[Federal Register Volume 62, Number 56 (Monday, March 24, 1997)]
[Notices]
[Pages 13857-13863]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7358]


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DEPARTMENT OF COMMERCE
[C-122-815]


Pure and Alloy Magnesium From Canada: Final Results of the First 
(1992) Countervailing Duty Administrative Reviews

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

ACTION: Notice of final results of countervailing duty administrative 
reviews.

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SUMMARY: On March 19, 1996, the Department of Commerce (the Department) 
published in the Federal Register its preliminary results of 
administrative review of the countervailing duty orders on pure and 
alloy magnesium from Canada for the period December 6, 1991 through 
December 31, 1992 (see Preliminary Results of First Countervailing Duty 
Administrative Reviews: Pure Magnesium and Alloy Magnesium From Canada 
(Preliminary Results),  61 FR 11186 (March 19, 1996)). We have 
completed these reviews and determine the net subsidy to be 9.86 
percent ad valorem for Norsk Hydro Canada, Inc. and all other 
producers/exporters except Timminco Limited, which has been excluded 
from these orders. We will instruct the U.S. Customs Service to assess 
countervailing duties as indicated above.

EFFECTIVE DATE: March 24, 1997.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai, Office 1, Group 1, 
AD/CVD Enforcement, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4087.

SUPPLEMENTARY INFORMATION:

Background

    On March 19, 1996, the Department published in the Federal Register 
the Preliminary Results of its administrative

[[Page 13858]]

reviews of the countervailing duty orders on pure and alloy magnesium 
from Canada (61 FR 11186). The Department has now completed these 
administrative reviews in accordance with section 751 of the Tariff Act 
of 1930, as amended (the Act).
    We invited interested parties to comment on the Preliminary 
Results. On April 18 and 25, 1996, case briefs and rebuttals were 
submitted by Norsk Hydro Canada, Inc. (NHCI), a producer of the subject 
merchandise which exported pure and alloy magnesium to the United 
States during the review period, the Government of Quebec (GOQ), and 
the Magnesium Corporation of America (petitioner). At the request of 
respondents, the Department held a public hearing on May 2, 1996.

Period of Review

    The reviews cover the period December 6, 1991 through December 31, 
1992. The reviews involve one company and the following programs: 
Exemption from Payment of Water Bills, Article 7 Grants from the Quebec 
Industrial Development Corporation (SDI), St. Lawrence River 
Environment Technology Development Program, Program for Export Market 
Development, the Export Development Corporation, Canada-Quebec 
Subsidiary Agreement on the Economic Development of the Regions of 
Quebec, Opportunities to Stimulate Technology Programs, Development 
Assistance Program, Industrial Feasibility Study Assistance Program, 
Export Promotion Assistance Program, Creation of Scientific Jobs in 
Industries, Business Investment Assistance Program, Business Financing 
Program, Research and Innovation Activities Program, Export Assistance 
Program, Energy Technologies Development Program, and Transportation 
Research and Development Assistance Program.

Applicable Statute and Regulations

    The Department is conducting these administrative reviews in 
accordance with section 751(a) of the Act. Unless otherwise indicated, 
all citations to the statute and to the Department's regulations are in 
reference to the provisions as they existed on December 31, 1994. 
However, references to the Department's Countervailing Duties; Notice 
of Proposed Rulemaking and Request for Public Comments, 54 FR 23366 
(May 31, 1989) (Proposed Regulations), are provided solely for further 
explanation of the Department's countervailing duty practice. Although 
the Department has withdrawn the particular rulemaking proceeding 
pursuant to which the Proposed Regulations were issued, the subject 
matter of these regulations is being considered in connection with an 
ongoing rulemaking proceeding which, among other things, is intended to 
conform the Department's regulations to the Uruguay Round Agreements 
Act. (See 60 FR 80 (Jan. 3, 1995)).

