from its balance

sheet and income statements, the ITC

preliminary determination in this case

(Certain Laminated Hardwood Flooring

from Canada, Inv. No. 701–TA–367),

and a study of Leclerc’s 1995 business

plan by an outside consulting firm, to

support its position that lenders in

Canada had every reason to loan it

money throughout the 1993–1995

period.

Leclerc states that the approach in the

Department’s October 9, 1996
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creditworthiness memorandum (i.e., in

which a company can only be

considered uncreditworthy if it did not

have sufficient revenues or resources in

the past to meet its costs and fixed

financial obligations) is consistent with

the preamble to the Department’s

Proposed Regulations and past cases.

Because it did have sufficient resources

to meet its costs and fixed financial

obligations, Leclerc asserts that no

creditworthiness inquiry should be

conducted.

With respect to petitioner’s criticism

of the company’s financial ratios,

Leclerc argues that the Department must

examine the individual circumstances

of the company. According to Leclerc,

when the financial ratios are considered

in context, they do not reflect financial

instability nor do they indicate that the

company was unable to cover its costs

and fixed financial obligations out of its

revenue.

DOC Position

As noted above, we believe that the

commercial loans received by Leclerc in

1993 and 1994 are comparable to the

government-provided loans in those

years. Hence, we have determined that

the company was creditworthy in those

years.

We agree with petitioner that a

number of aspects related to Leclerc’s

financial position in 1995 would have

troubled a commercial lender and that

Leclerc’s financial position in 1995

reflected certain imbalances (see

January 24, 1997 memorandum from

David R. Boyland, Import Compliance

Specialist, AD/CVD Enforcement, Office

1, to Susan H. Kuhbach, Acting Deputy

Assistant Secretary, Group 1, AD/CVD

Enforcement). Additionally,

circumstances surrounding Leclerc’s

1995 financing arrangements strongly

suggest that Leclerc would not have

been able to obtain long-term

commercial financing in that year (see

December 10, 1996 Leclerc Verification

Report). It is on this basis that we have

determined Leclerc to be

uncreditworthy in 1995.

Regarding Leclerc’s argument that the

Department should not have

investigated the company’s

creditworthiness since it had sufficient

resources in the past to cover its costs

and fixed financial obligations, we

disagree. As noted in our Preliminary

Determination (61 FR 59080, 59079

(November 20, 1996)), while past

indicators can provide useful

information about a company’s future

prospects, they should not cause the

Department to disregard information

contemporaneous with the granting of

the loan that is relevant to the

company’s ability to meet its future

financial obligations.

Comment 3 (Disproportionality—

Determining Specificity Based on POI

Benefits.)

The GOQ argues that the Department

incorrectly found that SDI loans were de

facto specific on the grounds that there

was disproportionate use. The GOQ

maintains that the amount of benefits

approved in any one year should not be

the basis upon which the Department

makes a disproportionality

determination. Instead, the GOQ argues

that the Department should make its

disproportionality determination for the

POI based on the SDI benefits allocated

to the POI. In other words, all benefits

bestowed over the life of the SDI

program should be allocated over time,

and the Department’s specificity

analysis should be based on the

distribution of allocated benefits in the

POI. To support this argument, the GOQ

cites the Final Results of Countervailing

Duty Administrative Review; Live Swine

from Canada (Live Swine from Canada)

56 FR 28531, 28534 (June 21, 1991)

which states ‘‘[i]n analyzing de facto

specificity, the Department looks at the

actual number of commodities covered

during the particular period under

review.’’

Petitioner argues that the GOQ has

offered no support in the law or in past

case precedent showing that a

disproportionality finding requires a

specificity analysis based on a POIallocated benefit analysis. Furthermore,

according to petitioner, the GOQ

approach is not feasible.

DOC Position

We disagree with the GOQ’s assertion

that the Department’s disproportionality

analysis must focus solely on the

benefits allocated to the POI. Such an

approach confuses the initial specificity

determination, which is based on the

action of the granting authority at the

time of bestowal, with the allocation of

the benefit over time. Because these are

two separate processes, the portions of

grants allocated to further periods of

time using the Department’s standard

allocation methodology is not relevant

in determining the actual distribution of

assistance at the time of bestowal.

As regards Live Swine from Canada

cited by Leclerc, the benefits analyzed

in that proceeding are recurring

subsidies. Hence, in performing its

review period-by-review period

analysis, the Department is looking at

separate and distinct disbursals each

year, and not at subsidies which have

been allocated over time.

