(65 FR 10766, February 29, 2000) C-122-815 (alloy) C-122-815 (pure) Sunset Review Public Document MEMORANDUM TO: Robert S. LaRussa Assistant Secretary for Import Administration FROM: Jeffrey A. May Director Office of Policy SUBJECT: Issues and Decision Memo for the Sunset Reviews of Alloy Magnesium and Pure Magnesium from Canada; Preliminary Results Summary We have analyzed the substantive responses and rebuttals of interested parties in the sunset review of the countervailing duty orders covering alloy magnesium and pure magnesium from Canada. We recommend that for our preliminary results you approve the positions we have developed in the Discussion of the Issues section of this memorandum. Below is the complete list of the issues in this sunset review for which we received substantive responses and rebuttals by parties: 1. Likelihood of continuation or recurrence of a countervailable subsidy A. Continuation of subsidy programs B. Elimination of subsidy programs C. Other factors 2. Net countervailable subsidy likely to prevail A. Rates from investigation B. Use of a more recent rate 3. Nature of the subsidy History of the Orders On July 13, 1992, the Department issued its final affirmative countervailing duty determinations with respect to imports of alloy magnesium and pure magnesium from Canada.(1) In the final determinations, the Department calculated an estimated net subsidy of 21.61 percent ad valorem for Norsk Hydro Canada Inc. ("NHCI") and "all other" producers/exporters, except for Timminco Limited, which was excluded from the orders because it was found to have an estimated net subsidy of zero in the original investigations.(2) The Department determined that countervailable benefits were conferred under three programs: Exemption from Payment of Water Bills, Article 7 ("SDI") Grants from the Quebec Industrial Development Corporation, and Preferential Electric Rates. In addition, Federal Funding for a Feasibility Study under the Canada- Quebec Subsidiary Agreement on Industrial Development ("Federal Funding for a Feasibility Study") was determined to convey countervailable subsidies but was not included in the calculation of the net subsidy rate because in 1990 NHCI reimbursed the Government of Quebec for the funds received and NHCI will not receive any more assistance under this particular Subsidiary Agreement. The Department issued its countervailing duty orders on alloy magnesium and pure magnesium from Canada on August 31, 1992, including the net subsidy rate of 21.61 percent ad valorem.(3) Since the issuance of the orders, the Department has conducted six administrative reviews and one changed circumstances review of these orders.(4) On November 16, 1992, the Department issued the final results of its changed circumstances review, in which the net subsidy rate was reduced to 7.61 percent ad valorem for NHCI, after the Preferential Electric Rates program was found not to confer a countervailable subsidy and was therefore subtracted from the net subsidy rate. In the next six administrative reviews, the Department again adjusted the net subsidy rate for NHCI to take into account programs that had been terminated and the changing rate of amortization for the Article 7 SDI grants. Background On August 2, 1999, the Department initiated sunset reviews of the countervailing duty orders on alloy magnesium and pure magnesium from Canada (64 FR 41915), pursuant to section 751(c) of the Act. The Department received a notice of intent to participate on behalf of the Magnesium Corporation of America ("Magcorp") on August 13, 1999, within the deadline specified in section 351.218(d)(1)(i) of the Sunset Regulations. Pursuant to 19 U.S.C. § 1677(9)(C), Magcorp claimed interested party status as a domestic producer of the subject merchandise. Moreover, Magcorp stated that it was a petitioner in the original countervailing duty investigations and has participated in all of the administrative reviews conducted by the Department. The Department received a complete substantive response from Magcorp on September 1, 1999, within the 30-day deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The Department also received a complete substantive response on behalf of NHCI on September 1, 1999, within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). NHCI claimed interested party status under 19 U.S.C. § 1677(9)(A) as a manufacturer and exporter of the subject merchandise to the United States. In its substantive response, NHCI stated that it participated in the original investigation and all of the subsequent administrative reviews. In addition, the Department received a substantive response on behalf of the Government of Quebec ("GOQ") on September 1, 1999, within the deadline specified in the Sunset Regulations under section 351.218(d)(3)(i). The GOQ claimed interested party status under 19 U.S.C. § 1677(9)(B) as a provincial government of the country in which the subject merchandise is produced and from which it is exported. The GOQ also claimed interested party status under 19 U.S.C. § 1677(3), as a political subdivision of Canada and, therefore, the "country" of Canada, where the subject merchandise is produced and from which it is exported. The Department determined that NHCI's and the GOQ's responses constituted an adequate response to the notice of initiation. As a result, the Department determined, in accordance with section 351.218(e)(2) of the Sunset Regulations, to conduct a full (240 day) reviews.