[Federal Register: August 17, 2001 (Volume 66, Number 160)]
[Notices]
[Page 43186-43216]
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DEPARTMENT OF COMMERCE
International Trade Administration
(C-122-839)
Notice of Preliminary Affirmative Countervailing Duty
Determination, Preliminary Affirmative Critical Circumstances
Determination, and Alignment of Final Countervailing Duty Determination
With Final Antidumping Duty Determination: Certain Softwood Lumber
Products From Canada
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary affirmative countervailing duty
determination and preliminary affirmative critical circumstances
determination.
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SUMMARY: Preliminary Determination: The Department of Commerce (the
Department) preliminarily determines that countervailable subsidies are
being provided to producers and exporters of certain softwood lumber
products (subject merchandise) from Canada. For information on the
estimated countervailing duty rate, please see the ``Suspension of
Liquidation'' section of this notice. For information on critical
circumstances, see the ``Critical Circumstances'' section of this
notice.
EFFECTIVE DATE: August 17, 2001.
FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds at (202) 482-6071 or
Stephanie Moore (202) 482-3692, Office of AD/CVD Enforcement VI, Group
II, Import Administration, International Trade Administration, U.S.
Department of Commerce, Room 4012, 14th Street and Constitution Avenue,
NW., Washington, DC 20230.
SUPPLEMENTARY INFORMATION:
Petitioners
The petition in this investigation was filed by the Coalition for
Fair Lumber Imports Executive Committee, the United Brotherhood of
Carpenters and Joiners, and the Paper, Allied-Industrial, Chemical and
Energy Workers International Union. The Coalition for Fair Lumber
Imports Executive Committee is comprised of Hood Industries,
International Paper Company, Moose River Lumber Company, New South
Incorporated, Plum Creek Timber Company, Polatch Corporation, Seneca
Sawmill Company, Shearer Lumber Products, Shuqualak Lumber Company,
Sierra Pacific Industries, Swift Lumber Incorporated, Temple-Inland
Forest Products, and Tolleson Lumber Company, Incorporated. On April
20, 2001, the petition was amended to include the following four
companies individually as petitioners: Moose River Lumber Co., Shearer
Lumber Products, Shuqualak Lumber Co. and Tolleson Lumber Co., Inc.
These parties are collectively referred to as the petitioners.
Case History
Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigation: Certain Softwood Lumber Products from Canada, 66 FR
21332 (April 30, 2001) (Initiation Notice)), the following events have
occurred: On May 1, 2001, we issued countervailing duty questionnaires
to the Government of Canada (GOC).\1\ On June 28, 2001, we received
questionnaire responses from the GOC and from the Provincial
Governments of Alberta, British Columbia, Manitoba, New Brunswick,
Newfoundland, Nova Scotia, Ontario, Prince Edward Island, Quebec and
Saskatchewan. We also received responses from the Northwest Territories
and the Yukon Territory. On July 23, 2001, we issued supplemental
questionnaires to the GOC and to the provincial governments. On August
6, 2001, we received supplemental
[[Page 43187]]
questionnaire responses from the GOC and the provincial governments.
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\1\ Upon the issuance of the questionnaire, we informed the
Government of Canada that it was the government's responsibility to
forward the questionnaires to each of the provinces and territories.
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On May 10, 2001, the Natural Resources Defense Council, the
Defenders of Wildlife, the Northwest Ecosystem Alliance, along with the
Grand Council of the Cree and the Interior Alliance, submitted new
subsidy allegations. Supplementary information on these allegations was
filed on June 1, 2001, and on June 15, 2001, the Nishnawbe Aski Nation
submitted an additional subsidy allegation.\2\ Based upon the
information on the record, we have decided not to initiate
investigations of these allegations. See August 9, 2001, Memorandum to
Melissa G. Skinner from Team on New Subsidy Allegations, which is on
public file in the Central Records Unit (CRU), Room B-099, of the
Department of Commerce.
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\2\ None of these parties qualify as an interested party
pursuant to section 771(9) of the Act. However, the Natural
Resources Defense Council, Defenders of Wildlife, and the Northwest
Ecosystem Alliance can be considered consumer organizations under
section 777(h) of the Act. The Grand Council of the Cree, the
Interior Alliance, and the Nishnawbe Aski Nation do not qualify as
consumer organizations under section 777(h) of the Act.
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On June 5, 2001, petitioners also submitted additional subsidy
allegations. Based upon the information on the record, we have decided
to initiate investigations on only certain of the new subsidy
allegations made by petitioners. See id.
On June 5, 2001, we issued a partial extension of the due date for
this preliminary determination from June 27, 2001 to July 27, 2001. See
Certain Softwood Lumber Products From Canada: Extension of Time Limit
for Preliminary Determination in Countervailing Duty Investigation,
(Extension Notice) 66 FR 31617 (June 12, 2001).
On July 23, 2001, we extended the due date of this preliminary
determination by an additional 13 days to August 9, 2001. See Certain
Softwood Lumber Products From Canada: Extension of Time Limit for
Preliminary Determination in Countervailing Duty Investigation, 66 FR
39146 (July 27, 2001).
On July 27, 2001, we amended our Initiation Notice, to exempt
certain softwood lumber products from the Provinces of New Brunswick,
Nova Scotia, Prince Edward Island, and Newfoundland (the Maritime
Provinces) from this investigation. This exemption does not apply to
softwood lumber products produced in the Maritime Provinces from Crown
timber harvested in any other Province. See Amendment to the Notice of
Initiation of Countervailing Duty Investigation: Certain Softwood
Lumber Products from Canada, 66 FR 40228 (August 2, 2001).
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the CVD regulations are to the regulations
codified at 19 CFR part 351 (2001).
Scope of the Investigation
The products covered by this investigation are softwood lumber,
flooring and siding (softwood lumber products). Softwood lumber
products include all products classified under headings 4407.1000,
4409.1010, 4409.1090, and 4409.1020, respectively, of the Harmonized
Tariff Schedule of the United States (HTSUS), and any softwood lumber,
flooring and siding described below. These softwood lumber products
include:
(1) Coniferous wood, sawn or chipped lengthwise, sliced or peeled,
whether or not planed, sanded or finger-jointed, of a thickness
exceeding six millimeters;
(2) Coniferous wood siding (including strips and friezes for
parquet flooring, not assembled) continuously shaped (tongued, grooved,
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like)
along any of its edges or faces, whether or not planed, sanded or
finger-jointed;
(3) Other coniferous wood (including strips and friezes for parquet
flooring, not assembled) continuously shaped (tongued, grooved,
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like)
along any of its edges or faces (other than wood mouldings and wood
dowel rods) whether or not planed, sanded or finger-jointed; and
(4) Coniferous wood flooring (including strips and friezes for
parquet flooring, not assembled) continuously shaped (tongued, grooved,
rabbeted, chamfered, V-jointed, beaded, molded, rounded or the like)
along any of its edges or faces, whether or not planed, sanded or
finger-jointed.
Although the HTSUS subheadings are provided for convenience and
U.S. Customs purposes, the written description of the merchandise under
investigation is dispositive.
Scope Issues
In the Initiation Notice, we invited all interested parties to
raise issues and comment regarding the product coverage under the scope
of this investigation. We received numerous comments, including scope
clarification requests, scope exclusion requests, and requests for
determinations of separate classes or kinds. The requests covered
approximately 50 products, ranging from species, like Western red cedar
and Douglas fir, to fencing products, bed frame components, pallet
stock, and joinery and carpentry products.
In our review of the comments, we found that certain products,
raised by several respondents, are acknowledged by petitioners as being
outside the scope of the investigation. Those products fall into the
following two groups:
A. Products made of lumber, but in which the lumber has been
processed into another product, and are classified as such in the
HTSUS:
1. Trusses;
2. I-Joist beams;
3. Pallets;
4. Fence pickets;
5. Bed frames;
6. Garage doors;
7. Large edge-glued lumber panels, used in furniture or door
manufacturing, classified under HTSUS item 4421;
8. Properly classified complete door frames;
9. Properly classified complete window frames;
10. Properly classified furniture.
B. Products that are outside the scope, but only if they meet
certain requirements:
1. Truss kits: If they constitute a full package of the exact
number of pieces necessary to create a truss of a specified length and
height. The kit must contain all of the pieces of the truss, cut with
the appropriate angles, as well as all the necessary metal and wood
scabs, so that the only thing that is needed is actual assembly. Such
kits will also be packaged together and conform to a particular design
or plan
2. Unassembled pallet kits: If they include the exact number of
pieces for a complete pallet, bundled together. A kit will not include
any pieces over 48" in length, the decking will be 1" or less in
nominal thickness, and the three pieces of dimension lumber used for
runner or ``stringers'' (which are 2" in nominal thickness) must
already have the large notches which are used by a fork lift to lift a
pallet (each notch is 1\1/2\" deep by 8" wide).
3. ``Stringers'' (pallet components used for runners) if they are
no longer than 48" and have precut notches for the fork lift, each
notch is 1\1/2\" deep and 8" wide.
4. Bed frame kits: If all the pieces required to make the bed frame
are packaged together and no further processing is required, with none
of the
[[Page 43188]]
components exceeding 1" in nominal thickness or 83" in length.
5. Radius-cut bed frame components, not exceeding 1" in nominal
thickness or 83" in length.
6. Dog-eared fence pickets, no more than 1" thick (nor more than 4"
wide), 6 feet or less in length. The dog-ear cut measures at least \3/
4\".
We have preliminarily determined that the products listed in groups
(A) and (B) above are outside the scope of this investigation. With
regard to all other products, we have determined that, because of the
large number of requests, the even larger number of products, and, in
some instances, deficiencies in the information currently on the
record, it is not practicable for the Department to complete the
analysis of each request by the issuance of the notice of preliminary
determination. Therefore, we have requested additional information.
(See August 9, 2001, Memorandum to Bernard T. Carreau from Maria MacKay
on Requests for Scope Exclusions in the Antidumping and Countervailing
Duty Investigations on Softwood Lumber from Canada, which is on public
file in the CRU.)
Exclusions
In our notice of initiation, we asked for comments on a system to
process the expected large number of exclusion requests. This request
had the purpose of ensuring that the Department had the opportunity to
process the highest number of requests, but did not in any way imply
that companies could not submit a request for exclusion in accordance
with the CVD Regulations, at any time prior to the preliminary
determination.
We received comments from respondents and petitioners. The GOC
proposed a system of streamlined procedures. Under this system,
applications for exclusion would be pre-approved by the GOC and
submitted to the Department grouped into categories with identical
relevant facts, accompanied by a set of government certifications. The
Department could then consider the criteria and the process for
categorizing the companies to determine whether the group as a whole
should be excluded. On the other side, petitioners argued that the
Department does not have the authority under the URAA to grant
exclusions in an aggregate case. The petitioners also emphasized that,
should the Department decide to entertain company exclusion requests,
(1) the required certifications must categorically indicate freedom
from subsidization of the requester, its affiliates, and, if the
requester is not a lumber producer, its lumber suppliers; and (2) the
Department must have verified that the excluded company's output is
free from subsidization. In addition, petitioners argued that the
production/sales of any excluded company must be removed from the
denominator before calculating a country-wide rate. Respondents argued
to the contrary that the statute requires the country-wide rate to be
based on ``industry-wide'' data.
On July 27, 2001, the Department amended its initiation and
exempted the Maritimes from investigation, a decision which affected
hundreds of Canadian lumber producers. See 66 FR 40228, August 2, 2001.
After exempting the Maritime Provinces from the investigation, the
Department notified the GOC that its proposal with respect to non-
Maritime Provinces would somewhat facilitate the task of reviewing
numerous company-specific exclusion requests, but requested that the
applications include all certifications required in section 351.204 of
the CVD Regulations. The deadline for the submission of the requests
for consideration in the final determination is August 31, 2001;
however, the Department also provided a deadline for submission of
applications which the Department would make every effort to consider
before the issuance of its preliminary determination (see August 1,
2001, Memorandum to Bernard T. Carreau from Melissa G. Skinner on
Requests for Exclusion of Individual Companies from the Countervailing
Duty Investigation on Softwood Lumber from Canada and Letter from
Bernard T. Carreau to Paul Bailey, Embassy of Canada, re:
Countervailing Duty Investigation: Certain Softwood Lumber from Canada,
which are on public file in the CRU.)
On August 8, 2001, the GOC submitted 95 company-specific
applications for exclusion. The applications are grouped under six
headings: two cover 78 independent re-manufacturers, three cover 13
lumber producers, purchasing logs at arm's length, from private lands,
or from U.S. suppliers, and the last group covers 4 companies asking
for exclusion based on receipt of de minimis subsidies.
While the original intent of the GOC was to make it possible for
the Department to review the criteria on a group-wide basis, rather
than by individual applications, we found that this approach would not
allow for a thorough analysis of this submission primarily for two
reasons: (1) Within the groups there were underlying issues requiring
specific information that was not provided (for instance, a number of
companies within all groups indicated that they had affiliates, and yet
certifications were not provided in most instances for those
companies); and (2) we found inaccuracies in the documentation
submitted (for instance, company certifications that did not cover the
entire period of investigation and government certifications not
covering all the programs under investigation). Therefore, the analysis
required an examination of each individual request.
Because of the time constraints, we focused on the groups that were
the most manageable. We looked at the applications of the lumber mills
that purchased logs in arm's-length transactions, from private lands,
and that used U.S. origin logs only. We found only one company,
Frontier Lumber, that meets the requirements for exclusion. For all
other applications, either the requester had affiliated companies for
which proper certification was not provided, or the requester did not
specifically indicate whether or not it had operated as a non-producing
exporter during the period of investigation, or the company
certification was incomplete. A complete analysis of the requests is
provided in the August 9, 2001 Memorandum to Bernard T. Carreau from
Maria MacKay and Gayle Longest on Company Exclusion Requests in the
Countervailing Duty Investigation on Softwood Lumber from Canada, which
is on public file in the CRU.
Those companies included in the August 8, 2001, request that were
not preliminarily excluded from the investigation as a result of
today's preliminary determination, as well as any additional companies
that will have submitted proper exclusion requests before the August
31, 2001, deadline will be given the opportunity to address
deficiencies in their request to determine whether they should be
excluded in the final determination. We intend to continue working
closely with both the individual requesters and the GOC on this issue
as the investigation proceeds.
Injury Test
Because Canada is a ``Subsidies Agreement country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from Canada materially injure or threaten material
injury to a U.S. industry. On May 23, 2001, the ITC's preliminary
determination finding that there is a reasonable indication that an
industry in the United States is being threatened with material injury
by reason of
[[Page 43189]]
imports from Canada of subject merchandise was published in the Federal
Register. See 66 FR 28541.
Alignment With Final Antidumping Duty Determination
On August 8, 2001, petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in this investigation with the final
determination in the antidumping duty investigation of certain softwood
lumber products from Canada.
Period of Investigation
The period of investigation (POI) for which we are measuring
subsidies is April 1, 2000, through March 31, 2001, which is the most
recently completed fiscal year of the GOC.
Critical Circumstances
The petition contains allegations of critical circumstances, as
defined by section 703(e) of the Act, with respect to imports of
certain softwood lumber products from Canada. See Petitions for
Antidumping and Countervailing Duties: Certain Softwood Lumber Products
from Canada, Case Nos. A-122-838 & C-122-839 at Vol. IA I-50 to I-57
(April 2, 2001).\3\ On June 28, 2001, July 17, 2001, and August 7,
2001, the petitioners provided the Department with additional
submissions supporting those allegations. See Letters from Dewey
Ballantine LLP to the Secretary dated June 28, 2001, July 17, 2001, and
August 7, 2001.
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\3\ For the scope of the products covered by this investigation,
see Initiation Notice 66 FR 21332; Amendment to the Notice of
Initiation of Countervailing Duty Investigation: Certain Softwood
Lumber Products From Canada, 66 FR 40228 (August 2, 2001).
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In a submission dated July 27, 2001, respondents argued that the
statutory prerequisites for the Department to make a critical
circumstances determination are not present. The respondents contend,
among other things, that: (i) There are no subsidies inconsistent with
the Subsidies Agreement; (ii) the alleged Ontario program was
terminated in 1995; (iii) the alleged programs are not specific; (iv)
any benefit that could be calculated for the alleged Quebec programs
would be de minimis; and (v) there has been no surge in imports. See
Letter from Weil Gotshal Manges LLP to the Secretary dated July 27,
2001.\4\
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\4\ On July 26, 2001, West Frazier Mills Ltd. requested that the
Department make a company-specific critical circumstances
determination. As stated the Initiation Notice, we are conducting
this investigation on an aggregate basis in accordance with section
777A(e)(2)(B) of the Act and thus, did not request company specific
information relating to critical circumstances. Our critical
circumstances determination is based upon aggregate data. As it is
not practicable for the Department to investigate every lumber
company in Canada, it is not practicable for the Department to make
company-specific critical circumstance determinations.
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In accordance with 19 CFR 351.206(c)(2)(i), because the petitioners
submitted a critical circumstances allegation more than 20 days before
the scheduled date of the preliminary determination, the Department
must issue a preliminary critical circumstances determination not later
than the date of the preliminary determination.
Section 703(e)(1) of the Act provides that the Department, upon
receipt of a timely allegation of critical circumstances, will
determine whether there is a reasonable basis to believe or suspect
that:
(A) The alleged countervailable subsidy is inconsistent with the
Subsidies Agreement, and
(B) There have been massive imports of the subject merchandise over
a relatively short period.
The purpose of the critical circumstances provisions is to ensure
that massive imports following the filing of a petition do not
``undermine seriously the remedial effect of the countervailing duty
order to be issued * * *'' See section 705(b)(4)(A)(i) of the Act; see
also, Statement of Administrative Action (SAA) at 877 (``Critical
circumstances determinations focus on whether an order's effectiveness
is undermined by increasing shipments prior to the effective date of
the order''). Thus, where critical circumstances exist, to preserve the
remedial effect of the order, the statute provides for the extension of
the provisional measures period to cover imports prior to the
preliminary determination.
The purpose of the Department's preliminary critical circumstances
determination is to preserve the possibility of this retroactive relief
where there is reasonable cause to believe or suspect that such relief
may be warranted by taking the limited step of suspending liquidation
of entries during the period ninety days prior to the preliminary
determination. Section 703(e)(2) of the Act and 19 CFR 351.206(a). The
Department's analysis is limited to the two factors set forth in
section 703(e)(1). For purposes of a final determination whether
retroactive relief is warranted, other factors are considered by the
ITC in its final determination. See section 705(b)(4)(A)(ii) of the
Act.
We note that the focus of the first statutory criterion is the
nature of the alleged countervailable subsidy, i.e., whether the
alleged countervailable subsidy is one that is inconsistent with the
Subsidies Agreement. This investigation includes two programs alleged
to be prohibited export subsidies: (1) The Development Corporations of
the Government of Ontario Export Support Loan; and (2) Export
Assistance from Investissement Quebec (previously Export Assistance
from the Societe de Developpement Industriel du Quebec). See Notice of
Initiation, 66 FR at 21333-34.\5\ As discussed below in the analysis of
the subsidy programs, the Department has preliminarily determined that
Export Assistance from Investissement Quebec is a countervailable
export subsidy. There is no question that export subsidies are
inconsistent with the Agreement. Therefore, this prong of the statute
is satisfied.
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\5\ Although originally listed as two separate programs,
evidence placed on the record indicates that these two programs have
been combined into a single export subsidy program administered
through Investissement Quebec. See GOC Questionnaire Response, SDI/
IQ Narrative at 5 (June 28, 2001).
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Although respondents do not contest that export subsidies are
inconsistent with the Agreement, they argue that an affirmative
preliminary determination of critical circumstances requires that the
benefit from such programs be above de minimis. We note, however, that
section 703(e)(A) refers only to an alleged countervailable subsidy
inconsistent with the Subsidies Agreement. Section 771(5) of the Act
defines a ``countervailable subsidy'' as a financial contribution by
the government that confers a benefit and is specific. The level of the
benefit provided is not part of that definition. Moreover, even if the
benefit to the subject merchandise from a particular subsidy program is
de minimis, that benefit is countervailed if the overall subsidy rate
is above de minimis. Thus, whether a particular program meets the
definition of countervailable subsidy and the level of the benefit
provided are two separate issues, only the first of which must be
addressed in the preliminary determination on critical circumstances.
Therefore, under a plain reading of the statute, a preliminary
determination that an alleged subsidy inconsistent with the Agreement
has provided a de minimis
[[Page 43190]]
benefit to the subject merchandise does not preclude an affirmative
preliminary determination of critical circumstances.
The Department has examined critical circumstances in only two
other preliminary CVD determinations under the current Act.\6\ In both
cases, the overall preliminary determination was negative; therefore,
there was no basis to impose any provisional measures. See Preliminary
Negative Countervailing Duty Determination: Certain Laminated Hardwood
Trailer Flooring From Canada, 61 FR 59079, 59085 (November 20, 1996);
Preliminary Negative Countervailing Duty Determination: Elastic Rubber
from India, 63 FR 67457, 67458 (December 7, 1998).