Comment 4 (Disproportionality—

Aggregation)

The GOQ argues that the

Department’s reference to the wood

products industries is inconsistent with

the law because the Department should

first consider whether the enterprise

itself has received a disproportionate

share, and then whether the industry

similarly benefitted. The GOQ also

argues that the Department should

compare the benefit received by the

hardwood trailer flooring industry—of

which Leclerc is the sole member—to

the total value of SDI loans.

Petitioner argues that requiring the

Department to compare benefits

received by the hardwood trailer

flooring industry to other such

industries at the same level of

aggregation is impractical and is directly

contrary to section 771(5A) of the Act

and section 355.43(b) of the Proposed

Regulations which allows the

Department to choose from various

levels of aggregation for comparison

purposes.

DOC Position

We disagree with the GOQ that the

Department considered the wrong

industry level when analyzing

disproportionality. In its May 20, 1996

questionnaire, the Department requested

that the GOQ provide the annual

‘‘industry distribution’’ of authorized

benefits under the Investment

Assistance Program for both Expansion

and Modernization Program and PREP.

Our determination of disproportionality

was based, in part, on an analysis of the

industry distribution maintained by the

GOQ and reported in their questionnaire

response. Although other GOQ

organizations such as SQDM provided

information at a more detailed level, the

Department presumed that the

information provided for SDI’s

Investment Assistance Program

represented the most detailed

information available to the GOQ.

Moreover, we did not perceive the

information to be incorrect.

In our disproportionality analysis, we

determined, for both Leclerc and the

wood products industry, the percentage

of total annual authorized financing. We

examined how these percentages

compared to the average transaction by

industry, as well as the percentage of

total assistance accounted for by the

other industry participants identified by

the GOQ. While the ‘‘wood products

industry’’, as originally reported by the

GOQ in its supplemental questionnaire

response, can be broken down into more

discrete units, we do not agree that we

are precluded from examining
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5209

disproportionality at the level of detail

originally provided by the GOQ. As the

GOQ acknowledged in the hearing, ‘‘the

statute * * * confers upon [the

Department] discretion to determine

what is the appropriate level of

aggregation’’ (see page 70 of January 7,

1996 hearing transcript). In this case,

the Department relied on information

provided by the GOQ to compare the

distribution of benefits to Leclerc and

the group of wood product industries to

other groups of industries that received

assistance under this program. Based on

this comparison, we determined that

Leclerc received a disproportionate

amount of assistance under this

program.

Comment 5 (Disproportionality—

Considering Only Disbursed Financing)

The GOQ asserts that for purposes of

determining disproportionality the

Department should look at loans that

were actually disbursed rather than

loans that were authorized. According

to the GOQ, if the Department considers

the amount actually disbursed in 1995,

the share of SDI financing accounted for

by the wood products industries in that

year is less than that received by the

plastics and rubber industries and is

‘‘on par’’ with disbursements to the

chemical and metal products industries.

Petitioner disagrees with the GOQ’s

argument that the Department should

base its disproportionality analysis on

loans actually disbursed, as opposed to

loans authorized. According to

petitioner, the level of authorized

financing reflects the GOQ’s intent

during a particular period and is,

therefore, an appropriate measure for

determining disproportionality.

Petitioner also notes that the only record

evidence in this case regarding industryby-industry assistance under the

Expansion and Modernization Program

is based on SDI authorized loans.

DOC Position

We disagree with the GOQ that

authorized SDI financing cannot be used

in the Department’s disproportionality

analysis. The only data we have on

shares received by industries/

enterprises other than Leclerc is derived

from authorized amounts. To use the

amount disbursed for Leclerc and the

amounts authorized for other industries/

enterprises to calculate their relative

shares would be inappropriate given the

inconsistency inherent in comparing

such data. (See also Comment 17.)

Comment 6 (Disproportionality—

Magnitude)

The GOQ argues that the Department

has never found disproportionality in a

case with facts resembling the facts

here. In the Final Affirmative

Countervailing Duty Determinations:

Certain Steel Products from Brazil 58 FR

37295 (July 9, 1993)), the steel

producers received more than 50

percent of the ‘‘benefits’’ under the

examined program, two-and-a-half times

more than the second largest recipient

industry. The GOQ also cites Final

Affirmative Countervailing Duty

Determination: Grain-Oriented

Electrical Steel from Italy 59 FR 18357

(April 18, 1994) and Final Results of

Countervailing Duty Administrative

Review: Live Swine from Canada 59 FR

12243 (March 16, 1994) as examples in

which the Department found

disproportionality based on large

industry usage of a program. While the

Department determined 16.9 percent to

be disproportionate in Final Affirmative

Countervailing Duty Determinations:

Certain Steel Products From Belgium

(Certain Steel Products From Belgium)

58 FR 37273 (July 9, 1993)), the GOQ

alleges that the Department was

examining a single industry (the steel

industry), as opposed to a group of

industries. The GOQ also cites Final

Results of Countervailing Duty

Administrative Reviews: Antifriction

Bearings (Other Than Tapered Roller

Bearing) (AFBs) from Singapore 60 FR

52377 (October 6, 1995) in which the

group of industries in which AFBs

belongs received a large percentage of

assistance, while AFBs themselves

received a small percentage.