Scopes of the Reviews

    The products covered by these reviews are shipments of pure and 
alloy magnesium from Canada. Pure magnesium contains at least 99.8 
percent magnesium by weight and is sold in various slab and ingot forms 
and sizes. Magnesium alloys contain less than 99.8 percent magnesium by 
weight with magnesium being the largest metallic element in the alloy 
by weight, and are sold in various ingot and billet forms and sizes. 
Secondary and granular magnesium are not included in the scope of the 
orders. Pure and alloy magnesium are currently provided for in 
subheadings 8104.11.0000 and 8104.19.0000, respectively, of the 
Harmonized Tariff Schedule (``HTS''). Although the HTS subheadings are 
provided for convenience and customs purposes, our written description 
of the scope of this proceeding is dispositive.
    Secondary and granular magnesium are not included in the scopes of 
these orders. Our reasons for excluding granular magnesium are 
summarized in the Preliminary Determination of Sales at Less Than Fair 
Value: Pure and Alloy Magnesium from Canada (57 FR 6094, February 20, 
1992).

Calculation Methodology for Assessment and Cash Deposit Purposes

    Since NHCI is the only known producer/exporter subject to these 
orders, we used its ad valorem subsidy rate to determine the country-
wide ad valorem subsidy rate. This ad valorem subsidy rate does not 
apply to Timminco Limited because it has been excluded from these 
orders.

Analysis of Programs

    Based upon our analysis of our questionnaire responses and written 
comments from the interested parties we determine the following:

I. Programs Conferring Subsidies

1. Exemption From Payment of Water Bills
    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the Preliminary Results. On this 
basis, the net subsidy rate for this program is as follows:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
NHCI and All Other Producers/Exporters except Timminco Ltd.         1.31
------------------------------------------------------------------------

2. Article 7 Grants From the Quebec Industrial Development Corporation
    In the preliminary results, we found that this program conferred 
countervailable benefits on the subject merchandise. Our analysis of 
the comments submitted by the interested parties, summarized below, has 
not led us to change our findings from the Preliminary Results. On this 
basis, the net subsidy for this program is as follows:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
NHCI and All Other Producers/Exporters except Timminco Ltd.         8.55
------------------------------------------------------------------------

II. Programs Found Not To Be Used

    In the preliminary results we found that the producers and/or 
exporters of the subject merchandise did not apply for or receive 
benefits under the following programs:
    <bullet> St. Lawrence River Environment Technology Development 
Program.
    <bullet> Program for Export Market Development.
    <bullet> Export Development Corporation.
    <bullet> Canada-Quebec Subsidiary Agreement on the Economic 
Development of the Regions of Quebec.
    <bullet> Opportunities to Stimulate Technology Programs.
    <bullet> Development Assistance Program.
    <bullet> Industrial Feasibility Study Assistance Program.
    <bullet> Export Promotion Assistance Program.
    <bullet> Creation of Scientific Jobs in Industries.
    <bullet> Business Investment Assistance Program.
    <bullet> Business Financing Program.
    <bullet> Research and Innovation Activities Program.
    <bullet> Export Assistance Program.
    <bullet> Energy Technologies Development Program.
    <bullet> Transportation Research and Development Assistance 
Program.
    We received no comments on these programs from the interested 
parties; therefore, we have not changed our findings from the 
Preliminary Results.

[[Page 13859]]

