[Federal Register Volume 62, Number 74 (Thursday, April 17, 1997)]
[Notices]
[Pages 18749-18755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9962]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-122-815]


Pure and Alloy Magnesium From Canada; Final Results of the Third 
(1994) 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 October 7, 1996, the Department of Commerce (the 
Department) published in the Federal Register its preliminary results 
of administrative reviews of the countervailing duty orders on pure and 
alloy magnesium from Canada for the period January 1, 1994 through 
December 31, 1994 (see Pure Magnesium and Alloy Magnesium From Canada; 
Preliminary Results of Countervailing Duty Administrative Reviews 
(Preliminary Results), 61 FR 52435. We have completed these reviews and 
determine the net subsidy to be 4.48 percent ad valorem for Norsk Hydro 
Canada, Inc. (NHCI) and all other producers/exporters except Timminco 
Limited, which has been excluded from these orders. We will instruct 
the U.S.

[[Page 18750]]

Customs Service to assess countervailing duties as indicated above.

EFFECTIVE DATE: April 17, 1997.

FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Steven Harris, 
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; tel. (202) 
482-4087 and (202) 482-2239, respectively.

SUPPLEMENTARY INFORMATION:

Background

    Pursuant to 19 CFR 355.22(a), these reviews cover only those 
producers or exporters of the subject merchandise for which reviews 
were specifically requested. Accordingly, these reviews cover only 
NHCI, a producer of the subject merchandise which exported pure and 
alloy magnesium to the United States during the review period.
    On October 7, 1996, the Department published in the Federal 
Register the Preliminary Results of its administrative reviews of the 
countervailing duty orders on pure and alloy magnesium from Canada (61 
FR 52435). We invited interested parties to comment on the Preliminary 
Results. On November 6 and 13, 1997, case briefs and rebuttals were 
submitted by NHCI, the Government of Quebec (GOQ), and the Magnesium 
Corporation of America (petitioner). At the request of respondents, the 
Department held a public hearing on December 4, 1996.
    These reviews cover the period January 1, 1994 through December 31, 
1994. The reviews involve one company (NHCI) 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

    Unless otherwise indicated, all citations to the statute are in 
reference to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the 
Act). The Department is conducting these administrative reviews in 
accordance with section 751(a) of the Act.

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).

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

A. 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.......................................................         0.65
------------------------------------------------------------------------

B. 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.......................................................         3.83
------------------------------------------------------------------------

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.

Analysis of Comments

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

    Respondents argue that 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

[[Page 18751]]

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 in these reviews and previous ones the 
Department has thoroughly analyzed the relevant issues with respect to 
NHCI's contract with the Industrial Park and has correctly calculated 
the countervailable benefit in the Preliminary Results.

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 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 these reviews, 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

    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 the 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.
    Petitioner agrees with the Department's treatment of the Article 7 
benefits received by NHCI and emphasizes that in these reviews and in 
prior reviews the Department has addressed the germane issues regarding 
the Article 7 benefits.

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

[[Page 18752]]

cases was never intended to dictate that the Department should apply 
the loan methodology in every situation in which a government makes 
contributions toward a company's interest obligations. 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 the 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) appended to Final Countervailing Duty Determination; Certain 
Steel Products from Austria (58 FR 37063, 37226, 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: Reexamination of Specificity of the Article 7 Assistance

    In the event the Department continues to treat the 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 (928 F.2d 1568, 
1577 (Fed.Cir. 1991)), Geneva Steel v. United States (914 F.Supp. 563, 
598 (CIT 1996)), and Final Affirmative Countervailing Duty 
Determinations: Certain Steel Products from Brazil (58 FR 37295, 37303 
(July 9, 1993)) 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 
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. To this end, the GOQ provided information on the Article 
7 assistance extended up to, and including, the POR in a submission 
dated April 4, 1996. The GOQ also provided information on assistance 
provided under Article 9 of the SDI Act in that same submission. 
According to the GOQ, assistance under Article 9 should be included in 
the Article 7 specificity analysis because Article 9 was the 
predecessor of Article 7 and the provisions of Article 9 functioned 
basically the same as those of Article 7.
    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 under Articles 7 and 9 to determine whether NHCI received a 
disproportionate share of benefits.
    Petitioner concurs with the Department's decisions on this issue in 
these reviews and in prior segments of the proceedings.