Petitioner states that the Department

analyzed specificity at both an industry

and company-specific level and

reasonably found that there was

disproportionate use. Although

petitioner agrees that the cases cited by

the GOQ indicate that greater levels of

usage have been the basis for a finding

of disproportionality in some instances,

petitioner asserts that this does not

mean the Department’s

disproportionality analysis in the

instant case is unreasonable or faulty.

DOC Position

We agree with petitioners.

Disproportionality is fact-specific and

determined on a case-by-case basis. The

shares found to be disproportionate in

previous cases do not represent a floor

below which the Department cannot

determine disproportionality to exist.

Our determination in this case was

based both on usage by the group of

industries to which Leclerc belongs and

usage by Leclerc. As discussed above,

the wood products industries were

among the top of users of the Expansion

and Modernization Program and

Leclerc, as an individual enterprise

within this group, also received a

relatively large percentage of financing

under this program. On this basis, we

determined that Leclerc received

disproportionate amounts under this

program.

Comment 7 (Disproportionality—

Addressing GDP)

The GOQ argues that the CIT has

determined that the Department cannot

rely on a mechanical, per se test for

disproportionality and that it has a

further obligation to address the reasons

that may explain why an industry has

received a relatively large share (see

British Steel at 1326). In addition to

comparing the industry’s share of

government benefits over time to the

industry’s share of gross domestic

product (GDP), the GOQ also argues that

the CIT has stated that the receipt of

large benefits may also be explained by

the fact that the industry was

expanding, or that there was an

increased demand for capital

investment. According to the GOQ,

when the Department considers GDP, it

must request and consider other

evidence which the Department did not

do in this case.

The GOQ states that information

provided to the Department at

verification demonstrated that the share

of loans received by the wood products

industries is virtually identical to their

share of total shipments of

manufactured goods in Quebec.

Additionally, the GOQ notes that during

the 1993–1995 period, North America

was emerging from a recession. In this

economic environment, the laminated

hardwood trailer flooring industry,

along with other wood products

industries, was experiencing sustained

growth and, thus, was in need of capital.

Petitioner disagrees that the

Department should use a GDP analysis

in this case because the GDP figures

relied upon by the GOQ are based on

manufacturing GDP. Therefore, they do

not represent Canada’s GDP and they do

not match the scope of SDI’s lending

authority which goes beyond the

manufacturing sector. Petitioner also

rejects the GOQ’s argument that the CIT

decision in British Steel stands for the

proposition that the Department must

perform a GDP analysis and examine

factors explaining why an industry

received a relatively large share of

assistance under a particular program.

According to petitioner, British Steel

requires the Department to examine the

above-referenced information only

when it relies on indirect factors to

determine disproportionality. Since the

indicators used in the instant case were

directly related, as opposed to indirectly
5210 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

related, petitioner argues that the CIT’s

finding in British Steel is irrelevant.

DOC Position

We disagree with the GOQ that a

finding of disproportionality requires

the Department to examine reasons that

may explain why the industry at issue

received a disproportionate share of the

benefits. The statute does not require

the Department to determine the cause

of any de facto specificity that occurs as

a result of the government action. To the

contrary, the statute provides that the

Department may impose a

countervailing duty if it determines that

a benefit provided by a government

action is conferred upon a specific

industry. No intent or purposeful

government action is required to show

that a specific industry is receiving the

benefit, as acknowledged by the Court

in British Steel. See also, Final

Affirmative Countervailing Duty

Determination: Certain Softwood

Lumber Products from Canada, 57 FR

22570, 22580–81 (1992).

In response to the Court’s remand

instructions in British Steel, the

Department stated that it is not required

to analyze the causal relationship

between the benefit conferred and the

specificity of the benefit. Furthermore,

‘‘imposing the requirement of an

affirmative showing that de facto

specificity is the result of particular

government actions is contrary to the

statute, the intent of Congress, and past

judicial precedent.’’ See Final Results of

Redetermination Pursuant to Remand

British Steel Plc. v. United States

(February 9, 1995) at 12. The

Department’s redetermination was

upheld by the Court (see British Steel

PLC v. United States 941 F. Supp. 119,

128, (CIT 1996)).