(5) On September 13, 1999, the Department received rebuttal comments from Magcorp NHCI, and the GOQ.(6) In accordance with section 751(c)(5)(C)(v) of the Act, the Department may treat a sunset review as extraordinarily complicated if it is a review of a transition order (i.e., an order in effect on January 1, 1995). On November 30, 1999, the Department determined that the sunset reviews of the countervailing duty orders on alloy magnesium and pure magnesium from Canada are extraordinarily complicated pursuant to section 751(c)(5)(C)(v) of the Act, and extended the time limit for completion of the preliminary results of these reviews until not later than February 18, 2000, in accordance with section 751(c)(5)(B) of the Act.(7) Discussion of the Issues In accordance with section 751(c)(1) of the Act, the Department is conducting these reviews to determine whether revocation of the countervailing duty orders would be likely to lead to continuation or recurrence of a countervailable subsidy. Section 752(b) of the Act provides that, in making this determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. Pursuant to section 752(b)(3) of the Act, the Department shall provide to the International Trade Commission ("the Commission") the net countervailable subsidy likely to prevail if the order is revoked. In addition, consistent with section 752(a)(6), the Department shall provide the Commission information concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the 1994 WTO Agreement on Subsidies and Countervailing Measures ("Subsidies Agreement"). Below we address the following issues contained in the substantive reponsese and rebuttals of interested parties. 1. Likelihood of continuation or recurrence of a countervailable subsidy A. Continuation of subsidy programs B. Elimination of subsidy programs C. Other factors 2. Net countervailable subsidy likely to prevail A. Rates from investigation B. Use of a more recent rate Continuation or Recurrence of a Countervailable Subsidy Drawing on the guidance provided in the legislative history accompanying the Uruguay Round Agreements Act ("URAA"), specifically the Statement of Administrative Action ("the SAA"), H.R. Doc. No. 103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 (1994), and the Senate Report, S. Rep. No. 103-412 (1994), the Department issued its Sunset Policy Bulletin providing guidance on methodological and analytical issues, including the basis for likelihood determinations. The Department clarified that determinations of likelihood will be made on an order-wide basis (see section III.A.2 of the Sunset Policy Bulletin). Additionally, the Department normally will determine that revocation of a countervailing duty order is likely to lead to continuation or recurrence of a countervailable subsidy where (a) a subsidy program continues, (b) a subsidy program has been only temporarily suspended, or (c) a subsidy program has been only partially terminated (see section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this policy are provided where a company has a long record of not using a program (see section III.A.3.b of the Sunset Policy Bulletin). Interested Parties' Comments In its substantive response, Magcorp maintains that revocation of the countervailing duty orders would likely lead to recurrence or continuation of countervailable subsidies. Magcorp argues that the history of the proceeding clearly shows that in the six years following the issuance of the orders, NHCI continued to receive benefits from the various subsidy programs (see September 1, 1999, substantive response of Magcorp at 10). Specifically, Magcorp maintains that the Article 7 SDI program, the Preferential Electric Rates program, the Water Bill Exemption program, and the Federal Funding for a Feasibility Study program all continue to exist. Concerning the Article 7 SDI subsidy program, Magcorp maintains that it continues to exist and has been incorporated into a new organization called Investissement-Quebec ("I-Q") (see id. at 11). Moreover, Magcorp argues that benefits under the SDI program will continue for at least another four years. As for the Preferential Electric Rates subsidy program, Magcorp argues that Hydro-Quebec (the electric power provider) has never renounced its policy of providing preferential rates to favored customers, indicating that such rates are still available (see id. at 14). Moreover, Magcorp asserts that Hydro- Quebec continues to provide electric power to NHCI under Risk and Profit- Sharing Contracts, where a portion of the electricity charge is based either on the price of the customer's products or the customer's profitability (see id. at 13-14). In addition, Magcorp argues that although in the changed circumstances review the Department found that the electric power contract between Hydro-Quebec and NHCI had been modified to eliminate the original countervailable benefit, the Department did not find that the electric power subsidy program had been modified in any way (see id. at 15). Magcorp argues that the issue is whether a program has been changed, and, according to 19 CFR § 351.526(b), a program-wide change is one which (1) is not limited to