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\6\ Although the Department initiated critical circumstances
investigations with respect to Venezuela and Thailand in Notice of
Initiation of Countervailing Duty Investigations: Certain Cold-
Rolled Flat-Rolled Carbon Quality Steel Products from Brazil,
Indonesia, Thailand and Venezuela, 64 FR 34204 (June 25, 1999), the
cases were terminated because the ITC found that the subject imports
from those countries were negligible. See Certain Cold-Rolled Steel
Products from Argentina, Brazil, China, Indonesia, Japan, Russia,
Slovakia, South Africa, Taiwan, Turkey, and Venezuela, 64 FR 41458
(July 30, 1999).
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The cases relied upon by respondents pre-date the URAA, which
amended the critical circumstances provisions and included, for the
first time, the definition of a countervailable subsidy discussed
above. The Department believes that the approach taken in the pre-URAA
cases would represent an inappropriate interpretation of the current
statute. To follow the approach taken in that line of cases, we would
have to go beyond the definition of countervailable subsidy and read
into the current preliminary critical circumstances provisions a
requirement that could frustrate the purpose of preserving the
possibility of retroactive relief through the limited step of
suspending liquidation pending the outcome of the full investigation.
In accordance with the statute and regulations, subsequent to the
issuance of our preliminary determination, we will have an opportunity
to verify the information concerning these subsidy programs and the
parties will have an opportunity to present written briefs and have a
public hearing to further examine the issue of critical circumstances.
However, at this preliminary stage, based upon the available
information, the Department has a reasonable basis to believe or
suspect that there are alleged countervailable subsidies inconsistent
with the Subsidies Agreement. Therefore, the first prong of section
703(e)(1) of the Act is satisfied.
In determining whether there are ``massive imports'' over a
``relatively short period,'' pursuant to section 703(e)(1)(B) of the
Act, the Department normally compares the import volume of the subject
merchandise for three months immediately preceding the filing of the
petition (i.e., the base period) with the three months following the
filing of the petition (i.e., the comparison period).
Section 351.206(h)(1) of the CVD regulations provides that, in
determining whether imports of the subject merchandise have been
``massive,'' the Department normally will examine: (i) The volume and
value of the imports; (ii) seasonal trends; and (iii) the share of
domestic consumption accounted for by the imports. As noted above, the
Department's analysis is limited to whether there were massive imports.
Some factors that respondents urge the Department to consider are not
relevant to that inquiry and, therefore, have not been factored into
this analysis. Whether those factors may be relevant to the ITC's final
inquiry is, of course, a matter for the ITC to determine.
In addition, Sec. 351.206(h)(2) of the CVD regulations provides
that an increase in imports of 15 percent or more during the
``relatively short period'' of time may be considered ``massive.''
Section 351.206(i) of the CVD regulations defines ``relatively short
period'' as normally being the period beginning on the date the
proceeding begins (i.e., the date the petition is filed) and ending at
least three months later.
Based upon U.S. Census import data and an examination of the
information on the record of the investigation, we find that there is a
seasonal element that affects imports of lumber from Canada. See
Critical Circumstances Preliminary Determination Memorandum from
Bernard T. Carreau to Faryar Shirzad for a detailed discussion of this
issue. Furthermore, both petitioners and respondents acknowledge that
lumber is a product for which demand is subject to seasonal shifts,
and, therefore, it is appropriate to use a seasonal methodology to
examine whether massive imports occurred with respect to lumber imports
from Canada. Accordingly, to address any distortions caused by seasonal
trade fluctuations in our analysis of import increases, we constructed
and then applied a seasonal adjustment factor. We selected the standard
seasonal adjustment program used by significant statistical agencies,
including the Bureau of Census, the Bureau of Labor Statistics and
Statistics Canada, and calculated a seasonal adjustment factor of 12.00
percent. This factor is based on the six-year time period 1995 through
2000. See Critical Circumstances Preliminary Determination Memorandum,
which is on the public file in the CRU.
As discussed above, on July 27, 2001, the Department amended its
notice of initiation of the CVD investigation to exempt the Maritime
Provinces (New Brunswick, Nova Scotia, Prince Edward Island, and
Newfoundland) from this investigation. We compared the import volume
during the period January through March 2001 (the base period) with the
seasonally adjusted import volume during the period April 2001 through
June 2001 (the comparison period), and found that, relative to the
first quarter, lumber imports from Canada, net of the Maritime
Provinces, increased by 23.34 percent in the comparison period.
Therefore, pursuant to section 703(e) of the Act and
Secs. 351.206(h) and (i) of the CVD Regulations, we preliminarily
determine that there have been massive imports of lumber from Canada
over a relatively short period of time. Therefore, we find that the
second prong of the statute has been satisfied.
As a result of this analysis, we find that both prongs of the
statute regarding critical circumstances have been met. Therefore, we
preliminarily determine that critical circumstances exist.
We will make a final determination concerning critical
circumstances when we make our final determination of countervailable
subsidies.
Subsidies Valuation Information
Aggregation
In the Initiation Notice, we stated that due to the extraordinarily
large number of Canadian producers, we anticipated that we would
conduct this investigation on an aggregate basis consistent with
section 777A(e)(2)(B) of the Act. No one objected. We did receive a
request from Canfor Corporation (Canfor) for a company-specific rate.
Canfor requested a company-specific questionnaire be issued or, in the
alternative, that it be allowed to respond to the questionnaire
provided to the GOC. We did not issue a company-specific questionnaire,
nor did Canfor submit a voluntary response. Thus for the purposes of
this preliminary determination, we have aggregated the subsidy
information on an industry-wide basis. Specifically, we used the
information provided by the GOC and the provincial governments and
calculated one subsidy rate for the Canadian softwood lumber industry
for
[[Page 43191]]
exports of softwood lumber to the United States.
Allocation Period
Under Sec. 351.524(d)(2) of the CVD Regulations, we will presume
the allocation period for non-recurring subsidies to be the average
useful life (AUL) of renewable physical assets for the industry
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class
Life Asset Depreciation Range System, as updated by the Department of
the Treasury. The presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets for the company or industry under
investigation, and the party can establish that the difference between
the company-specific or country-wide AUL for the industry under
investigation is significant.
In this investigation, the Department is considering non-recurring
subsidies. Regarding non-recurring subsidies, we have allocated, where
applicable, all of the non-recurring subsidies provided to the
producers/exporters of subject merchandise over the AUL listed in the
IRS tables for the softwood lumber industry. Therefore, in accordance
with Sec. 351.524(d)(2) of the CVD Regulations, the Department is using
an allocation period of 10 years. No interested party has challenged
the 10 year AUL derived from the IRS tables.
Benchmarks for Loans and Discount Rate
Because this investigation is conducted on an aggregated basis
(except as otherwise discussed below), for those programs requiring a
Canadian dollar-denominated discount rate or the application of a
Canadian dollar-denominated, long-term benchmark interest rate, we used
for our preliminary determination the national-average interest rates
on commercial long-term, Canadian dollar-denominated loans as reported
by the GOC. The information reported by the GOC was for fixed-rate
long-term debt.
Some of the investigated programs provided long-term loans to the
softwood lumber industry with variable interest rates instead of fixed
interest rates. Because we were unable to gather information on
variable interest rates charged on commercial loans in Canada, we have
used as our benchmark for those loans the rate applicable to long-term
fixed interest rate loans for the POI as reported by the GOC.
Recurring and Non-Recurring Benefits
The major subsidy allegations in this investigation are the timber
management systems maintained by the provinces. Petitioners have
alleged that the stumpage fees paid to harvest and cut timber by
softwood lumber producers, which are set by the provincial governments,
confer a countervailable benefit on the production and exportation of
the subject merchandise. This type of subsidy constitutes the provision
of a good or a service under section 771(5)(D)(iii) of the Act. Under
Sec. 351.524(c)(1) of the CVD Regulations, subsidies conferred by the
government provision of a good or service provide recurring benefits.
Therefore, any benefits conferred by the provinces' administered
stumpage programs have been expensed in the year of receipt.
The Department is also investigating a number of other programs
which provide grants to producers and exporters of softwood lumber.
Under Sec. 351.524 of the CVD Regulations, benefits from grants can
either be classified as providing recurring or non-recurring benefits.
Recurring benefits are expensed in the year of receipt, while grants
providing non-recurring benefits are allocated over time corresponding
to the AUL of the industry under investigation. However, under
Sec. 351.524(b) of the CVD Regulations, grants which provide non-
recurring benefits will also be expensed in the year of receipt if the
amount of the grant under the investigated program is less than 0.5
percent of relevant sales during the year in which the grant was
approved (referred to as the 0.5 percent test). Except where
specifically noted in this preliminary determination, the grants
provided under the investigated programs were less than 0.5 percent of
the relevant sales of softwood lumber, and, thus, were expensed in the
year of receipt.
Subsidy Rate Calculation
In this preliminary determination, we are investigating programs
administered both by the GOC as well as by the individual provinces.
For the programs administered by the GOC, we divided the aggregate
benefit conferred by each of the federal programs by the total value of
Canadian softwood lumber sales. For programs administered by the
relevant provinces, we calculated the program subsidy rate by dividing
the aggregate benefit conferred by each specific provincial program by
the total sales of softwood lumber from that province (or total export
sales of softwood lumber if the provincial program was an export
subsidy). We did not, as requested by respondents, calculate province-
specific rates. To calculate the overall subsidy conferred on the
subject merchandise from all investigated countervailable subsidy
programs, we weight-averaged each provincial subsidy program by the
provinces' relative shares of total U.S. exports of the investigated
subject merchandise, which, as explained above, does not include
exports from the Maritime Provinces.
As noted above, one company, Frontier Lumber, qualified for a
company exclusion. Our normal practice would be to deduct that
company's sales from our sales denominator in calculating the Canada-
wide subsidy rate. However, given the size of the company's sales, we
have not made an adjustment because any adjustment would have no effect
on the calculated subsidy rate for any of the investigated programs.
I. Provincial Stumpage Programs Preliminarily Determined To Confer
Subsidies
Petitioners have alleged that the stumpage programs administered by
the provinces of British Columbia, Quebec, Ontario, Alberta, Manitoba,
and Saskatchewan provide Canadian softwood lumber producers with
countervailable benefits.\7\ Petitioners allege that, through the
provincially-administered stumpage systems, the provinces provide
softwood lumber producers with wood fiber for less than adequate
remuneration through the selling of rights to harvest timber on
government-owned (or Crown) forest lands.
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\7\ Petitioners have also alleged that a ban on the export of
logs provides a benefit to softwood lumber producers. However, we
have not addressed this allegation in this determination because any
conceivable benefit provided through a log ban would already be
included in the calculation of the stumpage benefit based upon our
selected market-based benchmark prices for stumpage.
---------------------------------------------------------------------------
Petitioners have also made the same allegation with respect to the
Yukon Territory, Northwest Territories, and timber sold on federal
land. However, we have not examined these stumpage programs in this
determination because the amount of exports from the two Territories
and from federal land is insignificant. Thus, these programs would have
no measurable effect on any subsidy rate calculated for this
investigation. We will revisit this issue for the final determination.
In order to confer a countervailable benefit, a program must be
provided to a specific enterprise or industry or group of enterprises
or industries, it
[[Page 43192]]
must provide a financial contribution, and it must confer a benefit. We
address each criterion below.
Specificity
Subsidies contingent upon export performance or the use of domestic
goods over imported goods are by definition deemed to be specific in
accordance with section 771(5A) of the Act. For other subsidies, in
accordance with section 771(5A)(D)(i) of the Act, if the law enacting
the program expressly limits the subsidy program to an enterprise or
industry, the program is de jure specific. However, when the law
enacting the program does not expressly limit the subsidy program to an
enterprise or industry, then the Department applies the criteria listed
under section 771(5A)(D)(iii) of the Act to determine whether the
program is specific based upon the actual manner in which the program
is used. The examination of specificity under section 771(5A)(D)(iii),
referred to as a de facto specificity analysis, provides for the
following:
Where there are reasons to believe that a subsidy may be
specific as a matter of fact, the subsidy is specific if one or more
of the following factors exists:
(I) The actual recipients of the subsidy, whether considered on
an enterprise or industry basis, are limited in number.
(II) An enterprise or industry is a predominant user of the
subsidy.
(III) An enterprise or industry receives a disproportionately
large amount of the subsidy.
(IV) The manner in which the authority providing the subsidy has
exercised discretion in the decision to grant the subsidy indicates
that an enterprise or industry is favored over others.
The statute states that any reference under section 771(5A)(D) to
an enterprise or industry includes a group of enterprises or
industries. In accordance with Sec. 351.502(a) of the CVD Regulations,
the Department, in analyzing whether a subsidy is de facto specific,
will examine the factors contained in section 771(5A)(D)(iii) of the
Act sequentially. In addition, Sec. 351.502(a) provides that, if a
single factor warrants a finding of specificity, the Department will
not undertake further analysis.
Congress, in the SAA explained how the Department's specificity
analysis should be conducted. See Statement of Administrative Action
accompanying H.R. 5110, H.R. Doc. No. 316, Vol. 1, 103d Congr., 2d
Sess. 911-955 (1994). The SAA states that the specificity test should
be applied ``in light of its original purpose, which is to function as
an initial screening mechanism to winnow out only those subsidies which
truly are broadly available and widely used throughout an economy.''
See SAA at 929. The SAA also provides that, because the weight accorded
to the individual de facto specificity factor is likely to differ from
case to case, clause (iii) of section 771(5A)(D) ``makes clear that the
Department will find de facto specificity if one or more of the factors
exists.'' Id. at 931. With respect to the type of subsidy program at
issue in this investigation, the SAA states that ``where a government
confers a subsidy through the provision of a good or service, the fact
that the use of the subsidy may be limited due to the inherent
characteristics of the good or service in question would be irrelevant
for the purposes of a de facto specificity analysis.'' Id. at 932.
To determine whether the provincial stumpage programs are specific
under the law, we examined the programs based upon the criteria set
forth under section 771(5A)(D)(iii) of the Act. Information on the
programs is contained in the provincial government responses.
A review of the responses from the provincial governments shows
that there are two different types of companies which benefit from the
investigated stumpage programs: (1) Sawmills and (2) pulp and paper
mills.\8\ Therefore, there are two types of users (or beneficiaries) of
the provincial stumpage programs. Almost all of the softwood timber
harvested on Crown land in each of the investigated provinces is
harvested by, or on behalf of, sawmills and pulp mills. In addition,
the substantial majority of harvested timber in each of these provinces
is cut for sawmills producing the subject merchandise.
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\8\ In Lumber III (Final Affirmative Countervailing Duty
Determination: Certain Softwood Lumber Products from Canada, 57 FR
22570; 22580 (May 28, 1992), we referred to the specific class of
stumpage beneficiaries as the pulp and paper products and solid wood
products industries, which was defined as the primary timber
processing group (i.e., sawmills and pulp and paper mills).
---------------------------------------------------------------------------
Because there are only two industries, sawmills and pulp mills,
that use provincial stumpage programs, we preliminarily determine that
the provincial stumpage programs are specific under section
771(5A)(D)(iii)(I) of the Act.
Financial Contribution
In addition to being specific, a countervailable subsidy program
must provide a financial contribution. Section 771(5)(D)(iii) of the
Act states that the provision of a good or service (other than general
infrastructure) by a government constitutes a financial contribution
under the statute. We preliminarily determine that the provision of
stumpage by the provincial governments constitutes the provision of a
good or service under section 771(5)(D)(iii) of the Act. Thus, we
preliminarily determine that the provincial governments have provided a
financial contribution as defined under section 771(5)(D) of the Act to
Canadian softwood lumber producers.
Benefit
After determining that the provincial stumpage programs are
specific under section 771(5A)(D)(iii) of the Act, and that these
programs provide a financial contribution in the form of the provision
of a good or service under section 771(5)(D)(iii) of the Act, we must
then determine whether this specific financial contribution provides a
benefit.
Under section 771(5)(E)(iv) of the Act, a benefit is conferred by a
government when the government provides the good or service for less
than adequate remuneration. Section 771(5)(E) further states that the
adequacy of remuneration
shall be determined in relation to prevailing market conditions for
the good or service being provided * * * in the country which is
subject to the investigation or review. Prevailing market conditions
include price, quality, availability, marketability, transportation,
and other conditions of * * * sale.
The word ``remuneration'' is defined as ``[payment] for goods
provided, services rendered, or losses incurred.'' American Heritage
Dictionary. The question presented is what constitutes ``adequate''
payment for a good or service. To discern the meaning of the word
``adequate,'' we must look to the wording of this particular provision
of the statute, the corresponding provision in the WTO Subsidies
Agreement upon which the statute is based, and the larger context in
which this provision appears.
In interpreting the phrase ``less than adequate'' remuneration, we
must also bear in mind the purpose of section 771(5)(E). The purpose is
to determine whether the recipient of the financial contribution--in
this case a good or service--has received a benefit. A benefit is
something that is favorable or advantageous. A review of section
771(5)(E) shows that the term ``benefit'' is used to mean something
better than the recipient could otherwise obtain in the market, e.g., a
government interest rate lower than the commercial rate for a
comparable loan. Section 771(5)(E)(iii). Therefore, we also
[[Page 43193]]
interpret ``adequate'' remuneration to be remuneration that is market-
based.
This interpretation of the term ``adequate remuneration'' is
further consistent with the larger context in which this provision
appears both in the statute and the Subsidies Agreement. In addition to
the case where goods or services are provided for less than adequate
remuneration, section 771(5)(E) of the Act refers to three other
instances of a countervailable benefit and provides guidance on how to
measure those benefits. In the case of an equity infusion, paragraph
(i) provides that a benefit exists ``* * * if the investment decision
is inconsistent with the usual investment practice of private
investors, * * *, in the country in which the equity infusion is
made.'' In the case of a loan, paragraph (ii) provides that a benefit
exists ``* * * if there is a difference between the amount the
recipient of the loan pays on the loan and the amount the recipient
would pay on a comparable commercial loan that the recipient could
actually obtain on the market.'' In the case of a loan guarantee,
paragraph (iii) provides that a benefit exists ``* * * if there is a
difference, * * *, between the amount the recipient of the guarantee
pays on the guaranteed loan and the amount the recipient would pay for
a comparable commercial loan if there were no guarantee by the
authority.'' These provisions reflect almost verbatim the language of
paragraphs (a), (b), and (c) of Article 14 of the Subsidies Agreement.
The point of comparison for measuring the benefit from these types
of subsidies is the marketplace free of government interference.
References in the statute and the Subsidies Agreement to the ``usual
investment practice of private investors,'' ``commercial loans'' that
can actually be obtained ``on the market,'' and a ``comparable
commercial loan if there were no guarantee by the authority'' support
this conclusion. It follows from this central principle--common to all
the other provisions under the benefit section, both in the statute and
the Subsidies Agreement--that the adequacy of remuneration must be
measured by reference to the marketplace free of government
interference.
Additional support for this conclusion is found in the chapeaus of
section 771(5)(E) and Article 14 of the Subsidies Agreement. The
introduction to the benefit section in the statute states that ``A
benefit shall normally be treated as conferred where there is a benefit
to the recipient [.]'' Similarly, the title of Article 14 is
``Calculation of the Amount of a Subsidy in Terms of the Benefit to the
Recipient.'' From the perspective of the recipient of a subsidy, the
true measure of the benefit derived from any government largesse is by
reference to what the recipient would have had to pay for the physical
or financial good or service in the marketplace, absent any government
involvement. Thus, while one could argue that, from the government's
perspective, remuneration could be considered ``adequate'' as long as
it covers the costs to the government of providing the good or service,
the cost-to-government standard is wholly inappropriate from the
perspective of the private recipient. This is because the cost to the
government does not necessarily measure the price at which the private
recipient could have obtained the good or service in the marketplace
free of government interference.
The concept of benefit in the statute derives from the Subsidies
Agreement. A recent WTO dispute settlement panel stated that:
benefit clearly encompasses ``some form of advantage''; (the
authority must) ``* * * determine whether the financial contribution
places the recipient in a more advantageous position than would have
been the case but for the financial contribution * * * the only
logical basis for determining the position the recipient would have
been in absent the financial contribution is the market.''
Canada--Measures affecting the Export of Civilian Aircraft, (WT/DS70/R,
para 9.112).
The WTO Appellate Body stated:
* * * the marketplace provides an appropriate basis for comparison
in determining whether a ``benefit'' has been ``conferred'' because
the trade-distorting potential of a ``financial contribution'' can
be identified by determining whether the recipient has received a
``financial contribution'' on terms more favorable than those
available to the recipient in the market.
Id. (WT/DS70/AB/R, para 157) (emphasis added).