Analysis of Comments

Comment 1: Countervailability of the Exemption From Payment of Water 
Bills

    Respondents argue that the NHCI's contract with its supplier of 
water, La Societe du Parc Industriel et Portuaire de Becancour 
(``Industrial Park''), was inextricably linked with the credit it 
received from the GOQ to offset its water bills. If the water credit 
had not been received, respondents state that a different billing 
arrangement would have been made. Therefore, in determining the amount 
of the benefit conferred by the credit, the Department should look to 
what NHCI would have paid absent the water credit and the contract 
compared to what it paid with the credit and the contract. To calculate 
what NHCI would have paid absent the credit and the contract, 
respondents argue that the closest approximation is the amount NHCI 
would have paid under its present contract based on actual water 
consumption rather than forecasted consumption.
    Petitioner states that under the terms of the contract between NHCI 
and the Industrial Park, the amount invoiced is based, in part, on 
forecasted consumption and this amount is what NHCI would have paid in 
the absence of the water credit. By countervailing the portion of the 
water invoice that was offset by the water credit and, hence, not paid 
by NHCI, petitioner states that the Department correctly calculated the 
countervailable benefit in the Preliminary Results. Even if the 
Department were to consider what NHCI would pay in the absence of the 
credit and existing contract, petitioner points out that other 
Industrial Park customers also are obligated to pay an amount based, in 
part, on forecasted consumption although they are allowed to change 
their forecasted consumption levels yearly. Hence, forecasted 
consumption cannot be ignored as an element of the charge for water. 
Petitioner also points out that, in addition to requiring the 
Industrial Park to supply the actual amount of water used by NHCI, the 
contract also bound the Industrial Park to certain other potential 
obligations upon the request of NHCI. According to petitioner, the 
contract was structured to compensate the Industrial Park for any costs 
it might incur in meeting those other potential obligations.
    DOC Response: We disagree with respondents that we are required to 
hypothesize what NHCI would have paid for its water in the absence of 
the credit and the contract it entered into to measure the benefit 
conferred by the credit. The position put forward by NHCI is analogous 
to a situation where a company received a low-interest loan from a 
government and argues to the Department that because of the low 
interest rate, it borrowed more than it otherwise would have. 
Therefore, the company would contend, to calculate the benefit 
conferred by the low-interest loan, the Department should compare the 
actual amount of interest paid on the low-interest loan with the actual 
amount of interest the company would have paid on a smaller loan at a 
higher benchmark interest rate. In this loan situation, we would not 
enter into a hypothetical calculation of what amount the company would 
have borrowed absent the low-interest loan. Instead, consistent with 
section 771(5)(A)(II)(c) of the Act, we would simply countervail the 
difference in the two interest rates without regard to what effect the 
interest rate has on the other terms of the loan, i.e., the amount 
borrowed.
    In this review, the terms of the contract between NHCI and the 
Industrial Park unambiguously state that NHCI is required to pay an 
amount based, in part, on forecasted consumption. To the extent the 
GOQ's provision of the credit relieved NHCI from paying its water 
bills, a countervailable benefit existed without regard to whether NHCI 
would have received different terms under an alternative arrangement. 
Therefore, we determine that the benefit is the full amount of the 
credit.

Comment 2: Article 7 Assistance Under the SDI Act

    Petitioner states that the label ``interest rebate'' placed on the 
Article 7 assistance provided by the SDI does not change the nature of 
the assistance and that it remains, in substance, a grant. According to 
petitioner, the purpose, amount and disbursement timetable for the 
Article 7 assistance was inextricably linked to NHCI's purchase of 
specified environmental protection equipment. Petitioner further points 
out that the Article 7 assistance was not tied to the cost of NHCI's 
plant, the total amount of NHCI borrowing, the interest rate paid by 
NHCI on its borrowings, or the total amount of interest incurred by 
NHCI. Petitioner argues that the assistance had the impact of 
encouraging NHCI to install specified environmental protection 
equipment as opposed to encouraging NHCI to borrow money that it 
otherwise would not have borrowed. In light of the above, petitioner 
concludes that the funding was in the form of a non-recurring grant. 
Petitioner emphasizes that the Department should not allow respondents 
to engage in ``subsidy engineering'' by turning a large non-recurring 
capital grant into some other type of benefit.
    Respondents argue that the Department improperly applied its grant 
methodology to the Article 7 assistance provided to NHCI. According to 
respondents, because NHCI knew it would receive interest rebates from 
SDI prior to taking out loans, the Department should calculate the 
benefit using its loan methodology and reduce the interest rate charged 
by the amount of the interest rebated. Respondents state that this 
would be consistent with the Department's methodology, citing a number 
of cases (e.g., Final Affirmative Countervailing Duty Determination; 
Certain Steel Products From the United Kingdom (UK Steel), 58 FR 37393, 
37397 (July 9, 1993)).
    Respondents further contend that the Preliminary Results were based 
on significant errors of fact regarding the interest rebates received 
by NHCI. First, respondents argue that the relationship between the 
interest rebates and the underlying loans was not indirect. Second, the 
interest rebates received by NHCI reduced NHCI's costs of borrowing for 
the construction of its plant, not its costs of purchasing 
environmental equipment.
    With respect to the first point, respondents argue that the 
Department was incorrect in its assertion that the Article 7 assistance 
was more closely linked to the acquisition of certain assets than the 
accumulation of interest costs. Moreover, respondents maintain that the 
SDI assistance was not intended solely for the purchase of 
environmental protection equipment, but was also intended to facilitate 
the construction of NHCI's facility in Quebec. The fact that the 
Article 7 assistance was intended to achieve more than one objective 
does not distinguish the Article 7 assistance from other interest 
rebate programs which the Department has treated under its loan 
methodology, according to respondents.
    With respect to the second point, respondents argue that since the 
Department wrongly assumed that Article 7 assistance was provided 
solely for the purchase of environmental equipment, the Department was 
able to conclude that the interest rebates exceeded the interest that 
would be in connection with the purchase of the environmental 
equipment. Hence, the Department concluded that the Article 7 
assistance should not be treated as an interest rebate. However, 
because the Article 7 assistance was intended to reduce the cost of 
financing for the project as a whole, the assistance was not excessive 
in the sense described by the Department.