an individual firm or firms; and (2) is effectuated by an official act. In these cases, argues Magcorp, the change was limited to an individual firm and was not effectuated by an official act (see id. at 16). Therefore, argues Magcorp, there has been no program-wide change since Hydro-Quebec and NHCI simply changed an electric power contract to eliminate a countervailable benefit (see id. at 16). As for the Exemption of Payment of Water Bills, Magcorp states that it has no information regarding the program's termination (see id. at 19). Magcorp also maintains that the Federal Funding for a Feasibility Study subsidy program continues to exist. Magcorp argues that the fact that program continues to exist is demonstrated by the benefits recently made available to Magnola Metallurgy Inc. ("Magnola"), a possible new Canadian producer of the subject merchandise (see id. at 20). NHCI argues in its substantive response that revocation of the countervailing duty orders would not likely result in the recurrence or continuation of countervailable subsidies. In fact, NHCI argues that the subsidy rate established by the Department in the most recent administrative review was minimal and entirely the result of an amortized non-recurring subsidy, which will expire in 2004 (see September 1, 1999, substantive response of NHCI at 2). Moreover, NHCI maintains that the programs under which subsidies were found in the original investigation either have been terminated, have been found by the Department not to confer a subsidy, have a long track record of non-use, or will expire within "a reasonably foreseeable time" (see id. at 3). NHCI maintains that the Exemption of Payment of Water Bills is not likely to continue or recur since the Department already determined that this program was terminated in the sixth administrative review with no residual benefits (see id. at 4). In fact, NHCI argues that the exemption expired in June 1997 (see id. at 4). NHCI also argues that a subsidy based on preferential electric rates is not likely to continue or recur since the Department found that the amended electric contract did not confer a subsidy (see id. at 5). NHCI points out that after it amended this contract, the Department found in a 1992 changed circumstances review that the amended contract did not confer a subsidy. As for the Article 7 SDI grant, NHCI maintains that it is not likely to continue or recur because the Department already found that this grant was non- recurring, based on a one-time authorization of funds. NHCI asserts that it has not requested or received any additional funds under this program (see id. at 5). NHCI maintains that the benefits which were allocated over time are at a minimal level and will expire completely within a reasonably foreseeable time (see id. at 5-6). The GOQ argues in its substantive response that revocation of the orders would not likely lead to continuation or recurrence of subsidization because the programs initially alleged or found to confer benefits either have been terminated or are not used (see September 1, 1999, substantive response of the GOQ at 4). Specifically, the GOQ maintains that the Department has determined in the changed circumstances administrative review that the Federal Funding for a Feasibility Study was terminated. Additionally, the GOQ argues that the Department determined in the sixth administrative review that the Exemption of Payment of Water Bills program had been terminated with no residual benefits. As for the Preferential Electric Rates, the GOQ maintains that the Department determined that the amended contract between NHCI and Hydro Quebec did not confer a countervailable subsidy (see id. at 5-6). Concerning the Article 7 SDI grants, the GOQ argues that because NHCI's SDI grant was found to be non-recurring, by its very nature that grant will not continue or recur if the orders are revoked (see id. at 6). The GOQ further maintains that the fact that the Department elected to allocate the benefits from the grant over a fourteen-year period in calculating the countervailing duty rate cannot by itself justify the continued existence of these orders (see id. at 6). In addition, the GOQ states that the Department specifically found that the SDI program itself was not countervailable; instead, the Department ruled that one particular grant to NHCI alone was specific and, therefore, countervailable (see id. at 7). Furthermore, the GOQ maintains that no further monies are available under the grant and renewal, depending on the amount of the grant, would require legislative action. Therefore, the GOQ asserts that the grant should be treated as terminated (see id. at 7). Moreover, the GOQ argues that Article 21 of the Subsidies Agreement requires analysis of whether continued subsidization will occur if the orders are revoked, and that the Agreement does not permit the Department to continue the orders solely on the basis of continued payment of unallocated benefits (see id. at 8). In its rebuttal, Magcorp argues that the Government of Canada ("GOC") has participated in all prior reviews of the orders and its failure to participate in these reviews undermines the adequacy of respondents' response as a whole (see September 13, 1999, rebuttal of Magcorp at 5-6). In addition, Magcorp argues that the Federal Funding for