Section 771(5)(E)(iv) ensures that, whatever standard is used to
assess the adequacy of the remuneration required by the government,
that standard must be reasonable and must take into account the market
factors in the country under investigation that could affect the
measurement of the adequacy of the remuneration. For example, the
commercial benchmark must be derived from comparable sales, i.e., sales
where the prevailing conditions of sale are comparable to the sales by
the government, or sales that can be adjusted to achieve comparability.
It is not necessary that the benchmark come from sales of the good
or service within the country under investigation, as respondents
argue. The statute requires that the analysis be made ``in relation
to'' prevailing market conditions in the country under investigation,
not ``in'' the country under investigation. Thus, we find no basis in
the statute for the restrictive reading proposed by respondents.
Moreover, such a restrictive reading would place beyond the reach of
the countervailing duty law any government supplier that dominates the
market for a particular input and then provides that input to producers
at beneficial prices. Under such a reading, subsidy disciplines would
only be available to remedy situations where the government has
subsidized only an incidental part of the market for a particular
input. We may not interpret the statute in a manner that would
frustrate its very purpose. See Goodman Manufacturing v. United States,
69 F.3d 505 (Fed. Cir.1995) (``Statutory interpretation is a holistic
endeavor. A provision that may seem ambiguous in isolation is often
clarified by the remainder of the statutory scheme--because * * * only
one of the permissible meanings produces a substantive effect that is
compatible with the rest of the law.'' (citation omitted)).
In sum, the key elements of a methodology to determine whether a
government has provided a good or service at less than adequate
remuneration as required by section 771(5)(E) are: (1) The
comparability of prevailing market conditions; and (2) a market-based
standard. These elements are reflected in the methodologies established
in the Department's Regulations.
Section 351.511(a)(2) of the CVD regulations sets forth three
methodologies for determining whether a government good or service is
provided for less than adequate remuneration. These methodologies are
listed in hierarchical order: (1) Market prices from actual
transactions within the country under investigation; (2) world market
prices that would be available to purchasers in the country of
exportation; or (3) an assessment of whether the government price is
consistent with market principles.
This hierarchy is based on a logical preference for achieving the
objectives of the statute. The simplest means of determining whether
the government required adequate remuneration is by comparison with
private transactions for a comparable good or service in the country.
Thus, the first methodology in the hierarchy calls for a comparison
with an actual market-determined price from a private supplier either
within the
[[Page 43194]]
country under investigation, or from outside the country in the form of
an actual import. Both transactions constitute market prices in the
country. This methodology is first in the hierarchy because observed
prices from actual transactions in the country are the most direct and
reliable indicator of a market-determined price that is available to
the producer in question. The second methodology calls for world market
prices that would be available to the producer in question. This
approach is also market-based, but it potentially introduces additional
variables with respect to availability, comparability, and the market-
determined nature of the prices. Nevertheless, world market prices
still constitute a reasonable approach because they can reflect market-
based prices for a comparable good or service that would be available
in the country. The third methodology, which requires an assessment of
whether the government's price is consistent with market principles, is
used only where an appropriate benchmark is unavailable either in-
country or abroad for comparison purposes.
The first preference, specified under Sec. 351.511(a)(2)(i), is to
compare the government price with a market-determined price resulting
from actual transactions in the country in question. Such a price could
include prices stemming from actual transactions between private
parties, actual imports, or in certain circumstances, actual sales from
competitively-run government auctions. In considering such transactions
or sales, the Department will take into account product similarity;
quantities sold, imported, or auctioned; and other factors affecting
comparability.
Further guidance on the use of market-determined prices stemming
from actual transactions within the country is provided in the Preamble
to the CVD Regulations. See ``Explanation of the Final Rules `` of the
Countervailing Duties, Final Rule, 63 FR 65348 (November 25, 1998) (the
Preamble). According to the Preamble, prices from a government auction
would be appropriate where the government sells a significant portion
of the good or service through competitive bid procedures that are open
to everyone, that protect confidentiality, and that are based solely on
price.
The Preamble also states that the Department normally will not
adjust such market-determined prices under this methodology to account
for government distortion of the market because such distortion will
normally be minimal as long as the government involvement in the market
is not substantial. If the government provider constitutes a majority,
or a substantial portion of the market, then such prices in the country
will no longer be considered market-based and will not be an
appropriate basis of comparison for determining whether there is a
benefit.
The second approach in the regulatory hierarchy is the use of world
market prices that would be available to purchasers in the country of
exportation (emphasis in the Preamble). The Preamble states that, where
it is reasonable to conclude that actual prices within the country
under investigation are significantly distorted as a result of the
government's involvement in the market, the Department will resort to
world market prices. For example, in Live Cattle from Canada, we
stated: ``* * * when confronted with an adequate remuneration issue,
the Department will normally seek to measure the adequacy of
remuneration by comparing the government price to market-determined
prices within the country. However, in certain situations, market
prices may not exist in the country or it may be difficult to find a
`market' price that is independent of market distortions caused by
government actions.'' See Final Negative Countervailing Duty
Determination; Live Cattle From Canada, 64 FR 57040, 57056 (October 22,
1999).
The regulation also states that, where there is more than one
commercially available world market price, the Department will average
such prices to the extent practicable, making due allowance for factors
affecting comparability. Such averaging would only be called for where
we conclude that more than one world market price, i.e., prices from
more than one foreign source, would be commercially available to
purchasers in the country of exportation.
It is important to note that, if the private prices within the
country subject to investigation were in fact market-based, they would
necessarily reflect the world market price available in the country of
exportation. Therefore, there should be no difference between the
private prices in the country of exportation and world market prices,
except for import taxes. To the extent there are any differences, this
just underscores the distorted nature of the private prices where the
government dominates a particular sector of the economy.
In selecting a world market price, the Department will examine the
circumstances in the case to determine if a purchaser in the country
could obtain the good or service on the world market. Normally, such a
world market price is a market-based price at which the good or service
could be imported. Thus, it should also indicate the price of that good
or service that we would find in the exporting country if that price
were market-based. As discussed in the Preamble, the Department will:
consider whether the market conditions in the country are such that
it is reasonable to conclude that a purchaser in the country could
obtain the good or service on the world market. For example, a
European price for electricity normally would not be an acceptable
comparison price for electricity provided by a Latin American
government, because electricity from Europe in all likelihood would
not be available to consumers in Latin America. However, as another
example, the world market price for commodity products, such as
certain metals and ores, or for certain industrial and electronic
goods commonly traded across borders, could be an acceptable
comparison price for a government-provided good, provided that it is
reasonable to conclude from record evidence that the purchaser would
have access to such internationally traded goods.
This approach is reasonable and consistent with the intent of the
statute since it furthers the statutory directive that subsidization be
measured on a market basis and in relation to prevailing market
conditions.
To determine whether the provincial governments have provided a
countervailable benefit to Canadian softwood lumber producers, we must
examine whether stumpage was provided to softwood lumber producers for
less than adequate remuneration. As we have noted above, the Department
must first determine whether there are market prices within Canada
which can be used to measure whether the provincial stumpage programs
provide a good or service for less than adequate remuneration.
The Provinces of Alberta, Ontario and Quebec have provided private
stumpage prices charged within their respective provinces. British
Columbia provided stumpage prices set by government auction. As a
starting point, these prices reported by all four Provinces would be
considered prices based upon actual transactions within the country
under investigation, as described in our regulations. However, an
examination of the information on the record demonstrates that the
private stumpage prices reported by the Provinces do not constitute
market-determined prices within the meaning of Sec. 351.511(a)(2)(i) of
the CVD Regulations.
In each of the Provinces, the stumpage market is driven by the
provincial governments' ownership and control of
[[Page 43195]]
forest land and the governments' practice of setting stumpage fees
administratively. The fees are often set with a view towards
traditional government economic policy goals, such as job creation,
rather than with a view toward obtaining a market price. The provincial
governments own a substantial majority of harvestable forest land.
These Crown lands account for between approximately 57 and 97 percent
of all forest land within each of the Provinces. Specifically,
provincial, federal, and private ownership of forest resources, by
province are:
British Columbia--94 percent provincial, 1 percent
federal, and 5 percent private;
Quebec--89 percent provincial and 11 percent private;
Ontario--83 percent provincial, 1 percent federal, and 17
percent private;
Alberta--57.4 percent provincial, 10.8 percent federal,
and 28.5 percent private;
Manitoba--94 percent provincial, 1 percent federal, and 5
percent private; and
Saskatchewan--97 percent provincial, 2 percent federal,
and 1 percent private.
In addition, the softwood harvest from Crown lands accounts for
approximately 70 to 90 percent of the stumpage sold within each of the
Provinces. Therefore, between 70 and 90 percent of the good or service
within each of the provinces is provided by the government. Further,
the apparent minimum cut requirements on public lands have the
potential to distort timber supplies and depress prices. Since stumpage
fees on public lands are the price driver for the stumpage market in
those Provinces, we conclude that the stumpage fees on private lands
are largely derivative of the public land prices and are therefore
distorted.
We considered additional information on the record with respect to
each of the Provinces examined for this preliminary determination. For
example, Quebec provided a private price that was obtained via a survey
of 81 companies that had purchased private stumpage during the POI.
However, as even acknowledged by the Quebec Ministry of Natural
Resources, private stumpage prices in Quebec are affected by the
administratively-set price for public stumpage.\9\ Ontario commissioned
a study of private stumpage sales in that Province. However,
information in the survey indicates that many private landowners do not
actively market their standing timber and that many sales were not
actually contested or open to competition. None of the respondents to
the survey indicated relying on auctions or a forester consultant to
assess the value of the timber. In fact, only 21 percent of the
landowners state that the price for stumpage was market-determined.
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\9\ See Petition at page 119.
---------------------------------------------------------------------------
Neither Manitoba nor Saskatchewan reported prices on private
stumpage sales within the provinces.
British Columbia did not provide private stumpage prices. Instead,
the Province provided prices from the auctions the government runs
under the Small Business Forest Enterprise Program (SBFEP). As the name
of the program indicates, the SBFEP auction is only open to small
businesses that are registered as small business forest enterprises.
Thus, the overwhelming majority of the purchasers of this government
good or service is explicitly excluded from this auction. Moreover,
only a small percentage of stumpage in British Columbia is sold via
SBFEP auction. Therefore, the SBFEP auction prices submitted by British
Columbia cannot be used as benchmark prices under Sec. 351.511(a)(2)(i)
of the CVD Regulations.
A large government presence in the market will tend to make much
smaller private suppliers price-takers. While it is not unusual for
small suppliers to be price-takers even in a market with no government
involvement, the government-dominated market will distort the market as
a whole if the government does not sell at market-determined prices. In
such a situation, true market prices may not exist in the country, or
it may be difficult to a find a ``market'' price that is independent of
the distortions caused by the government's action. In fact, where the
market for a particular good or service is so dominated by the presence
of a government monopoly or near monopoly, the remaining private prices
in the country in question cannot be considered to be market-based.
Such circumstances are present in this investigation. Because of the
provincial governments' control of the market through a system of
administratively-set prices and other market distorting measures, there
is no market-determined price for stumpage within Canada that is
independent of the distortion caused by the governments' interference
in the market. Therefore, we preliminarily determine that we cannot use
the private transaction prices provided by the provincial governments.
Information on the record of this investigation indicates that
there are prices from the world market for comparable goods which can
be used to determine whether the provincial stumpage programs provide a
good or service to softwood lumber producers for less than adequate
remuneration. For the reasons detailed below, we preliminarily
determine that stumpage prices from the United States qualify as
commercially available world market prices because it is reasonable to
conclude that U.S. stumpage would be available to softwood lumber
producers in Canada at the same prices available to U.S. lumber
producers.\10\ Furthermore, as demonstrated below, information on the
record indicates that stumpage in the United States along the border
with Canada is comparable to Canadian stumpage. Therefore, for purposes
of this preliminary determination, we have measured the adequacy of
remuneration of the provincial stumpage programs by comparing the
stumpage fees charged by the provincial governments with market-
determined prices for stumpage available in the United States. As
explained in more detail in the benefit sections of each province, as a
calculation matter, we only compared stumpage prices in each Canadian
province with stumpage prices in states bordering that province. For
example, we compared British Columbia prices with prices available in
Washington and Idaho, and we compared prices in Quebec with prices
available in Maine.
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\10\ We note, however, that Canadian stumpage generally is not
available to U.S. lumber producers because of restrictions on log
exports.
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There are no restrictions on obtaining stumpage on private and
state lands in the United States. Furthermore, timber harvested in the
United States is imported into Canada, and imports from the United
States account for almost 100 percent of all Canadian timber imports.
Such imports represent a decision made by Canadian mills to purchase
U.S. stumpage instead of Canadian stumpage. Finally, we note that some
of the largest softwood lumber producers in Canada have operations in
both Canada and in the United States and obtain stumpage in both
countries.
The United States, like Canada, is one of the world's largest
softwood timber producers, and the North American softwood timber
region is geographically separated from other softwood timber markets
throughout the world. Thus, given the costs of transporting timber
across the ocean, it is unlikely that Canadian softwood lumber
producers would obtain stumpage from a country other than the United
States. For these reasons, we preliminarily determine that it is
reasonable to conclude that the world
[[Page 43196]]
market prices of stumpage in the United States would be available to
softwood lumber producers in Canada, and that it is neither necessary
nor desirable to include any other world market prices in the benchmark
price.
We also conclude that the price for stumpage in the United States
is a market-determined price. The majority of softwood-producing forest
land in the United States is held by private concerns. Furthermore,
stumpage for harvestable timber, whether sold from private parties or
from state land, is sold through an open competitive process available
to all buyers. Thus, the stumpage prices in the United States, unlike
those in Canada, are set by market forces.
The cross-border stumpage prices that we have used are based on
sales from state lands. While our preferred benchmark would be a
weighted average of both state and private prices in the United States,
we have been unable at this time to locate adequate private sales data,
except for sales in Maine. Therefore, for purposes of this preliminary
determination, we have used sales data from only state lands.
Public land stumpage fees, such as those available on state lands,
accurately reflect market-based prices because they are determined by
public auctions available to all comers. These sales involve
competitive bidding where most purchasers have the choice of buying
public or private stumpage. Moreover, it is reasonable to conclude, for
purposes of this preliminary determination, that stumpage fees from
public lands are a suitable benchmark because the total volume of
timber cut from public land constitutes a minority of the amount of
total timber sold in the United States, making private timber sales the
primary driver of stumpage fees in the timber market overall. Although
we maintain that stumpage rates from state lands are an appropriate
benchmark under these circumstances, we intend to continue examining
sources for timber prices from private lands in the United States for
use in the final determination.
We have received numerous comments on whether cross-border prices
can serve as a benchmark to measure the benefit conferred from the
provincial stumpage programs. The petitioners support the use of cross-
border prices, while respondents oppose it.
In addressing this issue, it is useful to start with the different
legal frameworks governing this investigation as compared with Lumber
III. The final determination in Lumber III was made in 1992, before the
amendments to the Act as a result of the URAA. At the time of Lumber
III, the provision of a good or service was a benefit if it was
provided at preferential rates. The methodology used by the Department
to determine whether the good was provided at preferential rates was
set forth in the ``Preferentiality Appendix'' and in section 355.44(f)
of the then Proposed CVD Regulations.\11\ According to this
methodology, the Department would measure whether the government
provided a good or service at a preferential rate based upon, in order
of preference, the following benchmarks: (1) The price the government
charges to other parties for the identical or similar good; (2) the
price charged by other sellers within the same political jurisdiction
(i.e, country under investigation); (3) the government's cost of
providing the good or service; or (4) the price paid for that good
outside the country under investigation.
---------------------------------------------------------------------------
\11\ These Proposed CVD Regulations were never adopted by the
Department.
---------------------------------------------------------------------------
There are several important differences between the discarded
preferentiality standard and the current adequate remuneration
standard. Preferentiality is a measure of price discrimination, i.e.,
whether a government is favoring some buyers over others with lower
prices. Indeed, the first choice under the preferentiality methodology
was to use another government price as a benchmark to determine whether
the investigated program provides a benefit. This was the benchmark
used by the Department in Lumber III, and it provided a measure of
price discrimination, or preferentiality. It cannot be said to measure
adequate remuneration.
With the changes in the CVD law as a result of the URAA, and the
Subsidies Agreement upon which the URAA is based, the price
discrimination test was dropped in favor of adequate remuneration.
Under this standard, the government price must be compared with a
market-determined price. It is no longer sufficient to say that the
government does not discriminate among buyers. Rather, as discussed
above, we must determine whether the government is receiving adequate
remuneration, i.e., a market-based price.
As noted above, under the adequate remuneration methodology, if
there is no market-determined price within the country under
investigation, the Department seeks a price on the world market (if one
is available). However, under the preferentiality methodology, the use
of a price on the world market was the last alternative. The
preferentiality methodology required the Department to measure the
benefit from the government's provision of a good or service by
comparing the government's price for that good to its cost of providing
that good before using a world market price. Therefore, under the
preferentiality methodology, the Department was effectively precluded
from using a price from the world market in most cases.
Many comments made by respondents criticize the use of a cross-
border price by reference to contrary statements made by the Department
in Lumber III and prior lumber cases. However, contrary statements in
the past by the Department with respect to cross-border prices were
made in the context of a different legal framework. Furthermore, those
statements reflected a preferentiality hierarchy that put world market
prices last, in many instances effectively precluding the use of world
market prices, for the simple reason that world market prices are the
least appropriate measure of price discrimination by the government of
the exporting country.
Respondents further point out that there is no unified North
American market for stumpage because each individual stand of timber is
unique due to a variety of factors such as species combination,
density, quality, size, age, accessibility, terrain and climate. While
we agree in part with this statement, the differences in individual
stands of timber are just as applicable to comparisons within Canada as
they are with cross-border comparisons. For example, private lands in
Quebec tend to be located in the southern portion of the province,
whereas Crown lands tend to be located north of the St. Lawrence. All
parties agree that the topography, climate, and biological
characteristics of trees in northern and southern Quebec are very
different. In fact, information on the record indicates that the
terrain, climate, and mix of species in southern Quebec are much more
similar to those in Maine than they are to those in the northern part
of the province.
Further, despite statements that the Department may have made in
earlier lumber cases, the fact that individual stands may be to some
extent unique does not mean that all stands are so dissimilar as to
render any stumpage price comparisons meaningless and unreasonable.
Rather, information on the record indicates that, despite minor
differences, many softwood lumber stands in Canada and the United
States are in fact sufficiently similar to allow appropriate
comparisons of stumpage prices across borders.
As a general matter, there is nothing about the border between the
United
[[Page 43197]]
States and Canada that would affect the comparability of trees grown on
either side. Except for the Great Lakes, there is no significant body
of water or mountain range that defines the border between the two
countries. For the most part, the border is an artificial line drawn as
a result of a series of political compromises reached throughout the
two countries' histories.
While there may be some information on the record that is
conflicting, based on an analysis of all of the facts on the record, we
preliminarily determine that the timber in Canada is comparable to that
in the northern border states of the United States with respect to
quality, species, terrain, availability, and marketability. This is why
we have chosen stumpage prices from states which border Canada as
appropriate benchmark prices. We have also, where possible, made
comparisons on a species-specific basis, and we have accounted for
numerous other adjustments claimed by the Provinces, as explained below
in the narrative descriptions of the individual provincial stumpage
programs. We welcome comments from the parties as to whether additional
adjustments are warranted.
Respondents also argue that stumpage in the United States is not
available to purchasers in Canada and that therefore the Department may
not consider the price of stumpage in the United States to be an
appropriate benchmark. These arguments are clearly at odds with the
language of the statute and the CVD Regulations, and they are at odds
with the factual findings discussed above. The location of the good is
not the relevant point of the regulation, it is the availability of the
price for that good. Furthermore, as discussed above, we have concluded
that U.S. stumpage is in fact available to Canadian lumber producers.
For instance, Canadian border mills routinely obtain U.S. stumpage,
underscoring the fact that U.S. stumpage prices are actually paid by
Canadian producers.
In fact, U.S. prices are very much an ``in-country'' price from the
perspective of many Canadian mills, including some of the largest
mills. U.S. prices are a routine part of the business calculations of
many Canadian mills, particularly the border mills in Quebec, mills
located in the Maritimes, and the large multinational mills in the
Pacific northwest. Regardless of where the Canadian purchaser is
located, the purchaser has access to U.S. stumpage and can offer bids
at any U.S. public auctions. Indeed, we have already received, and we
anticipate receiving still more, exclusion requests from companies
located near the U.S. border that routinely use both U.S. and Canadian
stumpage. Thus, U.S. prices are clearly part of the prevailing market
conditions in Canada.
The Department notes, as the above analysis makes clear, that there
is little difference between actual import transactions under the first
tier and world market prices under the second tier of the adequate
remuneration hierarchy. While the regulation draws a distinction
between an actual, observable import transaction and a world market
price that would be available to producers in the country, the fact is
that world market prices are also based on actual transactions equally
available in Canada. For this reason, we maintain that there is no
practical distinction between a market stumpage price in Canada (if
such a price existed) and a market stumpage price in the United States
that is available to Canadian producers. Because there is no meaningful
commercial distinction between the two, any effort to draw a legal
distinction between them represents a hypertechnical reading of the
statute that elevates form over substance.