[[Page 13860]]

    DOC Position: The issue presented by this case is whether the 
Article 7 assistance received by NHCI should be treated as an interest 
rebate or as a grant. If it is treated as an interest rebate, then 
under the methodology adopted by the Department in the 1993 steel 
cases, the benefit of the Article 7 assistance would be countervailed 
according to our loan methodology (Final Affirmative Countervailing 
Duty Determinations: Certain Steel Products From Belgium, (Belgium 
Steel) 58 FR 37273, 37276, July 9, 1993). However, if treated as a 
grant, the benefits would be allocated over a period corresponding to 
the life of the company's assets.
    In their brief, respondents argue that the interest rebate 
methodology reflects the fact that companies face a choice between debt 
and equity financing. If a company knows that the government is willing 
to rebate interest charges before the company takes out a loan, the 
government is encouraging the company to borrow rather than sell 
equity. Hence, respondents conclude, the benefit should be measured 
with reference to the duration of the borrowing for which the rebate is 
provided.
    We disagree that the Department's interest rebate methodology was 
intended to reflect the choice between equity and loan financing. In 
the 1993 steel cases, (See, e.g., Belgium Steel), we examined a 
particular type of subsidy, interest rebates, and determined which of 
our valuation methodologies was most appropriate. The possible choices 
were between the grant and loan methodologies. Where the company had 
knowledge prior to taking the loan out that it would receive an 
interest rebate, we decided that the loan methodology was most 
appropriate because there is virtually no difference between the 
government offering a loan at 5 percent interest (which would be 
countervailed according to the loan methodology) and offering to rebate 
half of the interest paid on a 10 percent loan from a commercial bank 
each time the company makes an interest payment. Hence, we were seeking 
the closest methodological fit for different types of interest rebates.
    However, the interest rebate methodology described in the 1993 
steel cases was never intended to dictate that the Department should 
apply the loan methodology in every situation. The appropriate 
methodology depends on the nature of the subsidy. For example, assume 
that the government told a company that it would make all interest 
payments on all construction loans the company took out during the next 
year up to $6 million. This type of ``interest rebate'' operates 
essentially like a $6 million grant restricted to a specific purpose. 
Whether the purpose is to pay interest expenses or buy a piece of 
equipment does not change the nature of the subsidy. In contrast, the 
interest rebate methodology is appropriate for the type of interest 
rebate programs investigated in the 1993 steel cases, i.e., partial 
interest rebates paid over a period of years on particular long-term 
loans.
    As we did in the 1993 steel cases, the Department in these reviews 
is seeking the most appropriate methodology for the Article 7 
assistance. We erred in our Preliminary Results of First Countervailing 
Duty Administrative Reviews: Pure Magnesium and Alloy Magnesium from 
Canada, 61 FR 11186 (March 19, 1996), in stating that the primary 
purpose of the Article 7 assistance was to underwrite the purchase of 
environmental equipment. However, it cannot be disputed that the 
environmental equipment played a crucial role in the agreement between 
SDI and NHCI. Most importantly, the aggregate amount of assistance to 
be provided was determined by reference to the cost of environmental 
equipment to be purchased. In this respect, the Article 7 assistance is 
like a grant for capital equipment.
    Further, the assistance provided by SDI is distinguishable from the 
interest rebates addressed in the 1993 steel cases in that the interest 
payments in the steel cases rebated a portion of the interest paid on 
particular long-term loans. Here, although the disbursement of Article 
7 assistance was contingent, inter alia, on NHCI making interest 
payments, the disbursements were not tied to the amount borrowed, the 
number of loans taken out or the interest rates charged on those loans. 
Instead, the disbursements were tied to NHCI meeting specific 
investment targets and generally to NHCI having incurred interest costs 
on borrowing related to the construction of its facility.
    Therefore, while we recognize that NHCI had to borrow and pay 
interest in order to receive individual disbursements of Article 7 
assistance, we do not agree that this fact is dispositive of whether 
the interest rebate methodology used in the 1993 steel cases is 
appropriate. We believe this program more closely resembles the 
scenario described above where the government agrees to pay all 
interest incurred on construction loans taken out by a company over the 
next year up to a specified amount. Because, in this case, the amount 
of assistance is calculated by reference to capital equipment purchases 
(something extraneous to the interest on the loan) and the 
reimbursements do not relate to particular loans, we determine that the 
Article 7 assistance should be treated as a grant.
    The Department has in past cases classified subsidies according to 
their characteristics. For example, in the General Issues Appendix 
(GIA) attached to the Final Affirmative Countervailing Duty 
Determination: Certain Steel Products from Austria 58 FR 37217, 37254 
(July 9, 1993), we developed a hierarchy for determining whether so-
called ``hybrid instruments'' should be countervailed according to our 
loan, grant or equity methodologies. In short, we were asking whether 
the details of particular government ``contributions'' made them more 
like a loan, a grant or an equity infusion. Similarly, when a company 
receives a grant, we look to the nature of the grant to determine 
whether the grant should be treated as recurring or non-recurring. In 
these reviews, we have undertaken the same type of analysis, i.e., 
determining an appropriate calculation methodology based on the nature 
of the subsidy in question. As with hybrid instruments and recurring/
non-recurring grants, it is appropriate to determine which methodology 
is most appropriate based on the specific facts of the Article 7 
assistance. Although the Article 7 assistance exhibits characteristics 
of both an interest rebate and a grant, based on an overview of the 
contract under which the assistance was provided, we determine that the 
weight of the evidence in this case supports our treatment of the 
Article 7 assistance as a grant.