a Feasibility Study has not been terminated. Magcorp asserts that although the Department found in the original investigation that the original Subsidiary Agreement was terminated, this does not imply that the federal feasibility study subsidy program itself was terminated. In fact, argues Magcorp, the original Subsidiary Agreement has been replaced or renewed by other Subsidiary Agreements which provide funding for the program. Magcorp rebuts NHCI's and the GOQ's argument that the non-recurring nature of the SDI Article 7 grant indicates that the normal sunset review treatment of allocated subsidies does not apply. Magcorp states that the exception advocated by NHCI and the GOQ would eliminate the general rule that allocated subsidies extending beyond the end of the sunset review are dispositive of a likelihood of continuation or recurrence of countervailable subsidies (see id. at 10-11). Additionally, Magcorp rebuts the GOQ's claim that the SDI subsidy program itself is not countervailable. Magcorp argues that in the original investigation the Department explained that NHCI received a disproportionately large share of assistance under the program and concluded that the program, with respect to the assistance provided to NHCI, to be countervailable (see id. at 11-12). Magcorp also argues that the GOQ does not and cannot assert that the SDI program has been terminated; instead, Magcorp states, the GOQ only argues that the grant has been terminated (see id. at 13). Magcorp maintains that neither NHCI nor the GOQ has offered the Department any basis for departing from its normal policy on allocated subsides (see id. at 15). Therefore, Magcorp concludes that the undisputed fact that the benefit stream of the allocated SDI subsidy will expire in the year 2004 demonstrates that there will continue to be countervailable benefits after the completion of these reviews. Magcorp also rebuts the Department's finding in the sixth (1997) administrative review that the Exemption from Payment of Water Bills subsidy program had been terminated, arguing that the Department's determination on this issue is inconsistent with the preliminary results issued by the Department. In fact, Magcorp maintains that exhaustion of a credit is not evidence of an official act to modify or terminate a program and, therefore, the Department should find in these reviews that the program continues to exist and is likely to confer countervailable benefits should the orders be revoked (see id. at 17). NHCI rebuts Magcorp's statement that it is not aware of any information to the effect that the Exemption of Payment of Water Bills program had been terminated. NHCI points out that the Department determined in the sixth administrative review that the program had in fact been terminated with no residual benefit. NHCI also rebuts Magcorp's claim that the Preferential Electric Rates program has not been terminated. NHCI argues that the amended contract between Hydro-Quebec and NHCI eliminated any countervailable subsidy and, thus, the program was created and terminated by administrative action (see September 13, 1999, rebuttal of NHCI at 4). NHCI also adds that it is clear that the Department carefully considered the provisions of the amended electric power contract, including the Risk and Profit Sharing provisions, and made its final determination that the amended contract did not confer a countervailable benefit (see id. at 5). NHCI also rebuts Magcorp's assertion that the SDI grants continue to confer countervailable benefits. NHCI maintains that it received the full amount of funds authorized and is not eligible for additional funds under this authorization. Moreover, NHCI asserts that it has not received additional funding from SDI or its successor, I-Q, since the 1991 disbursement and contents that this non-use, in addition to the fact that the Department has already found the original subsidy to constitute a one-time, non-recurring authorization of funds, indicates that the subsidy is not likely to continue or recur (see id. at 6). Furthermore, NHCI rebuts Magcorp's assertion that Magnola should be subject to these reviews. NHCI maintains that Magcorp has provided no evidence that Magnola is currently in commercial production or has sold the subject merchandise in the United States, and in absence of such evidence Magnola cannot be considered an exporter or producer subject to these sunset reviews (see id. at 6-7). The GOQ rebuts Magcorp's argument that the Article 7 SDI program continues to exist. The GOQ maintains that the Department did not find the program to be countervailable, but instead found only that the particular grant provided to NHCI under the authority of Article 7 was disproportionate to others provided in the same period. Therefore, argues the GOQ, where the original subsidy finding was based on such a disproportionality determination rather than a finding that the program itself was countervailable, the Department cannot make a sunset finding that the subsidy action is likely to continue or recur on the simple basis that the program remains alive (see September 13, 1999, rebuttal of the GOQ at 3-4). In addition, the GOQ argues that in cases like this one, where the program itself has not been found countervailable and where no additional use of the program has occurred, the