Respondents also object to using prices of imported logs.
Presently, there is inadequate information on the record of this
investigation regarding U.S. logs imported into Canada. Thus, we did
not consider imported log prices as a benchmark for this preliminary
determination. However, we note that the CVD Regulations provide for
the use of import prices, and we will continue to examine information
related to actual log imports into Canada. We note that, when a
Canadian producer imports logs from the United States, that producer
has paid for U.S. stumpage. If the costs of harvesting, transportation,
and profit, are deducted from the price of the logs, whether the U.S.
logs are purchased in Canada or in the United States, the price of the
U.S. stumpage is derived. Therefore, we believe there is a reason to
consider there to be no difference between the purchase of stumpage in
the United States and the purchase of logs imported into Canada from
the United States.
Thus, after considering the information on the record, we
preliminarily determine that cross-border stumpage prices are the
appropriate comparison prices to measure whether the provincial
governments have provided a good or service to softwood lumber
producers at less than adequate remuneration. For each of the
provincial stumpage programs, we have compared the administratively-set
stumpage price charged to softwood lumber producers with the cross-
border stumpage benchmark prices. Using this methodology, we
preliminarily determine that each of the provincial stumpage programs
provides a benefit to Canadian softwood lumber producers by providing
stumpage for less than adequate remuneration.
In conclusion, we preliminarily determine that the provincial
stumpage programs are countervailable because they are specific under
section 771(5A)(D) of the Act, they provide a financial contribution
under section 771(5)(D)(iii) of the Act, and they confer a benefit
under section 771(5)(E)(iv) of the Act.
Below, we describe the stumpage programs for each of the
investigated provinces and provide the calculated ad valorem subsidy
rate for these programs.
1. Province of Quebec
The Government of Quebec (GOQ) makes standing timber on Crown land
available to those parties that have purchased harvesting rights. These
rights, often referred to as stumpage rights, apply to a particular
area of Crown land and entitle the purchaser to harvest standing timber
at a price that is set by the GOQ's Ministry of Natural Resources
(MRN), the agency responsible for administering the sale of standing
timber on Crown lands. The price that the MRN charges for stumpage
rights varies depending on where the timber stand is located. In
previous years, the MRN divided the Crown lands into 28 zones and
charged different prices for each zone. According to the GOQ, these
zones, or tariffing zones, delineated areas that were similar in terms
of climate, tree size, topography, species mix, etc. Until 1999, the
tariffing zones contained both Crown and private lands. However, in
1999 the GOQ amended the Forestry Act, the legislation that governs the
sale of standing timber on Crown land. Pursuant to this amendment, the
GOQ expanded the number of tariffing zones in April of 2000 to 161 in
order to ensure maximum homogeneity in each zone. Further, as a result
of the amendment, privately-owned forests were no longer located within
any of the tariffing zones.
In Quebec, there are four ways through which the MRN sells stumpage
rights: Timber Supply and Forest Management Agreements (TSFMAs), Forest
Management Contracts (FMCs), Annual Forest Management Permits (AFMPs),
and public auctions.
TSFMA licences account for virtually all standing timber harvested
on Crown lands. During the POI, TSFMAs
[[Page 43198]]
accounted for 95 percent of the softwood Crown timber harvested. A
TSFMA allows the holder to obtain an annual management permit to supply
a wood processing plant or mill. A TSFMA also authorizes the volume at
which particular species can be harvested. In order to obtain a TSFMA,
the applicant must own a wood processing mill. In return for the
stumpage rights, the holder of the TSFMA must carry out certain types
of silviculture treatments, as specified in the agreement with the MRN,
required to achieve a pre-established annual yield. The GOQ credits a
portion of these silviculture costs towards the payment of the stumpage
fees owned under the TSFMA. In addition, the MRN mandates the holder of
the TSFMA to build and maintain the roads leading to and through the
logging sites, and submit five-year and annual forest plans for
required silviculture activities. TSFMA holders are also required to
contribute to the forest fire protection agency Societe de protection
des forets contre le feu (SOPFEU), the insect and disease protection
agency Societe de protection des forets contre le insectes et les
maladies (SOPFIM), and the Forestry Fund. The overall term of the TSFMA
is 25 years. However, every five years from the effective date of the
agreement, the term of a TSFMA can be renewed for an additional 25
years, provided that the holder of the TSFMA has fulfilled its
obligations under the agreement.
FMCs are similar to TSFMAs in that they are also subject to the
stumpage prices charged by the MRN. In addition, holders of FMCs are
responsible for the same types of silviculture activities as those
covered by TSFMAs. The MRN usually enters into FMCs with non-profit
organizations or municipalities. FMCs normally cover relatively small
forest areas. During the POI, FMCs accounted for less than one percent
of the softwood Crown timber harvest.
Standing timber on Crown lands is also available through AFMPs.
Pursuant to sections 79, 93, 94, 95, and 208 of the Forest Act, AFMPs
permit the harvest of less desirable forms of timber, often referred to
as slash and cull, for use in energy production and metallurgical
purposes. The MRN issues AFMPs provided that it deems the production of
the applicant sufficient and that the slash and cull harvest promotes
the growth of stands in a particular forest area. Less than one percent
of the standing timber in Quebec is harvested under AFMPs.
The fourth method involves the sale of standing timber on public
reserves through public auctions. Public reserves are forest areas in
which no timber supply and forest management agreement is in force.
However, while these public auctions are permissible under GOQ law, the
MRN has yet to sell any publicly-owned timber under this method.
Aside from managing the sale of standing timber on Crown lands, the
MRN collects information on the price of standing timber in private
forests. Private market prices for standing timber are obtained through
a survey of companies that purchase standing timber from private
forests. The Quebec Institute of Statistics (the Institute), under the
aegise of the MRN, conducts a census of all purchases of privately-held
timber every 3 years. Between each census, the MRN conducts a survey of
private purchasers using randomly selected respondents. These surveys
are based on actual transactions of private purchasers and mainly cover
the purchase of trees in the spruce, pine, and fir species group. The
most recent analysis of private stumpage prices in Quebec took place in
2000. Of the 190 major companies trading standing timber, 81 responded
to the survey. All companies included in the survey have traded at
least 4,000 cubic meters of standing timber in the last four years. The
GOQ states that the survey covered the private forest in its entirety
as well as all 15 territories managed by private wood producers'
syndicates and marketing boards.\12\
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\12\ There are 15 wood producers' syndicates and marketing
boards in Quebec. Membership is voluntary. Their task is to
represent their members in dealings with Federal and local
governments on matters related to silviculture, forest management,
forest policies, laws, environmental certification, registration of
forest producers, resource sustainability, and tax issues.
---------------------------------------------------------------------------
Once the survey is complete, the Institute compiles a value for
each private forest territory covered by a syndicate or wood producer's
marketing board. The Institute then weights these values by the volume
of timber purchased by each respondent. The GOQ explains that the
purpose of this step is to improve the statistical accuracy in the
calculation of the average market value of standing timber in private
forests. The Institute then obtains a single, province-wide average of
the survey respondents, referred to as the Market Value of Standing
Timber (MVST), by attributing a weight corresponding to the total
trading volume for each wood producers' association territory.
The MRN, as required by the Forestry Act, uses a system called the
parity technique to determine the stumpage value the MRN charges to
TSFMA and FMC licences. Under the parity technique, the MRN employs a
complex formula which adjusts the private MVST in order to account for
relative differences that exist between the private MVST and the
tariffing zone to be appraised. The MRN then calculates an individual
stumpage rate that will be charged in each tariffing zone.
The MRN employs the parity technique by gauging the operating costs
for each of the 161 tariffing zones, the private forest (where costs
are lowest), and at the northernmost limit of demand (where costs are
highest). These operating costs include harvest costs, road
construction and maintenance costs, transportation costs to mill and
market, logging camp costs, and specific tenure costs. The GOQ states
that the operating costs are derived from cost indices that quantify
the average biophysical characteristics of each zone (i.e., average
tree volume, topographical and soil conditions, average transportation
distances, etc.). The MRN then calculates the difference between the
costs at the northernmost limit of demand and each tariffing zone's
operating costs, as well as the difference between costs at the
northernmost limit of demand and costs in the private forest. The ratio
of the former to the latter represents the operating cost adjustment
for each tariffing zone. The MRN then calculates a base MVST for the
northernmost limit of demand. With this data, the MRN determines the
MVST (i.e., the stumpage price) for each tariffing zone by multiplying
the operating cost adjustment by the difference between the private and
northern limit MVSTs and adding that product to the MVST at the
northernmost limit of demand. The resulting stumpage prices cannot
exceed the average market value of standing timber in private forests,
nor can they fall below a minimum stumpage rate (discussed below).
In addition to making an adjustment for relative operating costs,
the characteristics of wood from each tariffing zone are compared with
those of wood from the private forest to determine their impact on
processing costs and the value of the products they are able to
produce. According to the GOQ, this quality adjustment, introduced in
1999, takes into account the impact of average diameter, species
distribution, rot percentages, and log taper on log processing costs
and sawn product value. The GOQ states that consideration of these
characteristics, which are quantified into a public quality and private
quality index, allow the value of wood in each tariffing zone to be
adjusted according to the
[[Page 43199]]
differences between the quality of standing timber in both types of
forests. The GOQ states that quality adjustments can alter the MVST as
much as plus or minus C$5 per cubic meter.
Upon establishing the operating and quality adjustments, the MRN
calculates a minimum stumpage rate. The GOQ states that for the fir-
spruce-jack pine-larch species group, the minimum stumpage rate is
comprised of the average cost of silviculture treatments in the common
areas forming the northernmost demand limit. A basic rate of C$1 per
cubic meter ($1996), indexed annually pro-rata to changes in the market
value of private forest standing timber, is included in the minimum
stumpage rate. The GOQ states that during the POI, the minimum stumpage
unit rate was C$3.53 per cubic meter.
Lastly, the MRN indexes the MVSTs that are charged in each of the
tariffing zones on the first of each quarter in order to account for
any price changes in the private forest market price that may have
occurred since the most recently completed census or survey of private
market prices.
As explained above, the MRN calculates an administered stumpage
price for each tariffing zone. According to the MRN, there is no
distinction between sawlogs and pulplogs when setting the stumpage
price. Thus, to arrive at the administered stumpage rates used in our
stumpage calculations, we divided the total softwood stumpage fees paid
by TSFMA permit holders during the POI for each species by the total
softwood stumpage harvested under TSFMAs during the POI for each
species. In this manner, we obtained a weighted-average stumpage price
per species that was paid by TSFMA permit holders during the POI.
According to information submitted by the GOQ, the softwood stumpage
harvested under TSFMAs is equal to the total timber harvested for
lumber processing plants (i.e., processing plants that produce the
subject merchandise). Therefore, we have not incorporated the stumpage
fees paid by FMC permit holders into the Province-wide administered
stumpage rate.
Under TSFMAs, each TSFMA holder must become a member of SOPFEU and
pay the corresponding dues. The Department granted this adjustment in
Lumber III and we have granted it in this preliminary determination.
See 57 FR 22570 at 22600. To make the adjustment, we divided the total
dues incurred by TSFMA holders during the POI by the total harvest
under TSFMAs during the POI.
In addition, TSFMA holders must belong to SOPFIM and pay its
membership fees. The Department granted this adjustment in Lumber III
and we have granted it in this preliminary determination. See 57 FR
22570 at 22600. We adjusted for this obligation by dividing the sum of
all membership fees paid by TSFMA permit holders during the POI by the
total harvest under TSFMAs during the POI.
Prior to fiscal year 1996-1997, the cost of the forestry fund was
borne entirely by the MRN. However, beginning in fiscal year 1997-1998,
the MRN required TSFMA holders to contribute to the Forestry Fund. The
Fund provides financial support for seedling production, inventory
data, and forestry research activities. Because this is a cost imposed
on TSFMA holders by the GOQ, we have made an adjustment for the Fund by
dividing the TSFMA holders' total contributions during the POI by the
total harvest under TSFMAs during the POI.
TSFMA holders construct and maintain primary, secondary, and
tertiary roads for their logging operations. Because those roads are
available for public use, they must meet government standards. We
granted this adjustment in Lumber III. See 57 FR 22570 at 22598. We
have granted a similar adjustment in this preliminary determination.
The GOQ provided the cost per cubic meter of primary, secondary, and
tertiary road construction and maintenance, and we have made an
adjustment based on those costs. In Lumber III, the Department did not
grant an adjustment for primary road construction and maintenance. See
57 FR 22570 at 22599. However, for purposes of this preliminary
determination, we have included primary road construction and road
costs in the road adjustment because the GOQ was unable to provide a
breakout of its primary and secondary costs. During verification, we
will further examine the differences in infrastructure and a breakout
of primary and secondary road construction and maintenance costs.
We note that for purposes of this preliminary determination, we
have not made an adjustment for haulage roads. According to the GOQ,
haulage roads are final branches of a road network the surface of which
is composed entirely of natural materials. The GOQ further explains
that haulage roads are generally used for one year or less. At this
time, we preliminarily determine that haulage roads must be constructed
and maintained each time a timber stand is harvested, as opposed to
more permanent primary, secondary, and tertiary roads, and, thus, are
costs that are borne by all timber harvesters regardless of the level
of development of the roads that are within the area in which the
standing timber is located and regardless of whether the standing
timber was purchased from public or private sources.
We further note that prior to the issuance of our final
determination, we will examine whether purchasers of stumpage in
private forests in Maine incur road construction and maintenance costs
and, if so, the amount of those costs and the extent to which they
should offset the road construction and maintenance adjustment granted
to producers in Quebec.
Under the TSFMA tenure arrangement, companies must perform
silviculture treatments in order to achieve a sustained yield. The GOQ
indicates that it credits most of the silviculture costs towards the
stumpage dues paid by TSFMA permit holders. However, the GOQ also
states that it does not credit certain costs. Specifically, these
expenses pertain to control and planning costs associated with
silviculture activities and to costs associated with the transportation
of seedlings.
Regarding the control and planning costs, the GOQ submitted a study
conducted on behalf of the MRN by Del Degan, Masse et Associes inc.
that covered fiscal year 1997-1998. This study analyzed the supply
costs of harvesting softwood species and poplars found on Quebec's
Crown land.\13\ In particular, the study indicates the unit cost
difference between the amount of silviculture costs borne by TSFMA
permit holders and the amount of silviculture costs credited by the
GOQ. In Lumber III, 57 FR 22570 at 22600, we granted such control and
planning adjustments. For purposes of this preliminary determination,
we have granted the difference between silviculture costs incurred and
silviculture credits received by TSFMA permit holders as an adjustment.
To make this adjustment, we converted the costs from the 1997-1998 MRN
fiscal year study into POI-dollars using the Canadian Industrial
Product Price Index for Wood Industries as reported by Statistics
Canada.
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\13\ This study was included as part of the public version of
Quebec's August 6, 2001 supplemental questionnaire response.
---------------------------------------------------------------------------
In Lumber III, we determined that replanting is a silviculture
requirement of TSFMA holders and although seedlings were provided to
TSFMA holders by the GOQ, tenure holders were required to transport
them from
[[Page 43200]]
government nurseries to harvest sites. See Lumber III, 57 FR 22570 at
22600. The GOQ has stated that it did not credit costs associated with
the transportation of seedlings during the POI. Consistent with our
approach in Lumber III, we have adjusted the administered stumpage
price to reflect the cost for transportation of seedlings. The GOQ
states that it does not monitor seedling transportation costs because
they are not compensated by dues credits. However, the GOQ supplied the
seedling transportation cost that was used in Lumber III. For purposes
of the preliminary determination, we have used the seedling
transportation cost from Lumber III. We have converted this unit cost
figure, which was originally reported in the Quebec Calculation
Memorandum from the final determination of Lumber III, into POI-dollars
using the Canadian Industrial Product Price Index for Wood Industries
as reported by Statistics Canada.
As explained above, we have preliminarily determined that stumpage
prices in the United States provide the most accurate benchmark. In the
case of Quebec, it is bordered by four states: New York, Vermont, New
Hampshire and Maine. While data on stumpage prices are available for
all four states, our preliminary analysis of the data available to us
at this time indicates that the data for Maine are the most
comprehensive. For example, New York, Vermont, and New Hampshire are
based on a limited number of survey respondents while the stumpage
prices collected by the Maine Forest Service (MFS) are based on
approximately 3,000 landowner reports received by the MFS that reported
stumpage sales in 2000. In addition, among the four states, Maine has
the longest border with Canada. Prior to our issuance of the final
determination we will further examine our decision to use Maine data as
the benchmark stumpage price as well as our decision not to use the
data from New York, Vermont, and New Hampshire.
The MFS report provided weighted-average prices for each species in
Maine in U.S. dollars per thousand board feet (MBF). We converted these
U.S. prices into Canadian dollars using the average exchange rate for
calendar year 2000 as reported by the Central Bank of Canada. Next, we
converted these figures from MBF into cubic meters using the conversion
factor of 5.66. We note that this is the same conversion factor that
was used by the ITC. See Conditions Relating to the Importation of
Softwood Lumber into the United States, USITC Publication 1241, April
1982, which was placed on the record of this investigation on August 9,
2001. We then calculated the difference (unadjusted) between provincial
and Maine stumpage prices for each softwood species harvested in
provincial forests. To arrive at a weighted price difference, we
weighted each species' price difference in proportion to its share of
the TSFMA harvest for fiscal year 2000-2001. We then reduced this
weighted price difference by the amount of each adjustment described
above to arrive at the adjusted price difference.
To calculate the benefit under Quebec's stumpage system, we first
multiplied the adjusted price difference described above by the total
softwood harvested by TSFMAs during the POI. Next, we calculated the
provincial benefit by dividing the product of the adjusted price
difference and the total softwood harvested by TSFMAs during the POI by
the total value of softwood lumber shipments plus the total value of
by-products for the POI. This methodology of calculating the benefit is
similar to the one used in Lumber III. See 57 FR 22570 at 22577. During
verification, we will further examine the figures used in the
denominator of the provincial benefit calculation. Next, as explained
in the ``Subsidy Rate Calculation'' section of this notice, we weight-
averaged the benefit from this provincial subsidy program by the
province's relative share of total U.S exports. The preliminary
countervailable subsidy for the provincial stumpage programs can be
found in the ``Country-Wide Rate for Stumpage'' section, below.
2. Province of British Columbia
Although there are 11 forms of agreements that authorize the
granting of rights to harvest Crown timber in British Columbia (eight
are in the form of licences and three provide harvesting rights in the
form of permits), there are three main types: (1) Tree Farm Licenses,
(2) Forest Licenses, and (3) Timber Sale Licenses.
Tree Farm Licenses (TFLs) are area-based tenures. Licensees occupy
and continuously manage forests in a specific area. Each TFL specifies
a term of 25 years and describes the Crown and private lands included
within the license. The licensees are responsible for costs associated
with planning and inventories. These would include Forest Development
Plans, Management Plans, various resource inventories and assessments,
as well as other costs including road building, harvesting, basic
silviculture, stumpage and annual rent.
Forest Licenses are volume-based tenures in that they confer the
right to harvest a certain amount of timber each year within a given
Timber Supply Area without designating a specific area of land. A
Forest License has a maximum duration of 20 years. Approval to harvest
specific timber under a Forest License is accomplished though the
issuance of Cutting Permits. The licensees are responsible for costs
associated with planning, road building, harvesting, basic
silviculture, and payment of stumpage and annual rent.
Timber Sale Licenses grant the right to harvest timber within a
specific Timber Supply Area or TFL Area. Timber Sale Licences have a
maximum term of 10 years. Section 20 and 23 sales typically have a one-
year term; Section 21 sales have terms averaging 4 or 5 years. Section
20 and 21 are under the Small Business Forest Enterprise Program
(SBFEP). Section 20 licenses are awarded to the bidder with the highest
bonus bid, which is the amount the bidder is willing to pay on top of
the upset rate (minimum rate). Section 21 bidders compete on the basis
of a set of criteria which includes bonus bids, employment, new capital
investment, existing plant, proximity of the plant to the timber
supply, the value added through the manufacturing process, and similar
criteria. Section 23 sales involve very small volumes harvested for
salvage purposes.
The timber pricing system for all tenures are generally determined
by two appraisal systems, the Comparative Value Pricing (CVP) system
and the Market Pricing System (MPS). The CVP system is used to set
stumpage for all tenures except (1) competitive Timber Sale Licenses
issued under sections 20 and 21 of the SBFEP, and (2) those qualifying
under the ``Coast Hemlock Strategy.'' Under these exceptions, the MPS
is used. The CVP is a means of charging specific stumpage prices
according to the relative value of each stand of timber being sold.
Comparative value prices are established so that the average rate
charged will equal a pre-set target rate per cubic meter. The relative
value of each stand depends upon estimates of the selling price and the
cost of producing the end products. Two base rates are established for
the province, one for the Coast average market value zone (the Coast),
and the other for the remainder of the province (the Interior).