The same point is made in the

Uruguay Round Trade Agreements

Statement of Administrative Action

(SAA) at 262. The SAA states that

evidence of government intent to target

or otherwise limit benefits is irrelevant

in de facto specificity analysis.

Comment 8 (Disproportionality—

Considering SDI as Only One Program)

The GOQ argues that the Department

incorrectly limited its examination of

funds received by Leclerc and the wood

products industries to the Expansion

and Modernization Program, as opposed

to total loans received under all SDI

programs. The GOQ states that the latter

approach is correct because all SDI

loans come from the same pool of

monies, they are disbursed under

different ‘‘programs’’ only for

administrative purposes, and that

program distinctions make no difference

in the loan criteria, terms, essential

eligibility, or participation. Also, they

are administered by the same loan

officers and the customized terms for all

SDI loans and loan guarantees are

essentially the same. This information

indicates that the hardwood trailer

flooring industry received only a

fraction of all SDI loans between 1993

and 1995.

DOC Position

We do not agree that all SDI programs

should, in effect, be considered

integrally linked and, therefore, a single

program for purposes of determining

specificity. Section 355.43(b)(6) of the

Department’s Proposed Regulations

states that in determining whether two

or more programs are integrally linked

‘‘the Secretary will examine, among

other factors, the administration of the

programs, evidence of a government

policy to treat industries equally, the

purposes of the programs as stated in

their enabling legislation, and the

manner of funding the programs.’’ In the

Final Affirmative Countervailing Duty

Determination: Pure Magnesium and

Alloy Magnesium From Canada 57 FR

30946 (July 13, 1992) (Magnesium from

Canada), the Department applied this

standard when it found that SDI Article

7 assistance was not integrally linked to

‘‘general SDI programs.’’ In making this

determination, the Department noted

that ‘‘[t]he * * * programs offer

different types of assistance and have

been established for different purposes.’

Each SDI program under investigation

in this case (e.g., Expansion and

Modernization Program and PREP)

operates under separate regulations and

directives. Each program is also

different with respect to objective and

level of benefit. For example, PREP was

a temporary program established to

alleviate cash flow problems

experienced by Quebec companies

during the recession of the early 1990s.

Under PREP, SDI guaranteed a

percentage of loans that could range

between CD$100,000 and CD$1,000,000.

The Expansion and Modernization

Program, on the other hand, was a longterm program which provided

businesses with loans for the

establishment or expansion of facilities.

Although the floor for assistance under

Expansion and Modernization Program

is also CD$100,000, there is no stated

cap.

While we acknowledge the overlap

that the GOQ refers to with respect to

the administration of its programs, these

programs are not integrally linked

because they are separated for legal

purposes by different regulations. They

also have different objectives and

benefit levels. For these reasons, we

have continued to examine these

programs individually for the final

determination.

Comment 9 (Subsidiary Agreement:

Including Amount not Disbursed in POI

to Determine Benefit)

Petitioner claims that the

Department’s preliminary ad valorem

calculation regarding the Subsidiary

Agreement was understated because the

Department failed to include funds

disbursed to Leclerc after the POI.

The GOQ contends that petitioner’s

argument ignores the legal requirement

that the Department determine whether

countervailable benefits were provided

during the POI. According to the GOQ,

events occurring after the POI can have

no relevance to the Department’s

determination of whether benefits were

received during the POI.

Leclerc notes that the Department

correctly treated the Subsidiary

Agreement assistance as a variable rate,

long-term loan. Thus, in accordance

with section 355.49(d)(1) of the

Proposed Regulations, Leclerc argues

that the Department must determine the

amount of the benefit attributable to a

particular year under a variable rate,

long-term loan by calculating the

difference between what the firm paid

during the year under the government

loan and what the firm would have paid

during the year under the benchmark

loan.

DOC Position

We disagree with petitioner. In

accordance with section 355.48 of the

Proposed Regulations, a countervailable

benefit is deemed to have been received

at the time that there is a cash flow

effect on the firm receiving the benefit.

In the case of a loan, the cash flow effect

is normally deemed to have occurred at

the time a firm is due to make a

payment on the benchmark loan.

Therefore, because Leclerc would not

have been required to make a payment

during the POI on the benchmark loan

for the disbursement in question, that

disbursement could not have conferred

a benefit on the firm during the POI.