Comment 3: Re-Examination of Specificity of Article 7 Assistance

    In the event the Department continues to treat Article 7 assistance 
as a non-recurring grant, respondents state that the Department is 
obliged to make a finding that the Article 7 assistance conferred a 
subsidy to NHCI during the POR. The Department may not, as it has here, 
rely on a factual finding of disproportionality during a different time 
period and different amounts of assistance. Respondents state that a 
finding of de facto specificity requires a case-by-case analysis, 
citing PPG Industries, Inc. v. United States, Geneva Steel v. United 
States, and Certain Steel Products from Brazil to support their 
reasoning. Respondents also cite the sixth administrative review of 
Live Swine from Canada; Final Results of Countervailing Duty 
Administrative Review (Live Swine) (59 FR 12243 (March 16, 1994)) as an 
example where the Department reexamined the

[[Page 13861]]

countervailability of benefits found to be de facto specific in prior 
reviews.
    Respondents maintain that given the Department's responsibility to 
make a finding of specificity and countervailability based on the 
information relevant to the POR, the Department should consider any new 
assistance provided by SDI since the end of the original period of 
investigation. Respondents then present a methodology they believe 
should be employed whereby the Department would compare the portion of 
NHCI's original grant allocated to the POR, based on the Department's 
standard allocation methodology, and the portions of benefits allocated 
to the POR for all assistance bestowed to all other enterprises 
receiving SDI assistance to determine whether NHCI received a 
disproportionate share of benefits. Respondents state that the 
Department had a responsibility to gather the information necessary to 
make the specificity determination they have described. Since the 
Department has not gathered the information required for their proposed 
methodology, respondents conclude that a determination of de facto 
specificity during the POR is not possible.
    Petitioner counters that since the Article 7 assistance was in the 
form of a non-recurring grant, the Department properly looked at the 
time period when the government granted the assistance to make the 
specificity finding. According to petitioner, the provision of the 
assistance was, and always will be, specific regardless of how the GOQ 
administers the program in future years--even if it were to abolish the 
program. In other words, petitioner states that no future action by the 
GOQ could retroactively make the subsidy non-specific. Simply because 
the Department's grant calculation methodology assigns an amortized 
portion of the assistance to this review period, it does not mean that 
the GOQ is granting a new subsidy worthy of a new specificity analysis. 
Indeed, states petitioner, if a new subsidy were being analyzed, the 
Department's specificity analysis would not take into account portions 
of old subsidies amortized into the period being examined.
    DOC Position: It is the Department's policy not to revisit 
specificity determinations absent the presentation of new facts or 
evidence (see, e.g., Carbon Steel Wire Rod From Saudi Arabia; Final 
Results of Countervailing Duty Administrative Review and Revocation of 
Countervailing Duty Order, 59 FR 58814, November 15, 1994). In this 
review, no new facts or evidence have been presented which would lead 
us to question that determination. We address respondents' arguments in 
favor of making a POR-specific determination below.
    Respondents refer to the various reviews of the countervailing duty 
order on live swine from Canada as demonstrating that the Department 
has, as a matter of course, revisited its de facto specificity 
determinations from one segment of a proceeding to another. While 
distinct de facto specificity determinations were made with respect to 
the Tripartite program in the fourth, fifth and sixth reviews, these 
were not done as a matter of course. The Department reexamined 
specificity in these reviews of live swine only as a result of an 
adverse decision by the Binational Panel. Because the Binational Panel 
overturned the Department's finding of specificity regarding the 
Tripartite program in the fourth review of live swine for lack of 
evidence (and eventually rejected its analysis regarding specificity in 
the fifth review but upheld its decision), the Department continued to 
collect information in the sixth review, which was running concurrently 
with the Binational proceedings. In explaining its actions in the sixth 
review, the Department recognized that it does not routinely revisit 
specificity determinations, as respondents would have us believe, in 
stating the following:

Although our practice is not to reexamine a specificity 
determination (affirmative or negative) made in the investigation or 
in a review absent new facts or evidence of changed circumstances, 
the record in the prior reviews did not contain all of the 
information we consider necessary to define the agricultural 
universe in Canada.

(See Live Swine.) As can be seen from the foregoing, the facts 
surrounding the live swine reviews do not correspond to the situation 
presented here. In particular, the issue of specificity had not been 
conclusively settled in the live swine reviews and was in the process 
of litigation, and different information was available; unlike this 
case in which a definitive specificity determination had already been 
established.
    As for respondents' arguments that de facto specificity 
determinations should be done on a case-by-case basis, we agree. 
However, we disagree with respondents as to what ``case-by-case'' 
means. In each of the citations respondents refer to, ``case'' referred 
not to a separate segment of the same proceeding (e.g., the first 
review of an order distinct from the second review), but to a separate 
investigation or review of different products (e.g., an investigation 
of carbon black from Mexico as opposed to an investigation of steel 
products from Brazil) . It is this latter definition of ``case'' we 
find to be the proper basis for examination of de facto specificity 
determinations. Since a separate de facto specificity determination was 
made in the investigations of pure and alloy magnesium, we find that 
the analysis was properly conducted.
    In proposing that the Department base a POR-specific de facto 
specificity finding on the portions of non-recurring grants allocated 
to the POR, the respondents appear to be confusing the initial 
specificity determination based on the action of the granting authority 
at the time of bestowal with the allocation of the benefit over time. 
These are two separate processes. The portions of grants allocated to 
periods of time using the Department's standard allocation methodology 
are irrelevant to an examination of the actual distribution of benefits 
by the granting government at the time of bestowal. We agree with 
petitioner that the determination of whether a non-recurring subsidy 
was specific (or not) at the time of bestowal then becomes attached to 
the subsidy.
    Based on all of the arguments above, we find that the bases of the 
original specificity determination are still valid. Since no new 
evidence has been presented which would cause us to revisit the 
original specificity determination, we continue to find assistance 
under Article 7 of the SDI Act to be specific and, therefore, 
countervailable.