The MPS, established in January, 1999, uses results of the SBFEP
section 20 auction sales to set the ``upset'' stumpage rate for
upcoming ``competitive'' timber sales under sections 20 and 21. MPS
estimates the
[[Page 43201]]
site-specific value of standing timber directly from recent auction
sales. The resulting estimate is then discounted to set the upset
(minimum) price, and the winning bidder typically adds a bonus bid to
determine the total stumpage charge. In addition, section 21 is not
only awarded to the highest bidder; other factors such as employment,
new capital investment, existing plant, proximity of the plant to the
timber supply, and the value added through the manufacturing process
are taken into account. Based on volume, sections 20 and 21 represented
approximately 11 percent of the total softwood harvested during the
POI. Further, all individuals and companies under the SBFEP combine to
hold approximately 13 percent of B.C.''s Allowable Annual Cut (AAC).
There is no estimate of the volume of softwood harvested under the
``Coast Hemlock Strategy'' during the POI. However, because it is an
MPS ``pilot'' project that is currently being evaluated to determine
whether it will be expanded, contracted or canceled, the volume should
be a relatively small amount. Also, during the POI, the province sold
6.4 percent of the total log harvest through Section 20. Therefore, the
CVP system appears to be the method used to determine the vast majority
of administratively-set stumpage rates.
Since the government provides stumpage at administratively-set
prices that, even after accounting for differences in forest management
and harvesting obligations (as described below), are generally lower
than the benchmark stumpage prices that the government obtains from
other companies, we preliminarily determine that the B.C. provincial
government is providing stumpage for less than adequate remuneration.
We used as our volume information for British Columbia softwood
logs (including sawlogs and veneer, and excluding pulplogs) harvested
by the major tenure holders in the province during the POI. We also did
not include timber harvested on private or federal lands, both of
which, represent small percentages of softwood sawlogs harvested in
B.C. (approximately 10 percent and less than one percent by volume,
respectively, province-wide). We included in our administratively-set
prices stumpage sold through the SBFEP.
Although the price-determining factors are different between
administratively-set stumpage sales in B.C. and market-driven stumpage
sales in Washington state, an examination of stumpage prices alone is
not sufficient to determine whether timber is provided for less than
adequate remuneration. Tenure holders in B.C. are required to fulfill
certain forest management and timber-harvesting obligations, including
silviculture and other forest management activities. Therefore, it is
necessary to factor in certain cost adjustments to the administered
prices in B.C. to reflect the costs of certain mandatory activities
that are not factored into the administered price.
For the following adjustments made by the Department, with the
exception of reported annual rents, we relied on cost data submitted by
respondents, and taken from surveys conducted by the Ministry of
Forests (MOF) for Coastal B.C., summarized and reviewed by
Pricewaterhouse Coopers (PwC), and a survey developed and conducted
directly by PwC for Interior B.C. The PwC report represents data from
calendar year 2000. PwC was engaged by the MOF to collect and review
certain cost data from major license holders specifically for purposes
of this investigation. We did not include any cost adjustments
associated specifically with the SBFEP. For all adjustments, we relied
on costs borne by major tenure holders, since respondents provided cost
data based on survey responses of major tenure holders.
For the Coastal survey, PwC summarized and reviewed survey
responses conducted by the MOF. Major licensee cost data was summarized
for the Head Office, Forestry, and Engineering Component (i.e., General
and Administrative, Engineering and Forest Management Costs) from
licensees whose calendar year 2000 volume equaled approximately 50
percent of the total volume during the period. With regard to the
Logging Operations Component (i.e., Road Construction and Routine Road
Maintenance), PwC reviewed responses from licensees whose calendar year
2000 harvest volume totaled approximately 21 percent of the entire
harvest volume for the year.
For the Interior, since a calendar year 2000 survey has not yet
been completed by the MOF, an independent survey was developed and
conducted by PwC. Responses were compiled from major licensees whose
calendar year 2000 harvest volume equaled approximately 63 percent of
the total harvest volume.
In responding to the surveys, no licensees reported any operations
on private lands for the Interior. However, Coastal data includes costs
incurred on Crown and any private lands a licensee may own, but this is
limited to holders of Tree Farm Licenses. Respondents point out that
costs per cubic meter with regard to forest management
responsibilities, including silviculture and road construction and
maintenance, would generally be the same for both private and Crown
land within a Tree Farm Area, since the licensee responsibilities
mandate the same activities in the same areas (i.e., private land
within a Tree Farm Area is subject to the same standards as Crown land
within a Tree Farm Area). Therefore, consistent with our determination
in Lumber III, we have not accounted separately for the fact that a
small percentage of private cost data is included in the Coastal B.C.
survey information reported by respondents.
Based on the cost data submitted by respondents, we made the
following adjustments to the administered prices in order to obtain an
appropriate comparison with the benchmark prices:
(1) Annual ground rents, reported on a per cubic meter basis, were
included as an adjustment because they are charges for reserving the
use of the resource under license, and are imposed whether or not
timber is harvested.
(2) Major tenure holders are required to perform certain activities
pertaining to the reforestation of their timber stands. These
activities, referred to as silviculture, are broken down into two
types--basic and incremental. Major tenure holders must perform basic
silviculture, which includes surveying, site preparation, planting,
brushing, weeding, spacing and seedling. Incremental silviculture
activities, which are not required by law, take place after the
establishment of a free growing crop of trees. These activities are not
the responsibility of tenure holders. In limited instances, a licensee
may perform incremental silviculture on a voluntary basis. We added
basic silviculture costs incurred by major tenure holders to the
administered rate since major licensees are required to perform these
activities, whereas private harvesters in Washington state are not
required to do so. For Coastal B.C., we took the reported basic
silviculture costs and divided by the reported production volume to
arrive at a per cubic meter cost. We applied the same calculation for
the Interior, based on reported cost and volume information contained
in the PwC survey results. We included an adjustment for reported field
overhead and general and administrative expenses associated with these
activities. We made no adjustment for costs related to incremental
silviculture activities for either the Coast or Interior because major
tenure holders are not required to perform these activities.
(3) Major tenure holders are required to perform forest protection
activities on Crown lands, including fire prevention
[[Page 43202]]
and suppression, and pest management activities. Initial fire
suppression, maintaining specified equipment levels and fire readiness
plans are obligations of licensees. Major licensees are also required
to combat and extinguish all fires in their operating areas. If the
fires are not successfully controlled by the licensees, tenure holders
are billed by the Ministry for the costs of any additional measures
that need to be taken. As for insect and disease protection measures,
these are generally carried out by licensees. As a result, we have
included adjustments for these additional costs for both Coastal B.C.
and Interior B.C., as well as adjustments for the allocation of general
and administrative activities associated with these activities. To
arrive at per cubic meter costs for these activities, we have taken the
reported costs from survey respondents and divided by the reported
production volume for those respondents.
(4) There are certain general classifications of roads associated
with logging in B.C. Primary (mainline) roads are intended for regular
and ongoing traffic. These are roads that require extensive
engineering, excavation and construction. Secondary, or operational,
roads are generally intended for a lower volume of traffic, and built
on a less permanent basis than a mainline road. Cutblock, or on-block,
roads enable harvesting to take place on a single cutblock, and are
often only sufficient for the movement of crews and equipment. These
are temporary roads (typically used for a single season) that require
little, if any, maintenance.
Respondents report that major tenure holders are responsible for
building and maintaining mainline, operational and cutblock roads. All
Crown lands are generally for public use, except where safety concerns
may prevent their use. Respondents provided information on road and
bridge building and maintenance costs for major licensees, indicating
that maintenance of all forest roads is the responsibility of the
industrial user, and that roads used by major tenure holders require
ongoing maintenance.
Private harvesters in Washington state often must factor in costs
for construction and maintenance associated with all roads not
considered to be primary roads. Therefore, we included as an adjustment
only that portion of the reported costs for road and bridge building,
road and bridge maintenance, deactivation (the removal of the road
surface and sub-surface, including culverts, to return the roaded area
to its original natural state), field overhead and general and
administrative expenses that relate to mainline roads only. Since the
Government of British Columbia (GBC) did not provide a full breakdown
for mainline and operational road costs for both the Coast and
Interior, we relied on cost information provided in the Coastal survey
response of the PwC report to determine the applicable road cost
adjustments to make to the Coastal and Interior administratively-set
stumpage prices.
In the Coastal survey response, major licensees reported a majority
of their road expenses broken down by mainline, operational and major
bridge construction. Based on this reported data, we added the mainline
and major bridge construction costs and divided our sum by the total
road costs of Coastal survey respondents to arrive at a percentage of
the total road costs for which Coastal B.C. major licensees are
responsible for but which private harvesters are not. Without having a
complete itemization of mainline and operational road costs, we then
applied this percentage to the total reported road costs, per cubic
meter, to arrive at the applicable adjustment to include for Coastal
B.C. Next, we applied this calculated percentage to the submitted per
cubic meter road costs of Interior B.C. survey respondents, as well,
since road construction and maintenance costs were not reported
separately by road type (primary/mainline, secondary/operational,
etc.). We used this percentage to determine applicable adjustments for
road and bridge building, road and bridge maintenance, deactivation,
field overhead and general and administrative expenses.
Cost data reported by respondents does not include any construction
or maintenance costs incurred on cutblock, or onblock, roads. We will
further examine. We note that we will examine closely at road
construction and maintenance cost data.
(5) We have included costs reported as ``Sustainable Forest
Management'' costs, as submitted by respondents. These costs include
preparation of forest development plans, management plans, silviculture
prescriptions and cutting permits. Interior costs include post-logging
treatments, including mistletoe eradication, as well as landing/
roadside burning and rehabilitation. Respondents state that these costs
are assumed by industry without reimbursement, credit against stumpage
or other offset. We note that while private harvesters bear certain
costs relating to operational planning and land treatment, the
mandatory costs borne by major tenure holders are, in large part,
unique to those licensees. Based on these factors, we have
preliminarily granted adjustments for forest resource management
activities and an allocation of the general and administrative expenses
have been added to include the costs of these activities.
We have not included any adjustments to administratively-set prices
for costs related to timber sales, such as scaling, residue and waste
management and cruising, engineering and layout. While the GBC reported
that major licensees bear the costs of planning, engineering and
layout, cruising, scaling (including the cost of operating scale sites)
and residue and waste surveys, we see no reason to believe that private
harvesters would not bear many of these same costs. Indeed, there are
several costs related to auction sales that are borne by private
harvesters, including costs of evaluating the timber offered for sale.
Therefore, we have not included these adjustments for either the Coast
or Interior. We will examine this at verification.
To obtain benchmark prices that can be compared to
administratively-set B.C. prices, we used data from the Washington
State Department of Natural Resources (WDNR), as compiled in the
Stumpage Price Report (March 31, 2001), published by the Timber Data
Company. The WDNR data is derived from stumpage sold by public auction
or a sealed bidding procedure. There are no restrictions concerning who
may place a bid, including any foreign entity.
In order to determine our benchmark prices to compare to stumpage
prices in Coastal B.C. and Interior B.C., we first calculated weighted-
average prices, by volume sold during the POI, for each of the major
species in Washington, separately for Western and Eastern Washington.
For Western Washington, which is comparable to the B.C. Coast, we
looked at Douglas fir, true fir/hemlock and red cedar/cypress. For
Eastern Washington, which is comparable to the B.C. Interior, we
examined Douglas fir/larch, hemlock/true fir, ponderosa pine,
lodgepole/spruce and red cedar.
Certain species volume and price data was reported for Coastal and
Interior B.C. for which we did not have Washington state volume and
price data in the Stumpage Price Report. These species made up only a
very small percentage of the volume harvested. For the Coast, cypress
accounted for approximately 4.3 percent of the Coastal sawlog harvest,
while spruce accounted for 2.8 percent. We conferred with a forestry
official who explained that, of the Western Washington species for
which we have data, cypress is most similar in its uses and
characteristics to
[[Page 43203]]
red cedar (see ``Calculation of Stumpage Subsidy in British Columbia''
Memo to the File from Team, dated August 8, 2001). Therefore, for
purposes of this preliminary determination, we have used the Western
Washington red cedar price data to compare to Coastal B.C.''s price
data for cypress. In the case of spruce, we compared the prices we had
for Coastal B.C. spruce to Eastern Washington price data contained in
the Stumpage Price Report for purposes of the preliminary
determination. Similarly, red cedar made up 2.8 percent of the sawlog
harvest for Interior B.C., yet we did not have price data for red cedar
in Eastern Washington. Therefore, for purposes of the preliminary
determination, we used as a proxy Western Washington red cedar prices
to compare to red cedar in Interior B.C. We will attempt to gather more
precise information regarding these species comparisons prior to the
final determination.
We compared B.C. and WDNR data separately for the Coast and
Interior. We compared the stumpage prices reported for the species in
B.C. to the prices reported in Washington state, weight-averaged by
volume sold during the POI. We then converted the prices for each
species from U.S. dollars per thousand board feet to Canadian dollars
per cubic meter using monthly exchange rates from the Bank of Canada
for the POI and the conversion factor described above (see discussion
of Quebec's stumpage system and calculations). We compared the prices
for each species or species group in both the Coast and the Interior to
arrive at price differences for those species or species groups. Next,
we weight-averaged the price differences of all included species or
species groups by the harvested volumes of individual species or
species groups in British Columbia. On this basis, we arrived at per-
unit price differences for Coastal and Interior B.C.
In order to determine the ad valorem subsidy rate for B.C.
stumpage, we first took our calculated per-unit price differences for
both areas, and factored in all necessary adjustments, which are
detailed above. We next multiplied the total provincial harvest of
softwood logs for the POI by the reported percentage of the harvest
going to sawmills to arrive at a total sawmill harvest for the POI. We
multiplied the resulting figure by the per-unit price differences,
factoring in adjustments, to arrive at the total benefits for Coast and
Interior. We then added the benefits together for the Coast and
Interior and divided the sum by the combined total value of softwood
lumber and by-product shipments within B.C. Next, as explained in the
``Subsidy Rate Calculation'' section of this notice, we weight-averaged
the benefit from this provincial subsidy program by the province's
relative share of total U.S exports. The preliminary countervailable
subsidy for the provincial stumpage programs can be found in the
``Country-Wide Rate for Stumpage'' section, below.
3. Province of Ontario
The Government of Ontario (GOO) makes standing timber on Crown land
available to those parties who have purchased harvesting rights. These
rights, often referred to as stumpage rights, apply to a particular
area of Crown land and entitle the purchaser to harvest standing timber
at a price that is set by the GOO's Ministry of Natural Resources
(OMNR), the agency responsible for administering the sale of standing
timber on Crown lands. The GOO maintains two main types of tenure
arrangements under the Crown Forest Sustainability Act (CFSA): (1)
Section 26 Sustainable Forest Licenses (SFLs) and (2) Section 27 Forest
Resource Licenses (FRLs). Section 26 SFLs are set for an original 20-
year term, which are extendable indefinitely and are not transferable.
Four percent of Section 27 FRL holders and 41 percent of Section 26 SFL
holders are integrated.
Generally, an SFL covers all forest land in a management unit. The
GOO reported that SFLs cover 90 percent of the Crown timber land
designated as management units. According to the GOO, SFL holders are
responsible for forest planning, information gathering, monitoring,
basic silviculture, and road building costs. However, the GOO
reimburses many silviculture costs. Section 27 FRLs are set for terms
up to 5 years, can be extended for 1 year, and are not transferable.
Typically, a FRL covers only part of a management unit, and timber
amounts and species are specified. The areas of some FRLs overlap with
SFL areas, but, in such instances, different stands are covered.
To get either license, one must own a resource processing facility
or must have access to a market (i.e., an established arrangement with
a facility to supply wood). Under the CFSA, mills can also gain timber
under non-tenure arrangements, through Section 25 Supply Agreements and
Supply Commitment Letters. According to the available information on
the record, very little standing timber is harvested under Section 25
Supply Agreements or Supply Commitment letters.
In Ontario, lumber producers obtain the forest products they need
in five ways: (1) They pay the Government of Ontario stumpage dues and
harvest timber directly from their tenures on Crown lands; (2) they
purchase logs at arm's-length from a company that harvested it from
Crown lands; (3) they pay stumpage dues and harvest timber from private
timber owners; (4) they purchase logs from a company that harvested
timber from private lands; and (5) they import logs from the United
States.
The GOO stated that it does not distinguish between saw logs and
pulp logs; therefore, in its response to the questionnaire it reported
timber harvest data based on whether the log was destined for a saw
mill or a pulp and paper mill. The value data reported does not include
``in-kind'' services provided by tenure holders, however, the GOO has
provided certain estimates of the total value of services that tenure
holders are obligated to provide. The GOO reported that 30 percent of
the softwood timber harvested from Crown lands is resold by the tenure
holders to third parties.
The GOO reported that integrated and non-integrated firms pay the
same price for stumpage, which is different than what the Department
found in the Lumber III investigation. Stumpage fees are charged after
measurement has occurred, which can occur at the logging site, but
usually occurs at the destination mill. Ministry or company officials
conduct the actual scaling (measurement). The licensee pays the scaling
costs. Measurement can occur quickly or may be delayed for months due
to the weather.
The GOO reported that the overall provincial price for stumpage on
Crown lands that it charges is calculated according to four component
charges: (1) The minimum charge, (2) the forest renewal charge, (3) the
forest futures charge, and (4) the residual value charge. Ontario
reports that some of these component charges differ depending on end
product market prices. Ontario contends that prices paid for stumpage
represent only a portion of the value received by the province from
tenure holders, with the additional value coming from ``in-kind''
payments, which are discussed in the Ontario adjustments section below.
The minimum charge is set administratively every year depending on
the species and the destination of the harvested timber, i.e., whether
it is destined for a saw mill or a pulp and paper mill. The GOO states
that the primary reason for this charge is to generate a secure source
of revenue regardless of market conditions. During the POI, the minimum
charge for 97 percent of Crown timber was set at C$3.28 per cubic
meter, and the
[[Page 43204]]
minimum charge for three percent of Crown timber was set at C$0.59 per
cubic meter. According to the GOO questionnaire response, the Annual
Area Charge that the Department found in Lumber III was combined with
this charge in 1997.
The GOO reported that this charge generates funds necessary to
cover costs of renewing harvest area. This charge covers silviculture
costs, and, since 1997, has been determined annually for each
management unit and each species within the unit. According to GOO, the
monies collected from each management unit go into the Forest Renewal
Trust Fund for use for forest renewal costs within that specific
management unit.
The third component of the overall provincial stumpage price is the
forestry futures charge, which is the same for all management units and
species within the province and is set annually. Money collected from
this charge is paid into the Forestry Futures Trust Fund and is to be
used for costs relating to pest control, fire, natural disaster, stand
management, and the silviculture expenses of insolvent licensees.
During the POI, the charge was C$0.48 per cubic meter. In response to
questions in the Department's supplemental questionnaire, the GOO
indicated that this charge has not changed since the Fund was
established in 1995.
The fourth component of the stumpage charge is the residual value
charge, which is assessed when the price of end-forest products
produced with timber reaches a certain level determined by the OMNR.
For softwood lumber, the RV charge is assessed when the estimated price
a softwood mill receives for lumber exceeds C$351.97 per thousand board
feet. This charge is determined on a monthly basis according to a
formula.
The GOO reports that basic silviculture, not incremental
silviculture, is required to be performed on all harvested Crown land
requiring renewal in order to achieve a sustained yield. The GOO
reports that the aims of basic silviculture are to ensure the stand
regenerates quickly, the desired species regenerates in the area, the
trees in the stand reach the appropriate size, and the stand
regenerates with optimum tree density. Basic silviculture may include,
among other things, site preparation, direct seedling and planting,
tree improvement, vegetation management, and thinning.
The GOO claims that all harvesters of Crown timber are required to
pay the full cost of basic silviculture. Section 26 and 27 tenure
holders pay this through the portion of stumpage (i.e., the forest
renewal charge) deposited into the Forest Renewal Trust Fund; the
forest renewal charges on Crown lands still in transition from OMNR
management to a SFL tenure holder are paid into the Special Purpose
Account. After performing silviculture activities, the tenure holders
submit bills to the Ministry of Natural Resources and are reimbursed in
full for their eligible silviculture costs. According to the GOO, basic
silviculture expenditures eligible for reimbursement include: Cone
collection, seed extraction, tree improvement, stock purchase/delivery,
tree planting, seedling, scarification, site preparation (including
mechanical and chemical burn), tending, tree marking, modified harvest
cutting, and silvicultural surveys. Tenure holders also can charge the
province an additional 10 percent overhead for silviculture management.
Because Ontario tenure holders are reimbursed for 100 percent of
the costs of basic silviculture from the Forest Renewal Trust Fund, we
made an adjustment by subtracting the total value of the forest renewal
charges collected during the POI. In addition, we made a further
adjustment to the administered stumpage price to account for
reimbursement of silviculture overhead costs. We made this adjustment
for the reimbursement of silviculture overhead by deducting 10 percent
of the value of the forest renewal charges collected during the POI.