Comment 10 (Benchmark Interest Rate

Based on Adverse Facts Available)

Petitioner argues that the benchmark

interest rate for the loan under the

Subsidiary Agreement should be 20

percent, based on adverse facts

available. Petitioner contends that the

use of adverse facts available is

warranted because the GOC did not

provide the verification team with

certain documents.
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5211

The GOC argues that the requested

analysis/approval documents were

provided to the verification team (see

GOC Verification Report at page 2).

Accordingly, no grounds exist for the

Department to consider the punitive

measures petitioner proposes.

DOC Position

We agree with the GOC that

application of adverse facts available is

not warranted with respect to the

Subsidiary Agreement loan. As noted in

the GOC verification report, while the

GOC initially could not provide the

analysis/approval documents because of

concerns regarding the proprietary

nature of the documents, the GOC made

available certain approval documents to

the verification team on November 28,

1996. Thus, no grounds exist for the

Department to consider the use of

adverse facts available.

Comment 11 (Upstream Subsidy)

Petitioner states that the Department’s

verification of Leclerc’s lumber

purchasing records incidentally

confirmed that Leclerc paid widely

varying prices for the same species and

grade purchased at the same time, that

it paid higher prices for lower quality

lumber purchased at the same time, and

that it was able to buy lumber, a

commodity product, at prices below

what other buyers were willing to pay.

Thus, petitioner contends that because

the Department failed to address the

issues regarding the credibility of

Leclerc’s lumber purchasing records, the

Department must disregard Leclerc’s

prices.

Both the GOQ and Leclerc note that

the factual record in this case fully

supports the Department’s Preliminary

Determination that no competitive

benefit was bestowed on Leclerc

through its purchases of allegedly

subsidized lumber. Respondents note

that the Department twice verified the

actual prices paid by Leclerc for

purchases of lumber and the sources of

Leclerc’s lumber. Moreover,

respondents state that the Department’s

verification reports confirm that Leclerc

and the GOQ accurately reported all the

relevant competitive benefit data.

Respondents add that the Department

analyzed the verified data and correctly

concluded that no competitive benefit

was bestowed upon Leclerc.

DOC Position

We agree with respondents. We

thoroughly examined and verified

Leclerc’s lumber purchasing records for

the POI, as well as GOQ records which

confirmed the sources from which

Leclerc’s suppliers obtained timber (see

August 26, 1996 Verification Reports of

Leclerc and the GOQ and December 10,

1996 Verification Reports of Leclerc and

the GOQ). Moreover, many concerns

raised by petitioner prior to verification

were addressed at verification. This

verified record information was then

analyzed using several approaches.

Based on our analysis, we have

determined that the company did not

receive a competitive benefit through its

lumber purchases from allegedly

subsidized suppliers.

Comment 12 (Denominator Issue:

Subsidiary Agreement and SDI)

Leclerc contends that the financing

received under the Subsidiary

Agreement and SDI benefited the

company’s total production and,

therefore, the denominator used to

calculate the ad valorem subsidy rate

should be total sales. Leclerc adds that

the Department’s verification reports of

Leclerc and the GOC further confirm

that the assistance benefited total sales,

not just subject merchandise.

Petitioner contends that Leclerc’s

argument is misplaced because the GOC

and GOQ provided the assistance solely

to support the production of LHF.

Petitioner notes that the financing

received through SDI and the Subsidiary

Agreement was received by the two

companies in the Leclerc group of

companies which produce LHF, and

that other members of the group which

produce other items did not receive this

financing. Finally, petitioner claims that

Leclerc has failed to produce

documentation showing that the

governments intended their financing to

go beyond LHF production at the time

it was granted.

DOC Position

We agree with petitioner that the

assistance provided to Leclerc under

these programs was ‘‘tied’’ to the

production of subject merchandise.

Consistent with the Department’s

traditional tying analysis, we have

determined that our inquiry should

focus on the subsidy givers’’ (i.e., the

GOC and GOQ) intended use for the

subsidies prior to or at the point of

bestowal. Namely, a subsidy is

considered to be tied to a particular

product when the intended use is

acknowledged prior to or concurrent

with the bestowal of the subsidy (see

GIA at 37232). With respect to the

financing in question, all available

documentary record evidence generated

by the GOC, GOQ and Leclerc prior to

the point of bestowal (e.g., applications,

analysis reports, recommendation

documents, and contracts) demonstrate

that the governments only considered

the expansion and/or creation of LHF

facilities as the project for which the

assistance was provided.

Additionally, as noted by petitioner,

the Department verified that the

financing in question was provided to

Nilus Leclerc, Inc. and Industries

Leclerc, Inc., the LHF producers in the

Leclerc group of companies. Members of

the Leclerc group of companies which

produce non-subject merchandise were

not considered in the above-referenced

government documents as beneficiaries

of the financing in question. Therefore,

we have determined that the financing

received under the Subsidiary

Agreement and SDI solely benefited the

production of LHF.