Comment 4: Appropriate Denominator

    Respondents state that in the Preliminary Results the Department 
deviated from its standard practice in determining the denominator for 
companies with multinational production facilities that fail to rebut 
the presumption that subsidies are domestically tied. In particular, 
respondents argue that it is the Department's policy to tie such 
subsidies to domestic operations, by allocating benefits to sales by 
the domestic company regardless of country of manufacture, as opposed 
to tying to domestic production, as was done in the Preliminary 
Results. Respondents additionally state that the Department both failed 
to explain its basis for presuming that the subsidies were tied to 
Canadian production and to respond to NHCI's arguments in favor of 
allocating the subsidies over sales by NHCI of subject merchandise 
regardless of country of manufacture. In so doing, respondents claim 
the Department denied NHCI due process by preventing it from rebutting 
the presumption and

[[Page 13862]]

from responding to the rationale the Department used to support its 
decision to tie the subsidies to domestic production. In support of 
their assertion that the subsidies NHCI received are tied to its 
domestic operations, respondents state that any funds received 
benefited all employment-related activities in Canada (e.g., sales of 
all products) and that these activities are related to both domestic 
and foreign production. Respondents elaborate further that the 
denominator policy used by the Department in this case is a deviation 
from the fungibility of money principle.
    Respondents also cite British Steel plc v. United States (British 
Steel) (479 F. Supp. 1254, 1371) in which the Court reversed and 
remanded the Department's determinations because it found that the 
Department should have given plaintiffs due notice of its decision to 
apply the rebuttable presumption that the subsidies at issue were tied 
to domestic production in order to allow plaintiffs the opportunity to 
rebut the Department's presumption.
    Petitioner states that there is nothing on the record indicating 
that the GOQ intended the funds it provided to NHCI to benefit 
production in another country. Therefore, the Department should 
continue to allocate the subsidies received over sales of merchandise 
produced in Canada.
    DOC Response: Respondents cite British Steel in an attempt to imply 
that the Department must inform parties early during the course of each 
proceeding of its intent to use the rebuttable presumption that 
subsidies to companies with foreign manufacturing operations are tied 
to domestic production. However, the facts involved in British Steel 
are readily distinguishable. Therefore, the holding in that case does 
not apply to the present situation.
    In British Steel, the Court was examining the Department's policy 
of using the rebuttable presumption articulated in the GIA. In 
particular, the Court took issue with the introduction of the new 
policy in the final-determination stage of the investigation because 
the timing prevented parties from both commenting on the methodology 
and from presenting evidence rebutting the presumption. It is important 
to note that the Department's remand determination, as affirmed by the 
Court, upheld the appropriateness of using the rebuttable presumption. 
The Department has continued to use the rebuttal presumption and this 
policy has become accepted Department practice. Unlike British Steel, 
we are not dealing with the introduction of a new policy late into the 
course of a proceeding in this case. Therefore, the Department was not 
required to forewarn respondents of the use of the rebuttable 
presumption.
    We also note that the use of a denominator based only on 
domestically produced merchandise did not come as a surprise to 
respondents. To begin, in the original investigations of these cases 
(which pre-dated the rebuttable presumption) the Department used a 
denominator based only on sales of domestically produced merchandise 
(Final Affirmative Countervailing Duty Determinations: Pure Magnesium 