During verification, we will further examine the silviculture costs
required by the OMNR and reimbursements made.
Ontario claims that license holders make in-kind payments to the
province because of the following requirements: (1) Road construction
and maintenance; (2) forest management planning; (3) forest protection
(fire and insect protection costs); and (4) First Nations relations.
Total in-kind payments are estimated by the GOO on a per unit basis of
C$2.33 per cubic meter for the POI. The GOO claims that SFL holders and
FRL holders have similar obligations on tenures, claiming that FRL
holders have them indirectly through harvesting arrangements with
overlapping SFL holders.
As explained above, the administered stumpage price for each
management unit is based on a mixture of general charges and charges
specific to a particular management unit, species, and destination
mill. To arrive at a single province-wide administered stumpage rate
for use in our stumpage calculations, we divided the total softwood
stumpage fees paid by both SFL and FRL tenure holders during the POI by
the total softwood harvested during the POI. We then added to this
administered stumpage rate adjustments (on a per cubic meter basis) for
public stumpage obligations that would not be incurred, according to
our preliminary analysis, by private harvesters in the United States.
The GOO considers expenses regarding road construction and
maintenance requirements as ``in-kind'' contributions. The GOO
categorizes primary roads as permanent roads, which are constructed,
maintained and used as the main all-weather access system for the
management unit. Secondary roads are categorized as branches of main
roads which are designed to provide 5 to 15 years of all-weather access
for the public. Tertiary roads are temporary access roads, which are
used for several years and then abandoned.
The GOO reported that primary and secondary roads are identified in
20-year management plans submitted with Section 26 SFL licenses.
Section 26 SFL license holders are required to build and maintain
roads, while Section 27 FRL license holders are responsible for all new
forest roads. SFL holders construct and maintain primary, secondary,
and tertiary roads for their logging operations. Since those roads are
available for public use, they must meet government standards. In a
study by KPMG, the GOO provided data on the cost per cubic meter of
road construction and maintenance, according to the following formula:
100 percent of primary road construction, 50 percent of secondary road
construction and none for tertiary road construction costs. We have
made an upward adjustment to the administered stumpage price based on
those reported costs. During verification, we will further examine the
differences in infrastructure and of primary and secondary road costs.
The GOO stated that the cost of forest management planning is
included in the industry obligations in Canada. The CFSA requires that
forest management plans be prepared and approved following the Forest
Management Planning Manual (FMPM). The FMPM requires, among other
things, an environmental, social, and economic description of the
management unit, long-range sustainability planning for a 20-year
period, designation of areas of operation, and a description of the
program for monitoring forest management operations. We have made an
upward adjustment for the Forest Management Planning costs by dividing
the total estimated value of forest management planning costs during
the
[[Page 43205]]
POI by the total softwood harvest. During verification, we will further
examine the forest management planning obligations.
Other requirements on tenure holders established by the OMNR
include assistance with fire suppression (i.e., assisting the OMNR in
the prevention and initial fighting of forest fires). According to the
GOO's June 28, 2000 questionnaire response, the amount of costs
incurred for fire pertain to both SFL and FRL holders. We have made an
upward adjustment for the fire protection costs by dividing the total
estimated value of fire and insect protection costs during the POI by
the total softwood harvest volume during the POI.
The GOO reports that tenure holders provide training and education
for First Nation individuals, and provide financial support for
activities such as the maintenance of native heritage sites. According
to the GOO's June 28, 2000 questionnaire response, the amount of costs
incurred for First Nation relations includes both SFL and FRL holders.
We have made an upward adjustment for this cost by dividing the total
estimated value of these costs during the POI by the total softwood
harvest during the POI.
We preliminarily determine that stumpage prices in the United
States provide the most accurate benchmark. Although data on stumpage
prices are available for other states, we preliminarily determine that
the data we collected for Michigan and Minnesota are the most suitable
for comparison purposes. Michigan and Minnesota are the states in
closest proximity to Ontario, and the data we used reflected actual
sales, appraisals and volumes harvested. Prior to our issuance of the
final determination, we will further examine our decision to use this
Michigan and Minnesota data for comparison purposes.
In order to calculate our cross-border benchmark, we used the
Minnesota 2000 Corrected Public Stumpage Price Review and Price Index
(Minnesota Price Review) published by the Division of Forestry,
Minnesota Department of Natural Resources. The Minnesota Price Review
lists average prices and volumes for all timber sold on state and
federal public lands within Minnesota as well as 10 counties in
Minnesota, as provided by the Minnesota Department of Natural
Resources, from January 2000 through December 2000. We also used a
report from the Michigan Department of Natural Resources, Forest
Management Division (Michigan Stumpage Price Report) which lists
average stumpage prices for all sales from state lands from April 1,
2000 to March 31, 2001. As each source reported average prices for each
species in U.S. dollars per thousand board feet, where possible we
calculated a weighted-average of the prices for softwood sawlogs for
each of the species categories reported by Ontario. We then converted
these prices from US$/MBF to C$/m\3\ using a conversion factor of 5.66
cubic meters to thousand board feet, and the average exchange rate for
the POI as reported by the Bank of Canada.
We calculated the benefit conferred under Ontario's stumpage
program by first taking the difference between the U.S. benchmark
stumpage price and the adjusted administered stumpage price on a per
cubic meter basis. We then multiplied per unit benefit by Ontario's
total softwood sawtimber harvest volume in cubic meters to derive the
total benefit from Ontario's stumpage program.
In Lumber III, the Department calculated the program rate by
dividing ``the total benefit by the value of certain softwood lumber
products (at the first mill/planing mill stage) plus the value of by-
products that are produced during the lumber production process and
sold by lumber producers.'' See Lumber III, 57 FR 22570 at 22576.
Similarly, to calculate the program rate, we divided the total benefit
by the total value of Ontario's softwood lumber production plus the
total value of Ontario's softwood lumber by-products for the POI. Next,
as explained in the ``Subsidy Rate Calculation'' section of this
notice, we weight-averaged the benefit from this provincial subsidy
program by the province's relative share of total U.S. exports. The
preliminary countervailable subsidy for the provincial stumpage
programs can be found in the ``Country-Wide Rate for Stumpage''
section, below.
4. Province of Alberta
The province of Alberta provides stumpage under three main tenure
arrangements: (1) Forest Management Agreements (FMAs), (2) Timber Quota
Certificates (quotas), and (3) Commercial Timber Permits (CTPs). FMAs
are mainly used by integrated and larger timber companies, quotas are
used more by medium-sized companies, and CTPs primarily are used by
smaller ones.
An FMA is a long-term (20 years and renewable) agreement between
the Government of Alberta (GOA) and a company. The terms and conditions
are fully negotiated and approved by the Provincial Cabinet. FMA
holders gain the right to harvest timber with the approval of an annual
operating plan. An FMA includes the obligation to manage, on a
sustained yield basis, the timber within the Agreement Area.
FMAs are provided to companies that require the security of a long-
term tenure. In addition to paying stumpage fees, FMA holders are
responsible for a number of in-kind services, including construction
and maintenance of roads, reforestation of all areas harvested, and any
other obligations required by the Department of Alberta Sustainable
Resource Development (ASRD). Under the FMA tenure arrangement, recent
negotiations have led to an agreement to use regulation rates on many
FMAs (i.e., the rates set out in the Timber Management Regulation (the
TMR)). Since 1994, dues for coniferous timber harvested under the
authority of a FMA and consumed in sawmills usually are paid at the
general rates of timber dues as set out in the TMR. FMAs generally have
agreed to pay regulation rates for pulpwood as well. The timber dues
paid by FMA holders can also be negotiated between the ASRD and the FMA
holder.
A quota certificate is a long-term (up to 20 years and renewable)
right to harvest a share of the annual allowable cut (AAC) as
established by the ASRD. A timber license is required for a quota
holder to harvest the timber. Quota holders are responsible for road
construction and maintenance, reforestation of all areas harvested, and
operational planning. Quotas are sold by public tender or at an auction
to the highest bidder. The charge for competitively sold quotas
includes the timber dues as set out in the TMR, holding and protection
charges, and a bonus price. The quota gives the holder license to
harvest specific species and maintain utilization standards. For each
year that a quota is granted, the holder must prepare and submit, for
ASRD approval, an annual operating plan. There were no quotas sold
during the POI; however, there were outstanding quotas. Together, FMA
and quota holders accounted for approximately 92 percent of the
softwood sawlog harvest on provincial forest lands in fiscal year 2000-
2001.
CTPs are short-term (averaging 2-3 years) tenure arrangements used
to allocate smaller volumes of timber. CTPs are sold either directly or
at a public auction. Non-competitively-sold CTPs must pay the timber
dues as set out in the TMR. There are two types of competitively-sold
CTPs. The first type includes a bid price on top of the upset price,
which is the lowest price a seller will accept, as well as other costs
related to in-kind services. The second type of competitively-sold CTPs
includes a bid price on top of the
[[Page 43206]]
minimum auction price, other costs related to in-kind services, and the
TMR rate for timber dues. A CTP holder must also pay annual holding and
protection charges. If the CTP holder does not also hold another major
tenure (i.e., an FMA or a quota), the CTP holder must pay a
reforestation levy. In addition, a CTP holder must provide an annual
operating plan, which includes harvesting and road construction and
maintenance. Three hundred eighty-four coniferous CTPs were sold during
the POI.
The administered price for non-negotiated FMAs and quota tenure
holders is set by using the TMR timber dues and in-kind cost
adjustments. Timber dues, as established in Schedule 3 of the TMR,
describe the method of calculation of the rates of dues payable for
coniferous timber used to make lumber products in a given month based
on an average price for lumber in that month. This average is
calculated by taking the weekly price for 1000 board feet of kiln-
dried, 2x4, Standard and Better, Western Spruce-Pine-Fur for the last
week ending in the month preceding the payment month and for the three
immediately preceding weeks, as shown in the publication Random Lengths
Lumber Report. These four weekly prices are converted to Canadian funds
and then averaged. This amount is found in Schedule 3, Table Part A and
Part B, Column 1.\14\ Schedule 3 provides the general rate of timber
dues for coniferous timber used to make lumber, pulp, or roundwood
timber products. The figures provided in Schedule 3 are the same for
pulpwood and sawlogs.\15\ Column 1 provides a range of C$/1000 board
feet; the averaged amount as noted in Column 1 has a corresponding
cubic meter value in Column 2. Column 2 represents the timber dues that
an FMA tenure holder pays for billed volume of softwood timber. The
timber dues are determined after the product has been produced. In
addition, Schedule 6 covers the timber dues for timber used to make
veneer.
---------------------------------------------------------------------------
\14\ Table Part A covers the first 107,296 m3 of
roundwood, while Part B covers excess over 107,296 m3 of
roundwood.
\15\ We note that under FMAs, prices charged for timber used in
pulp production are the same as timber dues charged for roundwood
and chips. The GOA has indicated that sawlogs and pulplogs are
indistinguishable prior to processing; the distinction in name
relates exclusively to their ultimate mill destination. In this
investigation, subject merchandise does not include pulpwood.
Normally, we would make an adjustment to exclude pulpwood; however,
since the GOA does not differentiate between pulplogs and sawlogs,
we are not making such an adjustment.
---------------------------------------------------------------------------
To derive Alberta's administratively-set stumpage rate that we used
in our calculations, we divided the total timber dues charged to FMA,
quota, and CTP tenure holders during the POI for each species by the
total softwood stumpage billed under each tenure during the POI for
each species. In this manner, we obtained a weighted-average stumpage
price per species that was paid by tenure holders during the POI. To
this number, we added per unit adjustment costs.
Although the price-determining factors are different between
administratively-set stumpage sales in Alberta and market-driven
stumpage sales in Montana state (see Cross-border Benchmark Stumpage
Price section below), an examination of stumpage prices alone is not
sufficient to determine whether timber is provided for less than
adequate remuneration. Major tenure holders in Alberta are required to
fulfill certain forest management and timber-harvesting obligations,
including silviculture and forest management activities. Therefore, we
preliminarily determine that it is necessary to factor in certain cost
adjustments to the administered prices in Alberta to reflect the costs
of certain mandatory activities that are not factored into the
administered price.
For the following adjustments made by the Department, we relied on
cost data submitted by respondents. For adjustments, we relied on costs
borne by tenure holders, since respondents provided cost data based on
an independent consultant's report provided to the province by tenure
holders. During verification, we will further examine all of the
adjustments.
As explained below, we have made adjustments for road construction
and maintenance, basic reforestation, forest management planning, fire,
insect and disease costs, environmental protection costs, and holding
and protection charges.
Respondents report that major tenure holders are responsible for
all costs associated with building and maintaining roads. Respondents
stated that access for timber harvesting and extraction is completed at
the expense of the stumpage holder and that the province does not build
or maintain any access for the harvesting of timber.
We have no information on costs that private harvesters in Montana
must pay for construction and maintenance associated with roads.
Therefore, we included as an adjustment the entire cost of road
building and maintenance as reported by respondents.
Major tenure holders are required to perform certain activities
pertaining to the reforestation of their timber stands. These
activities, referred to as silviculture, are broken down into two
types--basic and intensive. As stated in the TMR and the GOA's August
6, 2001 supplemental questionnaire response, major tenure holders must
perform basic silviculture, which includes regeneration or
reforestation surveying, site preparation, planting, brushing, weeding,
spacing and seedling trees, and stand cleaning. Intensive reforestation
activities, which are not required by the GOA, include pruning,
fertilizing, pre-commercial thinning, spacing, weeding, and genetics. A
licensee may perform intensive silviculture on a voluntary basis.
We added basic reforestation costs incurred by major tenure holders
to the administered rate since major licensees are required to perform
these activities, whereas private harvesters in Montana are not
required to do so. We made no adjustment for costs related to
incremental silviculture activities because major tenure holders are
not required to perform these activities.
Reforestation levies are charged to CTP tenure holders if the
tenure holder does not concurrently hold an FMA or a quota. If a CTP
licensee also holds an FMA, then all reforestation activities are the
responsibility of the FMA holder. If a CTP is held by a quota holder,
then it depends on the type of quota whether or not the CTP holder will
be responsible for paying a levy or will be responsible for completing
reforestation activities. If a CTP holder is obligated to pay a levy,
he will pay this levy to the Forest Resource Improvement Association of
Alberta (FRIAA), who will carry out the reforestation work. We took the
total value of the reforestation levies paid during the POI and added
it to the other adjustments.
Forest management planning, as noted in the FMA Regulations at
10(1), states that a company must submit for the Minister's approval a
preliminary forest management plan (FMP) within twelve months. This
includes a description of the managing method used for the timber
harvesting. After 36 months, the company must submit a detailed FMP for
a one full rotation and it must identify a sustainable AAC. The FMP
includes reforestation and management practices, harvesting schedule
and road developments.
Major tenure holders are required to perform forest protection
activities on Crown lands, including fire prevention and suppression,
and pest management activities. Initial fire suppression, maintaining
specified equipment levels and fire readiness plans are obligations of
licensees. Major licensees are also required to combat and extinguish
all fires in their operating areas. As for
[[Page 43207]]
insect and disease protection measures, such as spraying or surveys to
measure the level and extent of infestation by a particular insect or
disease, these are generally carried out by licensees. As a result, we
have included adjustments for these additional costs for all tenure
holders as well as adjustments for the allocation of general and
administrative activities associated with these activities.
Environmental costs include those expenses paid by the tenure
holder in order to coordinate and comply with federal and provincial
environmental regulations.
According to the GOA's supplemental questionnaire response, holding
and protection charges are an additional form of cash payment paid by
tenure holders. The charge is for holding the timber stumpage rights
and for a portion of the costs of protecting the land base. Moreover,
the rates for holding and protection charges for CTPs and quotas are
prescribed by the TMR, while the holding and protection charges for
FMAs are specified in the FMA agreement.
For the reasons stated below, we did not make adjustments for
intensive reforestation, Geographic Information System (GIS) costs,
forest care, overlapping tenure costs, scaling, inventory, and land use
administration.
We did not include intensive reforestation because this level of
reforestation is not mandated by the GOA for tenure holders. GIS is a
computer system capable of assembling, storing, manipulating, and
displaying geographically referenced information. Respondents stated
that GIS is used in forestry to manage forests for timber and non-
timber purposes. We preliminarily determine that costs related to GIS
are not mandatory and are not borne exclusively by tenure holders in
Alberta.
Respondents stated in their supplemental questionnaire response
that Forest Care is a certification program developed by member
companies of the Alberta Forest Products Association as part of their
commitment to protect the environment and sustain the public forest.
Based on the information provided by respondents, we preliminarily
determine that costs related to Forest Care are not mandatory and are
not borne exclusively by tenure holders in Alberta.
Respondents stated in their supplemental questionnaire response
that in Alberta one tenure may overlap with another and that the costs
of managing this overlap would normally be borne by the landowners.
However, based on the information provided by respondents, we
preliminarily determine that costs related to overlapping tenures are
not mandatory and are not borne exclusively by tenure holders in
Alberta.
Based on the information provided by respondents, we preliminarily
determine that costs related to scaling are not mandatory and are not
borne exclusively by tenure holders in Alberta.
Moreover, we did not make an adjustment for costs related to
inventory because we preliminarily determine that these costs are not
mandatory and are not borne exclusively by tenure holders in Alberta.
Due to insufficient information on the record, we have
preliminarily determined not to adjust for land use administration
costs. We note that this and all other adjustments, both allowed and
not allowed, will be examined at verification.
In Table 19, Exhibit AB-S-43, of the GOA's June 28, 2001
questionnaire response, we discovered that some softwood lumber was
harvested from deciduous dispositions without paying stumpage. We
calculated the benefit for these free trees by multiplying the
benchmark stumpage rate by the amount harvested for free, and we added
this benefit into the calculation of our total benefit.
As explained above, we have preliminarily determined that stumpage
prices in the United States provide the most accurate benchmark. In the
case of Alberta, we are using data from the state of Montana, which
borders Alberta, to calculate our cross-border benchmark. We obtained
this data from the Stumpage Price Report (March 31, 2001), published by
the Timber Data Company. From the Stumpage Price Report we obtained the
total weighted-average price for all species of timber in Montana, as
provided by the United States Forest Service (USFS) and the Montana
Department of Natural Resources and Conservation (DNRC), from April
2000 through March 31, 2001. We converted these figures from MBF to
cubic meters using the conversion factor of 5.66. We also converted the
data from U.S. dollars to Canadian dollars, using monthly average
exchange rates from the Bank of Canada in effect during the POI, in
order to derive our basic stumpage rate in C$/m\3\ for each species.
In order to compare the species mix in Alberta and Montana, we
calculated the difference between provincial and Montana stumpage rates
for each softwood species harvested in provincial forests. We took the
difference for each species category and multiplied it by Alberta's
billed timber volume for each species category to arrive at the
weighted benefit. We multiplied this amount by the portion of Alberta's
species mix to derive a weighted-average benefit amount per species
category.
To calculate the benefit under Alberta's stumpage system, we first
multiplied the adjusted price difference described above by the total
softwood harvest billed by tenure holders during the POI. Next, we
calculated the provincial benefit. We note that in Lumber III, we
calculated the provincial benefit by dividing ``the total benefit by
the value of certain softwood lumber products (at the first mill/
planing mill stage) plus the value of by-products that are produced
during the lumber production process and sold by lumber producers.''
See Lumber III, 57 FR 22570 at 22576. Consistent with that approach, we
calculated a stumpage benefit amount and added the free trees from
hardwood stands benefit in order to derive the total benefit. We took
the total benefit and divided by the value of softwood lumber products
plus the value of by-products to derive the provincial benefit rate.
Next, as explained in the ``Subsidy Rate Calculation'' section of this
notice, we weight-averaged the benefit from this provincial subsidy
program by the province's relative share of total U.S. exports. The
preliminary countervailable subsidy for the provincial stumpage
programs can be found in the ``Country-Wide Rate for Stumpage''
section, below.
5. Province of Manitoba
The Government of Manitoba (GOM) states that the province owns 94
percent of the forest lands and the federal government owns one
percent. Private woodlot owners own the remaining 5 percent of forests.
The GOM makes standing timber available to those parties that have
purchased harvesting rights. These rights entitle the purchaser to
acquire timber at a price, known as the stumpage price, set by the
Forestry Branch of the Department of Conservation, the agency
responsible for administering the sale of standing timber of Crown
lands.
In Manitoba, there are three ways to acquire timber cutting rights:
(1) A Forest Management License (FML); (2) a Timber Sales Agreement
(TSA); or (3) a Timber Permit (TP). An FML is a long-term (up to 20
years) license, which may be renewed every five years, to harvest a
stated volume of timber in a particular area. Licensees must manage
their area
[[Page 43208]]
to ensure the (i) sustained yield, (ii) achievement of the maximum
growth potential, (iii) a mandated standard of environmental quality,
and (iv) and public right of access for recreational and other uses of
the forest. The licensee must submit an annual operating plan and
additional harvesting reports to the Forestry Branch. Stumpage must be
paid within 30 days of the end of each quarter in which the timber is
cut and scaled.