Comment 13 (SDI: Calculation Errors)

The GOQ and Leclerc contend that

the Department erred in calculating the

net present value of the 1995 and 1994

SDI loans by incorrectly calculating the

present value of some cash flows. The

GOQ and Leclerc assert that when these

errors are corrected, there is no benefit

from the SDI loans during the POI.

DOC Position

We agree with the GOQ and Leclerc

that errors were made in calculating the

present value interest factor for the SDI

loans. These errors have been corrected.

Comment 14 (The Department Must

First Find a Benefit)

According to the GOQ, the statute

requires the Department to find first that

a payment is a subsidy, and only

subsequently can it analyze whether the

subsidy is countervailable. The GOQ

and Leclerc assert that if the Department

had not erred when it determined that

the SDI loans conferred a benefit, it

would never have analyzed the

specificity of the SDI loans.

DOC Position

We disagree with the assertion that

the Department first must find a benefit

from a particular program that is used

in order to analyze the specificity of

such program. Programs can be found to

be specific on different grounds, which

in turn dictate the method for

calculating the benefit. For example, if

a program is found to be an export

subsidy, rather than a specific domestic

subsidy, the denominator used to

calculate the benefit is export sales

rather than total sales, which can affect

the finding of a benefit. Additionally,

because the Department cumulates the

benefit from all countervailable

programs in order to determine if the

aggregate benefit is greater than de

minimis, the Department must assess

the countervailability of any program
5212 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

where the benefit may be greater than

zero.

Comment 15 (Using 1996 Information to

Calculate the Benefit)

According to the GOQ, were we to

consider events subsequent to the POI,

there would be no benefit to Leclerc

from any of the loans. However, both

the GOQ and Leclerc also argue that

information concerning events

subsequent to the POI cannot be used

retrospectively to determine a

countervailable benefit.

Petitioner claims that the Department

did not verify important elements of

these events and, therefore, cannot rely

on them to calculate a benefit. In

rebuttal, Leclerc argues that the events

are on the record and verified.

DOC Position

We disagree with respondents that

our calculation of the benefit conferred

by a long-term loan during the POI

cannot reflect events subsequent to the

POI. For example, if we learn during

verification that scheduled payments on

the loan were missed during the year

following the POI, it is appropriate to

reflect those missed payments in our

calculation. This is because when we

are calculating the grant equivalent of a

long-term loan we necessarily include

information about expected payments

under the loan. Where actual payments

differ from expected payments, we

reflect the actual payments to increase

the accuracy of our calculation.

Our examination of the post-POI

information was sufficient to determine

that the information provided is

generally consistent with information

submitted in Leclerc’s questionnaire, as

well as other information provided by

the GOQ, which was fully verified.

Therefore, as facts available, we have

decided to use the post-POI information

to achieve accurate calculations of the

benefits conferred by these loans.

Comment 16 (The Department Should

Use its Long-term, Variable-rate

Methodology for SDI Loans)

Leclerc maintains that the

Department’s approach to calculating

the benefit under the SDI and

Subsidiary Agreement programs is

internally inconsistent, and that the

variable rate methodology could be used

for the SDI loans. While Leclerc notes

that we changed our methodology in

order to account for the premia, they

state that the underlying loans are

actually variable rate loans.

Furthermore, Leclerc notes that the first

option in the Department’s long-term,

variable-rate benchmark hierarchy is to

use the interest rate on a variable-rate,

long-term benchmark loan.

The GOQ notes that the Department

prudently deviated from its traditional

methodology to account for the full

costs to the borrower. However, the

GOQ notes that the Department might

choose to revert to its traditional

methodology.

Petitioner contends that the SDI loans

cannot be treated as variable rate loans

because of events subsequent to the POI

that preclude the use of the

Department’s long-term, variable-rate

methodology.

DOC Position

We disagree with Leclerc that the

Department should revert to using its

long-term, variable-rate methodology.

As we explained in our Preliminary

Determination, there are several features

of these loans that lead us to conclude

that our variable-rate loan methodology

is not capable of measuring the benefits

conferred by these loans. Therefore, we

have continued to apply our long-term,

fixed-rate loan methodology.

Comment 17 (Extent to Which the 1995

SDI Loan Provided a 1995 Benefit to

Leclerc)

The GOQ and Leclerc argue that the

authorized portion of the 1995 SDI loan

disbursed during the POI should not

have been countervailed because no

payments were due or would have been

due under comparable financing during

the POI. The GOQ and Leclerc state that

the Department’s Proposed Regulations

and prior practice dictate that it

countervail a benefit ‘‘at the time a firm

is due to make a payment on the loan.’’