Department should readily find that the "long track record" language of the Sunset Policy Bulletin and the SAA is satisfied (see id. at 4). In addition, the GOQ asserts that the benefits under the SDI program are the result of the Department's amortization approach and are not the equivalent of continued subsidization (see id. at 4). Moreover, the GOQ rebuts Magcorp's reference to the NHCI contract for preferential electric rates as a "program," asserting that in the original investigation, the Department investigated a single contract between NHCI and Hydro-Quebec and the Department never made any finding that the Hydro-Quebec rates to industrial users were a countervailable subsidy program. The GOQ further maintains that the contract was later amended to eliminate the discount provided to NHCI, and the Department found, in the changed circumstances review, that no subsidization is occurring with respect to the electric rates charged to NHCI (see id. at 5-7). Additionally, the GOQ asserts that Risk and Profit Sharing agreement between Hydro-Quebec and NHCI was also found by the Department in the changed circumstances review to not confer a countervailable subsidy (see id. at 7). Moreover, the GOQ also maintains that to the extent that the Exemption of Payment of Water Bills could be considered a program, the Department determined that the program expired in June 1997 (see id. at 8). The GOQ also asserts that there is nothing to suggest that NHCI would attempt to renegotiate new favorable water rates since the purpose of the original water concession has been served and the concession has expired (see id. at 8-9). Furthermore, the GOQ also argues that good cause does not exist for consideration of allegations concerning Magnola, which is neither a producer nor an exporter of the subject merchandise at this time, in these sunset reviews. The GOQ argues that the Department's regulations do not require nor permit it to conduct a full investigation into a potential new shipper as part of a sunset review. In addition, argues the GOQ, the allegations concerning Magnola concentrate on alleged subsidies which have never been investigated by the Department (see id. at 10). Department's Determination Section 752(b) of the Act provides that, in making its determination, the Department shall consider the net countervailable subsidy determined in the investigation and subsequent reviews, and whether any change in the program which gave rise to the net countervailable subsidy has occurred that is likely to affect that net countervailable subsidy. In these cases, the Department ruled that the Exemption from Payment of Water Bills has been terminated with no residual benefits(8) and the Department also determined, in the changed circumstances review, that the electricity contract between Hydro-Quebec and NHCI does not provide a countervailable subsidy.(9) Additionally, the Department determined in the original investigation that the funds provided by the GOQ under the Federal Funding for a Feasibility Study program were not countervailable.(10) The only remaining program which confers a countervailable benefit is the Article 7 SDI grants. The Department disagrees with NHCI and the GOQ that the countervailable benefit from the SDI grant will not continue if the orders are revoked. As we noted in the Sunset Policy Bulletin, the SAA at 889 provides that with respect to subsidies for which benefits are allocated over time, the Department will consider whether the fully allocated benefit stream is likely to continue after the end of the review, without regard to whether the program that gave rise to the long-term benefit continues to exist. Further, we stated that we normally will determine that a countervailable subsidy will continue to exist when the benefit stream, as defined by the Department, will continue beyond the end of the sunset review (see section III.A.4 of the Sunset Policy Bulletin). Even if NHCI's and the GOQ's assertions that the grant was a one- time subsidy are true, the fact remains that based on amortization, NHCI will continue to receive benefits until the year 2004, well after these sunset reviews are completed. Therefore, consistent with the SAA and the Sunset Policy Bulletin, we preliminarily determine that a countervailable subsidy is likely to continue or recur if these orders were revoked. We agree with NHCI and the GOQ that consideration of Magnola and potential subsidies to Magnola in the course of these sunset reviews is not appropriate. Magnola is neither a producer nor exporter of the subject merchandise and, therefore, is not an interested party as defined in section 771(9) of the Act; nor is Magnola subject to this order. Net Countervailable Subsidy Interested Parties' Comments In its substantive response, Magcorp maintains that although the Department can adjust the net countervailable subsidy rate from the original investigation, where an administrative review of the order has been conducted and the Department found that a program was terminated with no residual benefits and no likelihood of reinstatement, there is no legal or factual support for such a modification (see September 1, 1999, substantive response of Magcorp at 22). Indeed, Magcorp argues that the post-investigation modification of the electric power contract between Hydro-Quebec