65 FR 54498, September 8, 2000
C-122-815
Administrative Reviews
POR: 1/1/98 - 12/31/98
Public Document
AOH, Group I, Off. 1, x 3798
MEMORANDUM
DATE: September 1, 2000
TO: Joseph A. Spetrini
Acting Assistant Secretary
for Import Administration
FROM: Richard W. Moreland
Deputy Assistant Secretary
Group I, Import Administration
SUBJECT: Issues and Decision Memorandum: Final Results of the 1998
Countervailing Duty Administrative Reviews of Pure Magnesium and Alloy
Magnesium from Canada
Summary
We have analyzed the case and rebuttal briefs submitted by the interested
parties in the administrative reviews of the countervailing duty orders on
pure magnesium and alloy magnesium from Canada. The "Methodology and
Background Information" and "Analysis of Programs" sections below describe
the decisions made in these reviews. Also below is the "Analysis of
Comments" section which contains the Department's response to an issue
raised in the case and rebuttal briefs. We recommend that you approve the
positions we have developed in this memorandum.
Methodology and Background Information
Subsidies Valuation Information
Allocation Period
In the preliminary results of these administrative reviews,(1) the
Department calculated the benefit from a non-recurring grant received by
the only respondent in these reviews, Norsk Hydro Canada, Inc. ("NHCI").
This grant was determined to be countervailable in the investigations and
we have consistently allocated the benefits over the average useful life
("AUL") of renewable physical assets in the magnesium industry, as
recorded in the Internal Revenue Service's 1977 Class Life Asset
Depreciation Range System ("the IRS tables").
In these administrative reviews, we are applying the 1998 countervailing
duty regulations, which are effective for the first time in this
proceeding. Pursuant to section 351.524(d)(2) of these regulations, the
Department will use the AUL in the IRS tables as the allocation period
unless a party can show that the IRS tables do not reasonably reflect the
company-specific AUL or the country-wide AUL for the industry. If a party
can show that either of these time periods differs from the AUL in the IRS
tables by one year or more, the Department will use the company-specific
or country-wide AUL for the industry as the allocation period, subject to
the conditions described in section 351.524(d)(2)(iii).
In these reviews, no party has claimed that the AUL listed in the IRS
tables does not reasonably reflect the AUL of the renewable physical
assets of the firm or industry under review. Therefore, we have continued
to allocate NHCI's non-recurring grant over 14 years, which is the AUL for
the magnesium industry in the IRS tables.
B. Discount Rates
As in the investigations and previous administrative reviews of this
case, we have used the company's cost of long-term, fixed-rate debt in the
year in which the non-recurring grant was approved as the discount rate
for purposes of calculating the benefit pertaining to the period of review
("POR"). No new information has been presented in these reviews and
neither the petitioner nor the respondent have argued against the use of
this discount rate. We have, therefore, not made any changes to the
discount rate.
Analysis of Programs
1. Program Conferring Subsidies
Article 7 grant from the Québec Industrial Development Corporation ("SDI")
As noted above, in the Preliminary Results we found that this program
conferred a countervailable subsidy on the subject merchandise. No new
information, evidence of changed circumstances, or comments from
interested parties were presented in these reviews to warrant any
reconsideration of this finding. Accordingly, the net subsidy for this
program (1.38 percent ad valorem) remains unchanged from the Preliminary
Results.
2. Programs Determined To Be Not Used
In the Preliminary Results, we found that NHCI did not use the following
programs during the POR. No new information, evidence of changed
circumstances, or comments from interested parties were presented in these
reviews to warrant any reconsideration of these findings. Accordingly, we
determine that these programs did not confer countervailable benefits upon
NHCI during the POR.
St. Lawrence River Environment Technology Development Program
Program for Export Market Development
The Export Development Corporation
Canada-Québec Subsidiary Agreement on the Economic Development of the
Regions of Québec
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
Transportation Research and Development Assistance Program
3. Program From Which NHCI No Longer Derives A Countervailable Benefit
A. Exemption from Payment of Water Bills
In the last (1997) administrative reviews, the Department found that the
countervailable benefit from this program ceased during the POR. See
"Analysis of Comments" section below.
Analysis of Comments
Comment 1: Description of a program as "terminated"
The petitioner argues that the Department incorrectly stated in the
Preliminary Results that the water bill exemption program has been
"terminated." The petitioner explains that this statement is based on the
Department's finding in the 1997 administrative reviews that NHCI had
exhausted its water credit. According to the petitioner, exhaustion of a
credit is not evidence of an official act to terminate a program. The
petitioner requests that the Department remove all references to "program
termination" pending affirmative information that the water bill exemption
program has indeed been terminated.
In their rebuttal briefs, NHCI and the Government of Québec ("GOQ") point
out that the Department referred to the water bill exemption program as
"terminated" in both the preliminary and final results of the 1997
administrative reviews without any objections from the petitioner.
Moreover, they argue, the petitioner has not presented any new factual
information that would justify a reexamination of the program. On this
basis, NHCI and the GOQ urge the Department to deny the petitioner's
request.
The GOQ further argues that the petitioner's use of the word "program" is
misleading in this instance. The GOQ maintains that there never was a
"program" and that the exemption from water bill payments was a one-time
concession provided only to NHCI in a company-specific contract. The GOQ
argues that completion of the water credit under this contract is,
therefore, the type of evidence the Department should consider in
determining whether the benefits have been terminated.
Department's Position: NHCI was previously exempt from paying its water
bills until June 1997 when the company reached a certain credit level for
water consumption. In the investigations and prior administrative reviews,
we have countervailed this as a recurring grant. However, in the 1997
administrative reviews, we determined that NHCI had exhausted its credit
and had started to pay its water bills. We also found that no residual
benefits were being provided or received and that no substitute program
had been implemented. See Pure Magnesium and Alloy Magnesium From Canada:
Preliminary Results of Countervailing Duty Administrative Reviews, 64 FR
24585 (May 7, 1999); Pure Magnesium and Alloy Magnesium from Canada: Final
Results of Countervailing Duty Administrative Reviews, 64 FR 48805
(September 8, 1999); and Pure Magnesium and Alloy Magnesium from Canada;
Final Results of Full Sunset Reviews of Countervailing Duty Orders, 65 FR
41444, 41445 (July 5, 2000). In those reviews, as in the current reviews,
we have not received any new information or comments which would lead us
to change this finding. We have, therefore, described the water program as
a program from which NHCI no longer derives a countervailable benefit (see
section II.3. above).
Recommendation:
Based on our analysis of the comments received, we recommend adopting the
above position which does not result in any changes in the subsidy
calculations. If this recommendation is accepted, we will publish the
final results of these reviews and the final net subsidy rate of 1.38
percent ad valorem for NHCI in the Federal Register.
________ ________
Agree Disagree
_____________________
Joseph A. Spetrini
Acting Assistant Secretary
for Import Administration
___________________
Date
________________________________________________________________________
footnote:
1. See Pure Magnesium and Alloy Magnesium From Canada: Preliminary
Results of Countervailing Duty Administrative Reviews, 65 FR 25910 (May 4,
2000) ("Preliminary Results")