(See Proposed Regulations, 355.48(a),

(b)(3)). Leclerc cites, among others,

Final Results of Countervailing Duty

Administrative Review: Certain IronMetal Casings From India, 61 FR 64687

(December 6, 1996) in which the

Department calculated the benefit as

having been received when the first

interest payment was made, despite the

fact that interest had accrued in the

prior year.

If the Department continues to assign

a benefit to 1995 from the 1995 SDI

loan, the GOQ and Leclerc argue that

the Department should not include

amounts that were authorized, but not

disbursed during 1995. Including the

amounts that were not disbursed would

violate Article 19 of the Uruguay Round

Agreement on Subsidies and

Countervailing Measures because,

Leclerc argues, it could not have

benefited during the POI from funds

that were not disbursed.

Petitioner claims that the Department

was consistent with its regulations in

finding a benefit from the 1995 SDI loan

because it calculated the loan’s grant

equivalent. Petitioner notes that section

355.48(b) of the Department’s Proposed

Regulations state that ‘‘{the benefit}

occur{s} in the case of a grant * * * at

the time a firm receives the grant or

equity infusion.’’ Thus the benefit on

the 1995 loan occurred at the time of

receipt (i.e., during the POI). Petitioner

further argues that the cases cited by the

GOQ and Leclerc do not apply to the

loan in question because in all the cited

cases the loans in question are shortterm loans, in which the Department

does not calculate a grant equivalent.

Moreover, Petitioner contends that the

methodology proposed by the GOQ and

Leclerc is not consistent with economic

logic because it would preclude the

Department from finding a benefit on a

loan with lengthy payment deferrals if

the recipient could show that it

obtained a similar loan from commercial

lenders.

DOC Position

We agree with respondents. While we

have calculated a grant equivalent for

the SDI loans, the underlying

instrument continues to be a loan. If

there is no effect on the recipient’s cash

flow during the POI (i.e., no payment

would have been made on the

benchmark loan during the POI), there

is no benefit attributable to the POI. (See

Final Affirmative Countervailing Duty

Determinations: Certain Steel Products

from France, 58 FR 37304 (July 9, 1993)

and Final Affirmative Countervailing

Duty Determination: Brass Sheet and

Strip from France, 52 FR 1218, 1221

(January 12, 1987).)

Furthermore, based on the

Department’s practice of calculating a

benefit at the time a payment is due on

the benchmark loan, we have found, in

this instance, that the benefit conferred

by the SDI loans should be attributed to

the year subsequent to disbursement

because no payments were due on the

benchmark loans until that time.

Because we have decided that a

benefit should not be calculated for the

1995 SDI loan, we do not reach the

countervailability of the undisbursed

amount.

Comment 18 (SDI Loans Should be

Treated as Grants or the Methodology

Should be Revised)

As adverse facts available, petitioner

asserts that the SDI loans should be

treated as grants offset only by verified

payments. If the Department does not

treat the SDI loans as grants, it should:

(1) use only verified payments in the

repayment stream; (2) consider

principal outstanding at the end of the
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5213

loan term to be forgiven; (3) use a

benchmark interest rate of 20 percent;

(4) assume there will be no extension of

due dates; (5) assume any shares of

Leclerc that SDI might acquire will have

no value; and (6) treat the SDI loans as

export subsidies.

Such measures are justified, according

to petitioner, because Leclerc failed to

provide the Department with pertinent

information about the SDI loans prior to

verification. This omission constitutes a

serious material misrepresentation, in

petitioner’s view. Despite being

requested by the Department in the

questionnaire to provide such

information, Leclerc failed to do so.

Petitioner asserts that it is Department

practice to use facts available when a

party ‘‘withholds information that has

been requested’’ (see 776(a) of the Act).

Additionally, because the SDI

regulations state that it can enter into

agreements with distressed borrowers,

any SDI loan terms are suspect and,

thus, cannot be used for benefit

calculations.

Leclerc argues that petitioner’s

insistence on the use of adverse facts

available is without merit because

Leclerc has cooperated fully with the

Department. The Department has

conducted two successful verifications

with the GOQ, the GOC and Leclerc.

Leclerc claims that its voluntary

submission of minor additional

information discovered during the

course of preparing for verification

substantiates its cooperation.

Specifically, Leclerc states that the

Department’s standard questionnaire

simply asks that parties report

differences between what the loan

agreement requires and what a party

actually paid.