and NHCI was a company- specific renunciation of subsidy benefits that cannot be considered for the purposes of a sunset review (see id. at 23). Magcorp therefore concludes that the net countervailable subsidy rate should include the Preferential Electric Rates subsidy rate from the original investigation. In addition, Magcorp argues that there is good cause to consider other programs which it claims are currently being used by Magnola: the equity infusions made by the Societe Generale de Financement du Quebec ("SGF") and the Workforce Development and Training grants made by the Quebec Government ("Emploi-Quebec"). Magcorp argues that good cause exists for considering these newly-alleged programs because information regarding subsidies being conferred on Magnola was not available during the most recent administrative review (see id. at 31-32). Magcorp also maintains that neither SGF nor Emploi-Quebec has been investigated in other investigations or reviews conducted by the Department (see id. at 25). Magcorp, quoting the Sunset Policy Bulletin, states that the Department will consider new subsidy allegations in the context of a sunset review where (1) information on such a program was not reasonably available to domestic interested parties during the most recently completed administrative review; and (2) the alleged countervailable subsidy program came into existence after that administrative review. Magcorp maintains that both of these criteria apply in these instant reviews (see id. at 33). In conclusion, Magcorp argues that the net countervailable subsidy rate likely to prevail if the orders were to be revoked would be 21.61 percent ad valorem (see id. at 37). NHCI, in its substantive response, states that if the Department declines to revoke the orders, it should refer to the Commission a net subsidy rate of 1.22 percent ad valorem for the year 2000, based on the calculation methodology already established for calculating amortized benefits under the SDI program, since the only remaining subsidy allegedly benefitting NHCI is the one-time grant received in 1990 and 1991 under the SDI program (see September 1, 1999, substantive response of NHCI at 7-9). NHCI states that prior Department practice and the Sunset Policy Bulletin provide no guidance as to the subsidy rate to forward to the Commission for amortized subsidies. However, NHCI argues that the rate calculated in the original investigation is not appropriate because the Department has already established the amortized subsidy rate for the year 2000 and for each year until 2004, when the amortization expires. NHCI also argues that if the Department does not forward the 1.22 percent subsidy rate, then it should forward to the Commission the rate of 1.84 percent calculated in the sixth (1997) administrative review since it is the only calculated rate which reflects the termination of programs, the results of the changed circumstances review, and the amortization of the SDI subsidy through the year 1997 (see id. at 11-12). The GOQ argues that if the Department continues the orders on the basis that continuation of the orders is necessary to capture the unallocated benefits resulting from the countervailable SDI grant to NHCI, it follows that the Department cannot refer a rate that represents anything other than the unallocated portion of that specific grant, and, therefore, the rate determined in the most recent administrative review is the most appropriate rate to forward to the Commission (see September 1, 1999, substantive response of the GOQ at 8). The GOQ also argues that given the unique nature of the grant and the fact the NHCI is the only recipient of the grant and the only producer of the subject merchandise, imposition of an "all others" rate would exaggerate the level of injury that would be caused by the expiry of the orders. Thus, the GOQ argues that an adjustment to the "all others" rate is necessary to account for various changes that have occurred since the original investigation and recommends a net subsidy rate of 1.21 percent be forwarded to the Commission (see id. at 9). Magcorp rebuts NHCI's and the GOQ's recommendation that the Department forward to the Commission a net subsidy rate adjusted to take into account changes which have taken place since the original investigation. Magcorp argues that the respondents fail to cite any specific exception to the Department's normal policy and the respondents' adjustment approach seems to be premised on the assumption that the discipline of the countervailing duty orders has no impact on the conferral of countervailable subsidies (see September 13, 1999, rebuttal of Magcorp at 19). In conclusion, Magcorp again recommends the use of a net countervailable subsidy rate of 21.61 percent ad valorem likely to prevail in the event of revocation. NHCI and the GOQ argue in their rebuttals that the rate Magcorp proposes to use ignores the declining value of amortized benefits and the Department's prior findings regarding the termination of certain programs. Therefore, NHCI and the GOQ again recommend that the Department use a net subsidy rate of 1.22 percent (see September 13, 1999, rebuttal of NHCI at 7-8 and rebuttal of GOQ at 13-14). Department's Determination As discussed in the Sunset Policy Bulletin, the Department normally will report to the