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 these 
reviews, no new facts or evidence have

[[Page 18753]]

been presented which would lead us to question that determination. We 
address respondents' arguments in favor of making a POR-specific 
determination and the relevance of the information submitted for 
consideration below.
POR-Specific Determinations Re: De Facto Specificity
    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 of the 
order on live swine from Canada, 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.
Relevance Of Submitted Information
    As stated in the preceding section, the proper time period for a 
specificity determination is the time of bestowal. Therefore, 
information submitted by the GOQ on assistance provided subsequent to 
the time of bestowal of the assistance granted to NHCI under Article 7 
of the SDI Act is not relevant to the specificity determination. The 
remaining information presented by the GOQ on the Article 7 assistance 
granted prior to and including the time of bestowal of NHCI's Article 7 
benefits is nearly identical to that utilized by the Department in its 
original specificity determination. Differences between the updated 
information on Article 7 provided by the GOQ and information used in 
the original specificity determination are sufficiently small so as not 
to compromise the original specificity determination.
    As for the GOQ's argument that assistance under Article 9 should 
also be included in the specificity analysis, we note that the GOQ 
neither alleged that Articles 7 and 9 are integrally linked nor 
provided information which would allow us to make a determination on 
integral linkage. Information on the record in these proceedings with 
respect to Article 9 consists only of the following statement by the 
GOQ in its original response to the questionnaire:

    Article 7 replaced Article 9 of the SDI Act in 1986. Article 9 
operated almost identically to Article 7. Article 9 assistance, like 
Article 7, required authorization by the Gouvernement du Quebec.

In order for the Department to treat two programs as one for purposes 
of its specificity analysis, it must be demonstrated that the two 
programs are integrally linked. When examining the issue of integral 
linkage, it has been the Department's practice to examine, among other 
things, 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 
program (see Final Negative Countervailing Duty Determination and Final 
Negative Critical Circumstances Determination: Certain Laminated 
Hardwood Trailer Flooring From Canada 62 FR 5201, 5210 (February 4, 
1997)). As can be seen from the foregoing, the GOQ has failed to 
provide any evidence supporting its implicit claim that Articles 7 and 
9 should be treated as one program. Since Articles 7 and 9 are separate 
programs, information submitted on Article 9 assistance does not call 
into question the original specificity determination regarding Article 
7.
    Based on all of the arguments above, we find that the GOQ has not 
provided new information which would cause us to revisit our original 
specificity determination. As a result, the bases of the original 
specificity determination and the conclusions of that determination are 
still valid. We, therefore, maintain that assistance provided to NHCI 
under Article 7 of the SDI Act is 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,

[[Page 18754]]

respondents claim the Department denied NHCI due process by preventing 
it from rebutting the presumption and 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 agrees with the Department's decisions and analyses of 
this issue in these reviews and in prior segments of these proceedings.

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 were 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.

Final Results of Review

    In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an 
individual subsidy rate for each producer/exporter subject to these 
administrative reviews. For the period January 1, 1994 through December 
31, 1994, we determine the net subsidy for

[[Page 18755]]

NHCI to be 4.48 percent ad valorem. This rate adjusts the rate of 4.01 
percent found in the Preliminary Results to a f.o.b. basis (see the GIA 
at 37237). We will instruct the U.S. Customs Service to assess 
countervailing duties as indicated above. The Department will also 
instruct Customs to collect cash deposits of estimated countervailing 
duties in the percentages detailed above of the f.o.b. invoice price on 
all shipments of subject merchandise from reviewed companies, except 
from Timminco Limited (which was excluded from the order in the 
original investigations), entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final results of 
these reviews.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in Sec. 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a 
review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected at the rate 
previously ordered. As such the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and 
Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993) 
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic 
assessment, which is identical to 19 CFR 355.22(g)). Therefore, the 
cash deposit rates for all companies except those covered by these 
reviews will be unchanged by the results of these reviews.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company, except from Timminco Limited 
(which was excluded from the order in the original investigations). 
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by these orders are those established in the 
most recently completed administrative proceeding, conducted pursuant 
to the statutory provisions that were in effect prior to the URAA 
amendments. See Pure and Alloy Magnesium from Canada: Final Results of 
the First (1992) Countervailing Duty Administrative Reviews (62 FR 
13857 (March 24, 1997)). These rates shall apply to all non-reviewed 
companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 1994 through December 
1994, the assessment rates applicable to all non-reviewed companies 
covered by these orders are the cash deposit rates in effect at the 
time of entry.
    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.
    These administrative reviews and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).

    Dated: April 7, 1997.
Robert S. LaRussa,
Assistant Secretary for Import Administration (Acting).
[FR Doc. 97-9962 Filed 4-16-97; 8:45 am]
BILLING CODE 3510-DS-P