Additionally, Leclerc claims that

there is no legal precedent or argument

that would justify treating the SDI loans

as grants, and that there is no evidence

on the record that the loans are grants.

Thus, the Department should continue

to analyze the SDI financing as loans.

Leclerc and the GOQ argue that Leclerc

continues to have a legal obligation to

repay its SDI loans, thus no forgiveness

has occurred. Moreover, section

355.44(k) of the Proposed Regulations

requires the Department to recognize

loan forgiveness as a grant ‘‘at the time

of the assumption or forgiveness.’’

Leclerc asserts that petitioner’s other

methodological suggestions are

groundless. The events subsequent to

the POI affecting the SDI loans are

indeed on the record and verified, but

these events are irrelevant because they

occurred after the POI.

DOC Position

In this instance, we do not believe

that Leclerc’s late submission of

information concerning events

subsequent to the POI requires that the

Department use adverse facts available.

While we have included the post-POI

information in our calculations to make

them more accurate, our investigation

has clearly focussed on information

from years prior to and including the

POI.

Further, we agree with Leclerc and

the GOQ that the Proposed Regulations

state that a benefit from loan forgiveness

usually occurs when the loan is

forgiven. We disagree with petitioner

that the loans should be treated as

grants simply because SDI can

renegotiate loan terms with its clients.

Commercial lenders also typically have

the freedom to change the terms when

dealing with a distressed borrower.

Regarding treating the SDI financing

as a grant, the Department’s GIA at

37255 sets out the standard for

determining whether an instrument

should be considered a grant:

We have distinguished grants from both

debt and equity by defining grants as funds

provided without expectation of a: (1)

Repayment of the grant amount, (2) payment

of any kind stemming directly from the

receipt of the grant, or (3) claim on any funds

in case of company liquidation. (parenthesis

omitted)

Based on the above, the SDI loans

should not be considered grants because

the SDI financing does not meet any of

the three criteria. Moreover, in

distinguishing between equity and

loans, the GIA at 37255 states:

Loans typically have a specified date on

which the last remaining payments will be

made and the obligation of the company to

the creditor is fulfilled. Even if the

instrument has no pre-set repayment date,

but a repayment obligation exists when the

instrument is provided, the instrument has

characteristics more in line with loans than

equity.

While certain aspects of repayment

under the SDI loans are more flexible

than that of a standard commercial bank

loan, as reflected in its financial

statements, Leclerc had a repayment

obligation to SDI during the POI. Thus,

we find no basis on which to consider

the SDI loans to be a grant.

Summary

Based on the four countervailable

programs described above, the aggregate

ad valorem rate is 0.57 percent. This

rate is de minimis, pursuant to 703(b)(4)

of the Act. Therefore, we determine that

no benefits which constitute bounties or

grants within the meaning of the

countervailing duty law are being

provided to manufacturers, producers or

exporters of LHF in Canada.

Verification

In accordance with section 782(i) of

the Act, we verified the information

used in making our final determination.

We followed standard verification

procedures, including meeting with

government and company officials, and

examination of relevant accounting

records and original source documents.

Our verification results are outlined in

detail in the public versions of the

verification reports, which are on file in

the Central Records Unit (Room B–099

of the Main Commerce Building).

Return or Destruction of Proprietary

Information

This notice serves as the only

reminder to parties subject to

Administrative Protective Order (APO)

of their responsibility concerning the

return or destruction of proprietary

information disclosed under APO in

accordance with 19 CFR 355.34(d).

Failure to comply is a violation of the

APO.

This determination is published

pursuant to section 705(d) of the Act.

Dated: January 27, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import

Administration.

[FR Doc. 97–2715 Filed 2–3–97; 8:45 am]

BILLING CODE 3510–DS–P

U.S. Automotive Parts Advisory

Committee; Closed Meeting

AGENCY: International Trade

Administration, Commerce.

ACTION: Closed meeting of U.S.

Automotive Parts Advisory Committee.

SUMMARY: The U.S. Automotive Parts

Advisory Committee (the ‘‘Committee’’)

advises U.S. Government officials on

matters relating to the implementation

of the Fair Trade in Auto Parts Act of

1988. The Committee: (1) reports

annually to the Secretary of Commerce

on barriers to sales of U.S.-made auto

parts and accessories in Japanese

markets; (2) assists the Secretary in

reporting to the Congress on the

progress of sales of U.S.-made auto parts

in Japanese markets, including the

formation of long-term supplier

relationships; (3) reviews and considers

data collected on sales of U.S.-made

auto parts to Japanese markets; (4)

advises the Secretary during

consultations with the Government of

Japan on these issues; and (5) assists in

establishing priorities for the