Commission an original subsidy rate as adjusted to take into account program-wide changes. Since the Department has determined that the Exemption of Payment for Water Bills, the Preferential Electric Rates, and the Federal Funding for a Feasibility Study have been terminated or are not countervailable, we have subtracted the benefits arising from these programs from the original net subsidy. The Department agrees with the respondents in their argument that the amount of the amortized benefit for the Article 7 SDI grants should be taken into account when determining the net subsidy. However, we disagree that the subsidy rate of 1.22 percent, based on the calculation for the year 2000, as recommended by NHCI and the GOQ, should be used. The rate of 1.84 percent is the most recently calculated rate available to the Department, from the final results of the sixth (1997) administrative review. Therefore, given that the only remaining program is the Article 7 SDI grants, the Department preliminarily determines the net subsidy to NHCI of the subject merchandise from Canada if the orders were revoked is 1.84 percent ad valorem. The "all others" rate continues to be 4.48 percent ad valorem. Timminco is excluded from the orders. Nature of the Subsidy In the Sunset Policy Bulletin, the Department stated that, consistent with section 752(a)(6) of the Act, the Department will provide information to the Commission concerning the nature of the subsidy and whether the subsidy is a subsidy described in Article 3 or Article 6.1 of the Subsidies Agreement. Neither Magcorp nor the respondents specifically mentioned the nature of the subsidy in their responses. Given that receipt of benefits under the Article 7 SDI program is not contingent upon export, it does not fall within the definition of an export subsidy under Article 3.1(a) of the Subsidies Agreement. The Article 7 SDI grants may be a subsidy described in Article 6, if the net countervailable subsidy exceeds 5 percent, as measured in accordance with Annex IV of the Subsidies Agreement. The Department, however, has no information with which to make such a calculation, nor do we believe it appropriate to attempt such a calculation in the course of a sunset review.(11) Rather, we are providing the Commission the following program description. Article 7 ("SDI") Grants from the Quebec Industrial Development Corporation Acting on special mandates from the GOQ, the SDI provides assistance under Article 7 in the form of loans, loan guarantees, grants, assumptions of costs on loans, and equity investments. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the preliminary results of review in the Federal Register. AGREE____ DISAGREE____ Robert S. LaRussa Assistant Secretary for Import Administration (Date) 1. See Final Affirmative Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 30946 (July 13, 1992). 2. See Final Affirmative Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 30946 (July 13, 1992). 3. See Countervailing Duty Orders: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 39392 (August 31, 1992). 4. See Final Results of Changed Circumstances Administrative Reviews: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 54047 (November 16, 1992); Pure and Alloy Magnesium from Canada: Final Results of the First (1992) Countervailing Duty Administrative Reviews, 62 FR 13857 (March 24, 1997); Pure and Alloy Magnesium from Canada: Final Results of the Third (1994) Countervailing Duty Administrative Reviews, 62 FR 18749 (April 17, 1997); Pure and Alloy Magnesium from Canada: Final Results of the Second (1993) Countervailing Duty Administrative Reviews, 62 FR 48607 (September 16, 1997); Pure and Alloy Magnesium from Canada: Final Results of the Fourth (1995) Countervailing Duty Administrative Reviews, 62 FR 48812 (September 17, 1997); Pure and Alloy Magnesium from Canada: Final Results of the Fifth (1996) Countervailing Duty Administrative Reviews, 63 FR 45045 (August 24, 1998); Pure and Alloy Magnesium from Canada: Final Results of Countervailing Duty Administrative Reviews, 64 FR 48805 (September 8, 1999). 5. See Memorandum to Jeffrey A. May, RE: Sunset Reviews of Alloy Magnesium and Pure Magnesium from Canada: Adequacy of Respondent Interested Party Response to the Notice of Initiation, September 21, 1999. 6. On September 3, 1999, the Department received and granted a request from Magcorp for a five working-day extension of the deadline for filing rebuttal comments in this sunset review. This extension was granted for all participants eligible to file rebuttal comments in this review. The deadline for filing rebuttals to the substantive comments therefore became September 13, 1999. 7. See Extension of Time Limit for Preliminary Results of Full Five-Year Reviews, 64 FR 66879 (November 30, 1999). 8. See Pure Magnesium and Alloy Magnesium from Canada: Final Results of Countervailing Duty Administrative Reviews, 64 FR 48805 (September 8, 1999). 9. See Final Results of Changed Circumstances Administrative Reviews: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 54047 (November 16, 1992). 10. See Final Affirmative Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR 30946 (July 13, 1992). 11. Moreover, we note that as of January 1, 2000, Article 6.1 has ceased to apply (see Article 31 of the Subsidies Agreement).