The TSA is a short-term (up to five years) right to harvest a
stated volume of timber in a specific area generally issued to small
and medium sized operators. There were 204 such agreements in effect
during the POI. Licensees with TSAs harvest both hardwood and softwood.
Similar to the FMLs, the TSA holders must have an annual operating
plan. Like FML holders, the stumpage must be paid within 30 days of the
end of each quarter in which the timber is cut and scaled.
The TPs are short-term (up to one year) licenses where license
holders can only harvest a very small amount of timber. TP holders
generally use the license to harvest firewood (softwood and hardwood)
for their own use. Stumpage must be paid when the permit is issued.
There were 2,617 permits in effect during the POI.
Manitoba also has a quota system. The quota is a five-year
renewable fixed allocation of timber; whereas, a TSA or TP provides
direct access to the timber. The GOM states that all but a few quota
holders also have timber sale agreements.
Tenure holders pay stumpage fees at either the standard provincial
rate or a rate negotiated with the province. The Forestry Service has
divided the province into eight different forest regions. The standard
provincial rate varies depending on which of the forest regions the
timber is harvested from and whether the wood type is Aspen/Poplar or
all wood other than Aspen/Poplar. Otherwise, the rates do not vary by
species or grade. The GOM used a base rate set by administrative
determination for calculating the stumpage price for TS holders and TP
licensees. The base rates were then adjusted according to changes in a
weighted average of two Statistics Canada industrial product price
indices to derive an annual rate.
The GOM reports the per unit stumpage amounts by dividing the total
value of stumpage collected by the total quantity on a tenure and
species-specific basis. These values include a Fire Protection Charge
(FPC) for holders of TSAs and FMLs. TSAs and TPs also pay a Forest
Renewal Charge (FRC) to the province. The values do not include the un-
reimbursed costs that FMLs incur for renewal activity (i.e., basic
silviculture).
In the case of Manitoba, we are using data from the state of
Minnesota, which borders Manitoba, to calculate our cross-border
benchmark. We based the Minnesota stumpage prices on the Minnesota 2000
Corrected Public Stumpage Price Review and Price Index (Minnesota Price
Review) published by the Division of Forestry, Minnesota Department of
Natural Resources. The Minnesota Price Review lists average prices and
volumes for all timber sold on state and federal public lands within
Minnesota as well as 10 counties in Minnesota, as provided by the
Minnesota Department of Natural Resources, from January 2000 through
December 2000.
We preliminarily determine that there are certain costs that Crown
timber harvesters absorb that Minnesota harvesters do not; therefore,
we are adding in certain adjustments to the derived basic stumpage rate
for Manitoba. In terms of adjustments, the GOM provided details about
the un-reimbursed costs of basic silviculture activities performed by
Tolko, the only FML that harvests softwood sawtimber. The GOM said data
from Tolko's Annual Operating Report. We weighted the un-reimbursed per
unit costs reported for Tolko by the percentage of total volume that
the FML softwood harvest represents and added this amount to the
administered stumpage price.
The GOM states that the TSA and TP holders pay the province fees
related to basic silviculture; however, such fees are already included
in the stumpage. An upward adjustment to the administered stumpage
price would be double-counting.
We are including the following costs in the adjustment: (1) General
silviculture; (2) site preparation; (3) scarification; (4) tree
planting; (5) seedling purchase; (6) regeneration surveys; (7)
silviculture projects; (8) cost of developing the annual report; and
(9) forestry administration. Although the GOM reported the total
amounts that Tolko incurred for expenses related to tree improvement
and herbicide release, we did not include these expenses because the
amounts were so small that their inclusion would not have any impact on
the calculation. In fact, the GOM did not calculate a per unit amount
for these because the amounts were insignificant.
We did not include expenses related inventory because it is an
industry-wide cost and is borne by benchmark harvesters. We did not
include the expenses of a Geographic Information System and dwarf
mistletoe control because these expenses were not required by the
tenure arrangement. We did not include the expenses incurred by the
government for renewal of areas outside of FMLs because it is an
expense incurred by the government; not an unreimbursed expense
incurred by the licensee.
The GOM states that FML and TSA tenure holders bore the expenses
for additional in-kind costs that for which the GOM does not reimburse
the tenure holders. Although the tenure holders incur substantial in-
kind costs, the GOM was unable to report the costs of these activities
because tenure holders are required to report their commercial forest
activities, but not the cost of those activities. We will examine this
issue further at verification.
Manitoba reports the stumpage volume and value by tenure type and
species. The GOM states that the species harvested in Manitoba are
white and black spruce and jack pine (collectively ``spruce/pine'').
However, Manitoba also includes an ``other'' category. We will examine
the species-makeup of this category at verification.
To calculate the benefit, we derived a species-specific (i.e.,
``spruce/pine'' and ``other'') per unit stumpage cost in Manitoba by
summing the species value over volume. Next, we calculated an average
``spruce/pine'' price, weighted by the percentage of spruce and pine
volume. The GOM reported the per unit costs incurred by Tolko as a
ratio of its costs over its sawlog harvest. In order to apply this
adjustment, we weighted the per unit cost by the percentage of the
total harvest that the FML harvest represents to account for the fact
that the TSA and TP holders do not incur this cost. We added these
revised adjustments to the ``spruce/pine'' stumpage price and the
``other'' price.
As a benchmark for the ``spruce/pine'' rate, we calculated a
weighted average price of species identical (i.e. white and black
spruce, and jack pine) to the species in Manitoba. We then took the
difference between the benchmark and the administratively-set stumpage
rate. We classified the remaining species found in the Minnesota Price
Review in an ``other'' category which we used as a benchmark for the
``other'' category found in Manitoba. Again, we took the difference
between the administratively-set stumpage rate and the benchmark
stumpage rate. We weight-averaged the two differences by the volumes of
``spruce/pine`` and ``other'' found in Manitoba. Next, we multiplied
this rate by the softwood sawlog harvest to
[[Page 43209]]
derive the total benefit. We then divided the benefit by the value of
Manitoba's total softwood lumber shipments (including the by-products).
During verification, we will further examine the figures used in the
denominator of the provincial benefit calculation. Next, as explained
in the ``Subsidy Rate Calculation'' section of this notice, we weight-
averaged the benefit from this provincial subsidy program by the
province's relative share of total U.S. exports. The preliminary
countervailable subsidy for the provincial stumpage programs can be
found in the ``Country-Wide Rate for Stumpage'' section, below.
6. Province of Saskatchewan
In Saskatchewan, the northern half of the province is designated as
Forest Crown land. According to the Government of Saskatchewan (GOS),
only the lower third of this land contains harvestable timber. This
harvestable area where commercial forestry activities occur is referred
to as the Commercial Forest Zone (CFZ). The CFZ comprises approximately
12 million hectares. Of this amount, the GOS states that 55 percent
contains productive or harvestable land. The GOS states that there are
no private lands within the CFZ. In Saskatchewan, all private lands are
generally located south of the CFZ. According to information submitted
by the GOS, Crown lands accounted for approximately 89 percent of the
softwood sawlogs harvested in Saskatchewan during the POI. Private and
Federal lands accounted for 9 and 1 percent of the softwood sawlog
harvest, respectively.
The right to harvest timber on Crown lands, or stumpage, can only
be acquired by a license pursuant to Saskatchewan's Forest Resources
Management Act. These licenses come in three forms: Forest Management
Areas (FMAs), Forest Product Permits (FPPs), and Term Supply Licenses
(TSLs). The Saskatchewan Environment and Resource Management Department
(SERM) is the government agency responsible for the administration of
provincial timber programs, which includes setting the price of
stumpage in the province.
FMAs grant the licensee the right to harvest Crown timber for a
term not exceeding 20 years. At every fifth year of the FMA, the term
may be extended for an additional 5 years. According to the GOS, the
FMAs set out the rights and responsibilities of the licensee which, in
particular, focus on the long-term sustainable use of Crown land
covered by the agreement. The GOS negotiates the terms of FMAs with
each license. Thus, no standard terms or conditions apply to FMAs.
All FMAs, however, must pay certain charges. FMA licensees are
charged forest management fees. These fees vary across the province in
relation to the preponderance of timber types within the FMA and the
costs associated with reforestation of the species that exist there.
Forest management fees, also referred to as forest renewal fees, are
used to conduct the province's basic silviculture programs, which
include surveys, site preparation, mechanical brushing, cone
collection, chemical brushing, planting, fertilizer, spacing,
administrative costs, seedlings, and other miscellaneous costs.
Four FMAs were in effect during the POI: the Mistik Management FMA,
the L&M Wood Products FMA, the Weyerhaeuser FMA, and the Pasquia-
Porcupine FMA, which is also a FMA of Weyerhaeuser. All four of these
FMA licensees own their own mills. According to information submitted
by the GOS, these four FMAs accounted for approximately 86 percent of
the softwood sawlog harvest in the CFZ. The GOS states that its policy
is to grant FMAs to large mills requiring large volumes of timber and
that it requires FMA licensees to operate their facilities on a regular
basis. Failure to do so could result in the termination of the FMA and
the loss of the licensee's tenure. The GOS states that the requirement
relates to the province's responsibilities as a landowner as well as to
good forest management practices.
FPPs are the second type of stumpage license issued by the GOS.
FPPs are annual licenses that confer the right to harvest specified
forest products. Each FPP expires on either the date specified on the
permit or at the end of the GOC's fiscal year, whichever comes first.
FPPs cannot be renewed. Approximately 700 FPPs were issued during the
POI. During the POI, FPPs accounted for 14 percent of the province's
softwood sawlog harvest. The terms and conditions of FPPs vary in
accordance with the type of forest product harvested. The GOS states
that it allows FPP licensees to operate in FMA areas. In those
instances, the FPPs must pay forest management fees to the FMA
licensee. The rates charged to the FPPs are equal to those charged to
the FMAs by the GOS. The FMAs then forward these fees to the GOS. FPPs
operating on lands not covered by a FMA are required to pay forest
management fees directly to the province.
TSLs are similar to FMAs, but have a term of 10 years. As is the
case with FMAs, TSLs must pay processing facility and forest management
fees. There was only one TSL in effect during the POI, Green Lake Metis
Wood Products of Green Lake. The GOS states that this facility was
destroyed by a fire during the POI, and thus, only operated on a
limited basis during this period. The GOS states that the amount of
fees paid by this TSL licensee during the POI was negligible.
The SERM also charges licensees stumpage dues on harvested trees.
There are two steps to the SERM's method of setting stumpage rates.
These steps apply to all tenure arrangements. The first part is a base
rate of dues which applies to each cubic meter harvested during the
year. The second part is an incremental rate which applies to a
percentage of product value above a threshold trigger price.
Information from the GOS indicates that the incremental rates for
softwood sawlogs are a partial function of lumber prices as reported in
Random Lengths Lumber Report, an industry trade publication. With
respect to the stumpage dues paid by FMAs, the GOS states that while
each FMA uses the same basic structure, each FMA has individually
negotiated its base and incremental stumpage rate with the province.
These negotiated dues vary among FMAs according to tree size and
species. The GOS states that these negotiated rates reflect the
relative value of the timber included in the FMA license and that the
licenses are negotiated in an arm's-length transaction.
Payments of stumpage dues vary according to license. FMA licensees
submit their base dues on a monthly basis. Incremental dues are paid
either monthly or quarterly in accordance with the terms of the
particular FMA. FPP licensees have three payment options. FFP licensees
may pay stumpage dues: (1) When the permit is issued, (2) in equalized
payments for a maximum of three equalized payments throughout the year,
or (3) monthly, based on the timber scaled during that period. Up-front
payment and equalized payment options are calculated based on the total
volume of timber included in the FPP. The amount of dues payable is
determined through scaling the amount of timber harvested. The GOS
states that scaling is conducted by licensed scalers.
To derive Saskatchewan's administratively-set stumpage rate, we
divided the total value of softwood sawlogs, by species, by the total
volume harvested, by species, to derive the per unit price per species.
We categorized the species in two sets: (1) A Douglass/Larch/Tamarack
(DLT) mix; and (2) a Spruce-Pine-Fir (SPF) mix, which includes white
spruce, jack pine, black
[[Page 43210]]
spruce, and balsam. Additionally, we included the total volume of
veneer logs harvested in our calculation of the per unit stumpage
price. To arrive at a per unit stumpage price for veneer logs, we
weight-averaged the per unit prices by volume. We then included the per
unit amounts for veneer logs in the per unit stumpage price for SPF.
We obtained a weighted-average stumpage rate per species category
by taking the stumpage price for DLT and SPF, which included veneer
logs, mixes and divided by total volume harvested as attributable to
category mix. To this stumpage rate we added per unit adjustment costs,
in order to derive Saskatchewan's administratively-set stumpage rate.
Tenure holders in Saskatchewan are required to fulfill and/or pay
for certain forest management and timber-harvesting obligations,
including silviculture and forest management activities. Therefore, we
preliminarily determine that it is necessary to factor in certain cost
adjustments to the administered prices in Saskatchewan to reflect the
costs of certain mandatory activities that are not factored into the
administered price.
For the following adjustments, we relied on cost data submitted by
respondents. For all adjustments, we relied on costs borne by the
tenure holders, since respondents provided cost data based on the
responses of the tenure holders.
We have made adjustments for forest management planning and basic
silviculture. For the calculation of the total forest management fee,
we multiplied the per-unit forest management fee, for FMAs and FPPs,
and the total volume of sawlogs and veneer logs harvested during the
POI. We then added the basic silviculture costs incurred by FMA tenure
holders, as reported by the GOS, to the total forest management fees
paid during the POI to arrive at the total value of adjustments during
the POI.
In addition to the fees paid by FMA and FFP license holders,
described above, the GOS stated that FMA and FPP licensees must also
pay as a condition of their license several in-kind costs related to
forest management. These include, but are not limited to, long-term
operation, planning, environment plans, periodic independent audits of
forest management activities and scaling-related costs, including
payments for scaling services, scaler training, and scaling plans. In
addition, the GOS states that FPPs are also required to pay road user
fees as determined by local governments within the province. We did not
make an adjustment because there is not enough information on the
record that would allow us to quantify these in-kind costs. We will
further examine this issue during verification.
As explained above, we have preliminarily determined to use
stumpage prices in the United States for our benchmark. In the case of
Saskatchewan, we are using data from the state of Montana, which
borders Saskatchewan, to calculate our benchmark. We obtained this data
from the Stumpage Price Report. Specifically, we used the weighted-
average prices for each species in Montana, as provided by the United
States Forest Service (USFS) and the Montana Department of Natural
Resources and Conservation (DNRC), from April, 2000 through March,
2001. We converted these figures from thousand board feet to cubic
meters using the conversion factor of 5.66. We also converted the
prices from U.S. dollars to Canadian dollars, using monthly average
exchange rates from the Bank of Canada in effect during the POI, in
order to derive our basic stumpage rate in C$/m\3\ for each species.
We then calculated the difference between provincial and Montana
stumpage rates for each species harvested in provincial forests. To
arrive at a weighted average price differential, we weighted each
species mix's price differential in proportion to its share of
Saskatchewan's harvested volume for the POI to arrive at an overall
per-unit price differential.
In order to calculate the benefit under Saskatchewan's stumpage
system, we first took our calculated per unit price differential and
factored in necessary adjustments, which are detailed above. We next
multiplied the per unit price differential by the harvested volume to
arrive at the total benefit. We calculated the provincial rate by
dividing the total benefit by the value of softwood lumber shipments,
including the value of by-product shipments. Next, as explained in the
``Subsidy Rate Calculation'' section of this notice, we weight averaged
the benefit from this provincial subsidy program by the province's
relative share of total U.S. exports. The preliminary countervailable
subsidy for the provincial stumpage programs can be found in the
``Country-Wide Rate for Stumpage'' section, below.
Country-Wide Rate for Stumpage
The preliminary countervailable subsidy rate for the provincial
stumpage programs is 19.21 percent ad valorem.
II. Other Programs Preliminarily Determined To Confer Subsidies
Programs Administered by the Government of Canada
1. Non-Payable Grants and Conditionally Repayable Contributions From
the Department of Western Economic Diversification
According to the response of the GOC, the Western Diversification
Program (WDP) was introduced in 1987, and is administered by the
Department of Western Economic Diversification, a department of the
GOC. The WDP supports projects that promote or enhance economic
development or diversification in Western Canada, including the
initiation, promotion or expansion of enterprises, the establishment of
new businesses, research and development activities, and the
development of business infrastructure. As part of its mandate to
assist in the development of Western Canada, the WDP provides non-
repayable contributions (grants) to companies located in Western
Canada.
According to the GOC, seven companies in the softwood lumber
industry have received grants in the last ten years, the period
corresponding to the AUL of the softwood lumber industry.
We preliminary determine that this program is specific under
section 771(5A)(D)(iv) of the Act because assistance under this program
is limited to designated regions in Canada. In addition, the provision
of grants by the GOC constitutes a financial contribution as provided
within the meaning of section 771(5)(D)(i) of the Act.
Both recurring and non-recurring grants were provided under this
program. In accordance with Sec. 351.524 (a) and (b)(2) of the CVD
Regulations, all grants provided under this type of program are
expensed in the year of receipt. Therefore, to calculate the benefit
during the POI, we summed the amount of grants provided to all
producers/exporters of softwood lumber during the POI and divided that
amount by the f.o.b. value of total sales of softwood lumber for the
POI. Using this methodology, we preliminarily determine the
countervailable subsidy from this program to be less than 0.005 percent
ad valorem.
2. Federal Economic Development Initiative in Northern Ontario (FedNor)
FedNor is an agency of Industry Canada, a department of the GOC,
which encourages investment, innovation, and trade in Northern Ontario.
Specifically, FedNor's mandate
[[Page 43211]]
is to promote economic growth, diversification, job creation and
sustainable, self-reliant communities in Northern Ontario. According to
the response of the GOC, FedNor has historically provided assistance to
not-for-profit entities and to small businesses. In March 1996, FedNor
was re-engineered so that nearly all direct funding to commercial
businesses was eliminated. According to the GOC, most of FedNor's
assistance is provided to Community Futures Development Corporations
(CFDCs). CFDCs are not-for-profit community organizations.
CFDCs undertake strategic community planning activities, provide
small business counseling and advisory services, and offer commercial
loans to small and medium-sized businesses. Besides contributing to the
operating costs of the CFDCs, FedNor also provides investment funds to
the CFDCs in Northern Ontario that are used by the CFDCs to provide
loans to small and medium-sized businesses in the region. According to
the response of the GOC, once FedNor provides funds to the CFDCs,
FedNor has no involvement in any lending decisions made by the CFDCs.
FedNor usually will only require that the interest rate charged by the
CFDCs on its loans be at least the prime rate plus two percent.
The GOC stated in its response that during the ten year period
corresponding to the AUL, FedNor provided direct assistance, in the
form of grants, to entities in the softwood lumber industry on six
occasions. In addition, according to the response of the GOC, the CFDCs
had 40 loans outstanding during the POI to companies that are producers
of softwood lumber.
Because this program is limited to certain regions in Ontario, we
preliminarily determine that assistance provided under FedNor is
specific within the meaning of section 771(5A)(D)(iv) of the Act. With
respect to the loans provided under this program by the CFDCs, we
preliminary determine that no benefit is provided within the meaning of
section 771(5)(E)(ii) of the Act because the reported interest rates
charged on each of these loans is equal to or higher than the interest
rate charged on comparable commercial loans, as noted in the
``Benchmark for Loans and Discount Rate'' section, above. However, with
respect to the grants provided by FedNor, we preliminarily determine
that a financial contribution within the meaning of section
771(5)(D)(i) of the Act has been provided to the softwood lumber
industry.
In accordance with Sec. 351.524 of the CVD Regulations, all grants
provided under this program are expensed in the year of receipt.
Therefore, to calculate the benefit provided under this program, we
summed the amount of grants provided to all producers/exporters of
softwood lumber during the POI and divided that amount by the f.o.b.
value of total sales of softwood lumber for the POI. Using this
methodology, we preliminarily determine the countervailable subsidy
from this program to be less than 0.005 percent ad valorem.
Programs Administered by the Province of British Columbia
1. Forest Renewal B.C.
In June 1994, the GBC enacted the Forest Renewal Act to renew the
forest economy of British Columbia by, among other things, improving
forest management of Crown lands, supporting training for displaced
forestry workers, and promoting enhanced community and First Nations
involvement in the forestry sector. To achieve these goals, the Forest
Renewal Act created Forest Renewal B.C., a Crown corporation. The
corporation's strategic objectives are implemented through three
business units: the Forests and Environment Business Unit, the Value-
Added Business Unit, and the Communities and Workforce Business Unit.
While much of the activities of Forest Renewal BC are unrelated to the
provision of assistance to softwood lumber producers, petitioners
allege that this agency provided both grants and loans to producers of
softwood lumber.