and Alloy Magnesium From Canada, 57 FR 30946 (July 13, 1992)). Since 
the investigations in these cases, there has been a changed 
circumstances review (57 FR 54047 (November 16, 1992)) and a Binational 
Panel proceeding. In all of the proceedings, the denominators have 
included only domestically produced merchandise and in no case have 
respondents objected to those denominators. In addition, the 
questionnaire for these reviews requested information on sales 
denominators based on domestically produced merchandise. NHCI provided 
the requested sales denominator information along with denominators 
based on total sales by NHCI and arguments why those based on total 
sales should be used. Moreover, sales of domestically produced 
merchandise was used as the denominator in the Preliminary Results. As 
can be seen from the foregoing, respondents were aware as to the 
possible use of a denominator based on domestically produced 
merchandise and did indeed have an opportunity to attempt to rebut the 
presumption.
    Respondents also argue that the Department must explain the basis 
of its presumption. However, the idea behind the use of a rebuttable 
presumption is that the fact presumed--in this case that subsidies 
bestowed on companies with foreign manufacturing operations are tied to 
domestic production--becomes the default position and does not have to 
be explained in each case. As the Department stated in the GIA, ``Thus, 
under the Department's refined ``tied'' analysis, the Department will 
begin by presuming that a subsidy provided by the government of the 
country under investigation is tied to domestic production'' (GIA at 
37231). It follows that the Department will find that subsidies are 
tied to domestic production in the absence of evidence to the contrary.
    As for respondents' complaint that the Department failed to address 
its arguments that the subsidies received by NHCI benefited all of the 
company's operations, not just its manufacturing activities, we note 
that in the GIA it states, ``A party may rebut this presumption by 
presenting evidence tending to show that the subsidy was not tied to 
domestic production * * *'' The phrase, ``tending to show'' means that 
the party attempting to rebut the presumption must provide enough 
evidence to convince a reasonable fact-finder of the non-existence of 
the presumed fact--that subsidies are tied to the recipient firm's 
domestic production (Results of Redetermination Pursuant to Court 
Remand on General Issue of Sales Denominator: British Steel plc v. 
United States, Consol. Ct. No. 93-09-00550-CVD, Slip Op. 95-17 and 
Order (CIT Feb. 9, 1995) at 17). The mere absence of evidence limiting 
the government's intended scope of the benefit to domestic production 
is not sufficient. In this case, respondents' arguments have not risen 
to the level of evidence that would convince us that the GOQ intended 
that the subsidies it bestowed on NHCI were to benefit more than just 
domestic production. Therefore, respondents have failed to rebut the 
presumption that the subsidies received by NHCI were tied to domestic 
production.
    The Department's methodology for determining what to include in the 
denominator when a company has foreign manufacturing operations is 
explained in the GIA: ``If we determine that the subsidy is tied to 
domestic production, we will allocate the benefit of the subsidy fully 
to sales of domestically produced merchandise'' [emphasis added] (GIA 
at 37231). This quotation makes it clear that sales of foreign-produced 
merchandise by a respondent company would not be included in the 
denominator. Even if we were to consider tying the subsidies at issue 
to domestic operations, using respondents' suggestion of a sales 
denominator based on total NHCI sales would be improper since such a 
figure would include sales of foreign-produced merchandise by NHCI and, 
therefore, value-added from operations in other countries. Based on the 
foregoing arguments, we have continued to allocate subsidies received 
by NHCI to the company's merchandise produced in Canada.

Comment 5: Suspension of Liquidation for the Period April 4, 1992 to 
August 31, 1992

    Respondents argue that since the Department terminated suspension 
of liquidation for entries on or after April 4, 1992 to August 31, 
1992,

[[Page 13863]]

countervailing duties cannot be reassessed for that period.
    DOC Position: We agree with respondents.

Final Results of Review

    For the period December 6, 1991 through December 31, 1992, we 
determine the net subsidy to be 9.86 percent ad valorem for Norsk Hydro 
Canada Inc. and all other companies except Timminco Limited, which has 
been excluded from these orders. This rate corrects the rate of 9.87 
found in the Preliminary Results which arose from a rounding error.
    The Department will instruct the U.S. Customs Service to assess the 
following countervailing duties on entries during the periods December 
6, 1991 to April 3, 1992 and September 1, 1992 to December 31, 1992:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Norsk Hydro Canada Inc. and All Other Companies Except                  
 Timminco Limited (which is excluded from these orders)....         9.86
------------------------------------------------------------------------

    The Department will also instruct the U.S. Customs Service to 
collect a cash deposit of estimated countervailing duties of 9.86 
percent of the f.o.b. invoice price on all shipments of the subject 
merchandise from Norsk Hydro Canada Inc. and all other companies except 
Timminco Limited (which was excluded from the order during the original 
investigation), entered, or withdrawn from warehouse, for consumption 
on or after the date of publication of the final results of these 
reviews.
    This notice 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 355.34(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.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

    Dated: March 12, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-7358 Filed 3-21-97; 8:45 am]
BILLING CODE 3510-DS-P