According to the GBC's response, Forest Renewal B.C. generally does
not make direct loans to individual softwood lumber companies. Instead
it provides funds to community groups and independent financial
institutions, which may provide loans to companies involved in softwood
lumber production. Forest Renewal B.C. has made direct loans and
provided loan guarantees directly to softwood lumber producers on four
occasions. In each of these instances, the loan assistance was provided
in conjunction with the Job Protection Commission. See ``Job Protection
Commission'' section, below. With respect to the loans provided by
Forest Renewal B.C. (through intermediaries or direct), we
preliminarily determine that no benefit is provided within the meaning
of section 771(5)(E)(ii) because the reported interest rates charged on
each of these loans is equal to or higher than the interest rate
charged on comparable commercial loans, noted in the ``Benchmark for
Loans and Discount Rate'' section, above.
According to the GBC's response, Forest Renewal B.C. has provided
grants directly to softwood lumber producers. These grants have been
provided to softwood lumber producers in two ways: (1) As part of ad
hoc arrangements between Forest Renewal B.C. and softwood lumber
companies, and (2) as part of established grant programs to support
activities such as business development, industry infrastructure,
training, and marketing. Because direct grant assistance is provided
only to support the forest products industry, we preliminarily
determine that these grants are specific under section 771(5A)(D)(iv)
of the Act. The provision of these grants constitute a financial
contribution within the meaning of section 771(5)(D)(i) of the Act.
As noted in the ``Recurring and Non-recurring Benefits'' section of
this notice, all grants provided under this program are expensed in the
year of receipt. Certain marketing grants were provided for programs
supporting exports to Asian markets. In accordance with
Sec. 351.525(a)(4) of the CVD Regulations, we did not include marketing
grants tied to Asian markets in our benefit calculations because they
were tied to particular markets and thus, only benefitted sales to
those markets. To calculate the benefit provided under this program, we
summed the amount of grants provided to all producers/exporters of
softwood lumber during the POI (other than those tied to Asian markets)
and divided that amount by the f.o.b. value of total sales of softwood
lumber for the POI for the Province of British Columbia. Next, as
explained in the ``Subsidy Rate Calculation'' section of this notice,
we weight-averaged the benefit from this provincial subsidy program by
the province's relative share of total U.S. exports. Using this
methodology, we preliminarily determine the countervailable subsidy
from this program to be 0.09 percent ad valorem.
2. Subsidies to Skeena Cellulose Inc. (Skeena)
Petitioners alleged that the Province of British Columbia provided
Skeena with millions of dollars in aid in an attempt to save the
company from bankruptcy. According to the response of the government,
the agency responsible for administering the province's assistance to
Skeena was the British Columbia Ministry of Employment and Investment
(MEI). Skeena is primarily a pulp company but it does operate sawmills
which produce
[[Page 43212]]
subject merchandise. The assistance provided to Skeena by the MEI was
in the form of grants for road building, equity investment, payments
made in connection with wage concessions by the company's pulp mill
workers, and general stumpage reductions affecting low-grade hemlock
used in pulp production. In addition, MEI provided certain loans, and
guaranteed certain loans from Skeena's creditors, most of which were
provided for the company's pulp operations.
According to the GBC's response, the province's involvement in
Skeena was not in accordance with any specific provincial government
program. Because the assistance provided to Skeena by MEI was not
provided under a general government program, but was instead provided
under an ad hoc assistance plan tailored specifically for Skeena, we
preliminarily determine MEI's assistance to the company to be specific
under section 771(5A)(D) of the Act. We also preliminarily determine
that through the direct transfers of funds, the Province of British
Columbia provided a financial contribution to Skeena under section
771(5)(D)(i) of the Act.
As noted in the ``Recurring and Non-recurring Benefits'' section of
this notice, all grants were expensed in the year of receipt. With
respect to the provision of grants, the only grants provided to Skeena
during the POI were made with respect to road building. Because Skeena
is primarily a pulp and paper company, to determine the benefit
conferred upon subject merchandise, we first pro-rated the amount of
the grant by the percentage of softwood lumber sales to Skeena's total
sales for the POI.\16\ After determining the percentage of the grant
attributable to Skeena's softwood lumber production, we divided that
amount by the f.o.b. value of total sales of softwood lumber for the
POI for the Province of British Columbia. Next, as explained in the
``Subsidy Rate Calculation'' section of this notice, we weight-averaged
the benefit from this provincial subsidy program by the province's
relative share of total U.S. exports. Using this methodology, we
preliminarily determine the countervailable subsidy from the grants
provided by MEI to be less than 0.005 percent ad valorem.
---------------------------------------------------------------------------
\16\ Under our standard methodology, we do not pro-rate
subsidies received by investigated companies by subject and non-
subject merchandise. However, we have had to depart from this
standard practice in this investigation because this investigation
is conducted on an aggregate basis.
---------------------------------------------------------------------------
With respect to the equity investment by MEI, we preliminarily
determine that no countervailable benefit was provided to Skeena
because MEI purchased the already-existing Skeena shares from third
parties. Thus, no additional equity funds were actually invested in
Skeena, and there is no financial contribution. We also preliminarily
determine that the payments made in connection with wage concessions by
the company's pulp mill workers and general stumpage reductions
affecting low-grade hemlock used in pulp production did not provide a
benefit to softwood lumber production because this assistance was tied
to non-subject merchandise.
Finally, as noted above, loans and loan guarantees were also
provided to Skeena by MEI. Two of the loans provided to Skeena under
this program were tied to Skeena's pulp mills, and thus, did not
provide a benefit to softwood lumber under Sec. 351.525 of the CVD
Regulations.
In addition, MEI purchased two of Skeena's loans from the Royal
Bank. MEI purchased the loans held by the Royal Bank for approximately
40 cents on the dollar. These loans were not tied to specific
operations of Skeena, and thus, benefitted all of the company's sales,
including softwood lumber. When MEI purchased these two loans from the
Royal Bank, Skeena was obligated to make payment on the loans to the
province rather than to the Royal Bank. According to the response from
the GBC, Skeena now makes payments on these loans to the province
pursuant to the same commercial terms as applied when the Royal Bank
held these loans. However, although interest was paid on these loans at
commercial interest rates, the repayment of principal on these two
purchased loans is based upon Skeena's cash flow. For purposes of this
preliminary determination, we find that these two loans did not provide
a countervailable benefit. However, we will examine the purchase of
these two loans during verification to determine whether a
countervailable benefit was provided to Skeena during this transaction.
With respect to the four loan guarantees provided to Skeena by MEI,
one of the guarantees was provided specifically to the company's pulp
operations, and thus, did not provide a benefit to the subject
merchandise pursuant to Sec. 351.525 of the CVD Regulations. Regarding
the other three loans, the guarantees resulted in a lower interest rate
charged to Skeena by the commercial bank, and guarantee fees payable to
the government. However, we preliminarily determine that no benefit is
provided within the meaning of section 771(5)(E)(ii) because the
reported interest rates charged on each of these loans is equal to or
higher than the interest rate charged on comparable commercial loans.
See ``Benchmark for Loans and Discount Rate'' section, above.
Programs Administered by the Province of Quebec
1. Private Forest Development Program
The Private Forest Development Program (PFDP) promotes the
development of private forest resources in Quebec. Specifically, the
PFDP provides silviculture support to private woodlot owners through
payments, either made directly to forest engineers or via reimbursement
to the woodlot owner, for silviculture treatments executed on private
land. This program is funded by both the provincial government through
the Ministere des Ressources naturelles (MRN) and by sawmill operators.
The majority of the program funds come from the MRN. However, under the
authority of the MRN, wood processing plant operators are charged a fee
of C$1.45 for each cubic meter of timber acquired from private land.
This fee is used to fund the PFDP.
According to the GOQ response, there are approximately 13,000
forest producers (i.e., registered forest landowners) which receive
financial assistance each year under the PFDP. The average financial
assistance received by a producer is less than C$3,000 in any given
year. According to the GOQ response, there are approximately 50
sawmills that receive assistance from the program every year.
Because assistance under this program is limited to private woodlot
owners, we preliminarily determine that assistance provided under this
program is specific under section 771(5A)(D) of the Act. In addition,
payments by PFDP constitute a financial contribution under section
771(5)(D)(i) of the Act. The amount of the benefit conferred under this
program to softwood lumber producers is equal to the grant of funds
provided to the producers under the PFDP during the POI.
Respondents argue that no benefit is provided under this program to
sawmill operators because they are required to make contributions to
PFDP for lumber harvested on private land. Respondents state that the
sawmill operators' contributions were greater than the amount of
silviculture reimbursements the mills received under this program
during the POI. However, every holder of a wood processing plant
operating permit must pay the fee of C$1.45 for every cubic meter of
timber acquired from a private forest, regardless of whether or not
that mill owns private
[[Page 43213]]
forest land. The sawmill operators that received assistance under the
PFDP received assistance not because they used timber from private
forest lands but because they owned private forest land. Therefore, we
preliminarily determine that the fees paid to harvest timber from
private land do not qualify as an appropriate offset to the grants
received under the PFDP pursuant to section 771(6) of the Act. Section
771(6) of the Act specifically enumerates the only adjustments that can
be made to the benefit conferred by a countervailable subsidy and such
fees do not qualify as an offset.
According to the GOQ's response, there were approximately 50
softwood lumber producers that received assistance under this program
during the POI. However, the response only provides the amount of
grants received by the 35 largest producers. Therefore, to estimate the
amount of the grants received by the other 15 producers, we assumed
that they received the average grant amount received by the other 35
softwood producers. We will examine this closely at verification. We
combined our estimate with the amount reported in the response to
obtain a total amount of grants provided to softwood lumber producers
during the POI. As explained in the ``Recurring and Non-recurring
Benefits'' section of this notice, these grants were expensed in the
year of receipt.
To calculate the benefit provided under this program, we summed the
amount of grants provided to all producers/exporters of softwood lumber
during the POI and divided that amount by the f.o.b. value of total
sales of softwood lumber for the POI for the Province of Quebec. Next,
as explained in the ``Subsidy Rate Calculation'' section of this
notice, we weight-averaged the benefit from this provincial subsidy
program by the province's relative share of total U.S. exports. Using
this methodology, we preliminarily determine the countervailable
subsidy from this program to be 0.01 percent ad valorem.
2. Export Assistance Under the Societe de Developpement Industrial du
Quebec/Investissement Quebec (SDI)
The SDI export assistance program was established in 1994 and
expired in 1998, when it was replaced by export assistance under
Investissement Quebec (IQ). The objective of SDI, as established in its
founding legislation, was to promote the ``economic development of
Quebec, particularly by encouraging the development of businesses, the
growth of exports, [and] research and development of new techniques.''
During its existence, SDI worked mainly with businesses whose growth
was dependent on technological innovation and exports.
IQ was also established, in part, to facilitate export activities.
IQ works with private financial institutions by assuming risks to
support projects that might otherwise be cancelled or postponed. IQ
assistance is geared mainly to companies whose operations create a
significant impact in terms of innovation and exports. Export
assistance is provided by IQ's small-and medium-sized businesses (SMB)
program which is fundamentally similar to the SDI export assistance
program. During the POI, there were three outstanding long-term loan
guarantees provided to softwood lumber producers in Quebec.
Because this program provides assistance to exporters, we
preliminarily determine it to constitute an export subsidy under
section 771(5A)(B) of the Act. To determine whether the loan guarantees
provided a benefit, in accordance with section 771(5)(E)(iii) of the
Act, we first calculated the amount of interest charged, plus the
guarantee fees paid. Because information on the record indicates that
the SDI/IQ program provides export guarantees for projects considered
too risky for private financial institutions, we have preliminarily
determined that the national average benchmark described in the
``Benchmarks for Loans and Discount Rates'' section of this notice, is
an inappropriate benchmark for this program. In order to approximate
the interest rate that would have been charged the loan guarantee
recipients under this program, we have constructed a benchmark interest
rate based on default rates for companies at various levels of risk.
Using this benchmark, we preliminarily determine that the amount of
interest and fees paid under the guaranteed loans is less than the
amount of interest that would have been paid under a commercial
interest rate. Therefore, this program confers a benefit. We divided
the benefit amount by the value of total exports of softwood lumber for
the POI for the Province of Quebec. We then weighted this provincial
rate by Quebec's share of softwood lumber to the United States during
the POI. Using this methodology, we preliminarily determine a benefit
of less than 0.005 percent.
III. Programs Preliminarily Determined to be Not Countervailable
1. Funds for Job Creation by the Province of Quebec
Quebec's Ministere des Ressources Naturelles administers this
program but entrusts the program's operation to Rexforet Inc., a
subsidiary of SGF Rexfor, and to Quebec's Conference of Forest
Cooperatives (known by the French abbreviation, CCFQ). CCFQ is an
umbrella organization of 41 forest cooperatives. These cooperatives are
private, non-profit, community-based entities organized to pool the
resources of land owners and forest operators and to provide support
for forestry operations. This program was created in 1994 to train and
develop manpower and respond to the anticipated shortage of qualified
forest management workers by training unemployed individuals and
fostering their integration into regular work teams.
Eligibility for training under this program is limited to
unemployed individuals. Eligibility to provide training is limited to
forest cooperatives and nonprofit organizations having the ability to
provide the necessary level of training. Training assistance under this
program is limited to unemployed individuals, and does not relieve
companies of training costs that they normally would be obligated to
pay. In accordance with Sec. 351.513 of the CVD Regulations, we
preliminarily determine that this program does not provide a
countervailable benefit.
2. Sales Tax Exemption for Seedlings by the Province of Ontario
The Retail Sales Tax Act (RSTA) provides the legal authority for
the Province of Ontario to collect taxes on sales and certain services
in Ontario. The Retail Sales Tax Branch of the Ontario Ministry of
Finance is responsible for the administration of the RSTA. Article 2 of
RSTA establishes that sales of tangible personal property and certain
services are subject to an eight percent tax to be borne by the
purchaser. However, exemptions to the sales tax are provided under
Article 7 of the RSTA, that lists exemptions of the sales tax for
numerous categories of goods and services.
Paragraph 64 of Article 7 provides that the sales of cones,
cuttings, seeds and seedlings for planting in a Crown forest by a
forest resource license holder are included in this list of exemptions.
This exemption became effective on May 3, 2000. Prior to May 3, 2000,
the forest license holders were required to pay sales tax on seedling
purchases in connection with their reforestation
[[Page 43214]]
obligations. However, under the Crown Forest Sustainability Act,
Ontario reimburses license holders for reforestation expenses.
Therefore, prior to the tax exemption, the license holders would pay
the sales tax on seedlings and get reimbursed for the sales tax as part
of their reimbursement of reforestation expenses. The reimbursement of
reforestation expenses to forest license holders under the Crown Forest
Sustainability Act is accounted for in our calculation of the benefit
conferred by Ontario's stumpage program.
The tax exemption for seedlings is part of the Province of
Ontario's general provision for sales tax and sales tax exemptions
under the RSTA. Therefore, to determine whether the sales tax exemption
on seedlings is specific, the Department is required under section
771(5A)(D) of the Act to examine this exemption in connection with the
sales tax exemptions provided under the RSTA. An examination of the
items exempted from the sales tax under the RSTA shows that eligible
exemptions are numerous and cover hundreds of items across a wide-range
and multitude of industries. Further, an examination of the RSTA shows
that the actual recipients of the sales tax exemptions are not limited
in number, nor limited by enterprise or industry. In addition, the
recipients of the sales tax exemption on seedlings have not received a
predominant or disproportionate share of tax exemptions under the RSTA.
Therefore, we preliminarily determine that this sales tax exemption
program is not specific under section 771(5A)(D) of the Act. Thus, we
preliminarily determine that this program is not countervailable.
IV. Programs Preliminarily Determined Not To Confer A Benefit
1. Assistance Under Article 7 of the SDI
Assistance under Article 7 was administered by the SDI, a
government corporation. In 1998, Article 7 of SDI was replaced by
Article 28, that is administered by Investissement Quebec. Under
Article 7, SDI provided financial assistance in the form of loans, loan
guarantees, grants, assumption of interest expenses, and equity
investments to projects that would significantly promote the
development of Quebec's economy. According to the GOQ's response, prior
to authorizing assistance, SDI would review a project to ensure that it
had strong profit potential and that the recipient business possessed
the necessary financial structure, adequate technical and management
personnel, and the means of production and marketing required to
complete the proposed project. The Article 28 program operates in
fundamentally the same manner as Article 7.
During the POI, softwood lumber companies had outstanding loans
under Article 7. There were no outstanding loans under Article 28. No
other assistance was provided to softwood lumber companies under
Article 7. To determine whether these loans provided a benefit to the
softwood lumber industry, in accordance with section 771(5)(E)(ii) of
the Act, we compared the interest rates charged on the Article 7 loans
to the benchmark interest rate charged on comparable commercial loans
as described in the ``Benchmarks for Loans and Discount Rates'' section
of this notice. Using this methodology, we preliminarily determine that
no benefit was provided by these loans because the interest rates
charged under this program were equal to or higher than the interest
rates charged on comparable commercial loans. Because we preliminarily
determine that no benefit is provided under this program during the
POI, there is no need to address the issue of specificity.
2. Redemption of Preferred Stock Held by SDI
Petitioners alleged that in 1994, Tembec Inc. (Tembec) redeemed
preferred stock with a face value of C$80 million held by SDI in
exchange for only C$20 million of Tembec's Class A voting shares.
Petitioners alleged that through this transaction, the Province of
Quebec, acting through SDI, a government-owned corporation, provided
Tembec with a financial contribution of C$60 million, which represents
the difference between the value of the redeemed preferred stock and
the Class A voting shares of Tembec. Petitioners alleged that a benefit
is provided to the subject merchandise because Tembec is a softwood
lumber producer.
According to the government response, Temboard and Company Limited
Partnership (Temboard Partnership) was formed in April 1988, for the
purpose of constructing and operating a paperboard mill. Tembec was one
of the two limited partners of Temboard Partnership. Tembec Inc.
produces a number of forest products including softwood lumber. In
November 1988, a credit agreement was signed between Temboard
Partnership and SDI. The SDI loans provided under this credit
arrangement were for the construction and start-up of the new
paperboard mill of Temboard Partnership. Interest on the SDI loans was
capitalized until the outstanding debt of the SDI loans to Temboard
Partnership reached C$80 million. As a result of adverse conditions
affecting the operations of Temboard Partnerships, one of the partners
withdrew from the partnership and wrote off its investment in May 1991.
Tembec decided to continue providing support to the paperboard mill
company, and, therefore, became the sole owner of Temboard Partnership.
In September 1991, Temboard was incorporated and assumed all of the
assets and liabilities of the Temboard Partnership. Temboard Inc. then
incorporated a wholly-owned entity, Temfin Inc. (Temfin) for the sole
purpose of refinancing Temboard's debt, primarily through the issuance
of ``Distressed Preferred Shares'' to its commercial bank creditors and
to SDI. In subsequent years, the financial condition of Temboard Inc.
continued to deteriorate, which required another restructuring of the
troubled paperboard mill company. In 1994, because of the financial
condition of Temboard Inc., SDI exchanged its Distressed Preferred
Shares, which held a nominal value of C$80 million, for two million
publicly listed Tembec Class A common shares. This exchange required
Tembec Inc. to issue capital of C$20 million.
As noted above, we are conducting this investigation on an
aggregate basis. Therefore, we must examine and determine whether there
is any benefit conferred on production and exportation of subject
merchandise from Canada from this company-specific subsidy allegation.
These complex financial transactions between Tembec, its subsidiaries
and SDI are tied to loans made by SDI to Temboard, a paperboard
company, and to the conversion of that long-term debt into shares
issued to SDI. Because this subsidy allegation is tied to non-subject
merchandise, under Sec. 351.525 of the CVD Regulations, we
preliminarily determine that this alleged subsidy does not provide a
benefit to subject merchandise.
3. Assistance from the Societe de Recuperation d'Exploitation et de
Developpement Forestiers du Quebec (Rexfor)
Petitioners alleged that SGF Rexfor, Inc. (Rexfor) acts as a
conduit for passing funds to the lumber industry. They further alleged
that Rexfor itself is a producer of subject merchandise and, thus, it
is likely that Rexfor has received, and is currently receiving and
issuing below-market loans to lumber producers.
According to the GOQ's response, Rexfor is a corporation all of
whose
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shares are owned by the Societe Generale de Financement du Quebec
(SGF). SGF is an industrial and financial holding company that finances
economic development projects in cooperation with industrial partners.
The former Societe de Recuperation d'Exploitation et de Developpement
Forestiers du Quebec was created in 1969, and Rexfor was created in
1998, when the former company was merged with three other Crown
corporations into SGF. Rexfor is SGF's vehicle for investment in the
forest products industry.
According to the GOQ's response, Rexfor receives and analyzes
investment opportunities and determines whether to become an investor
either through equity or participative subordinated debentures.
Debentures are used as an investment vehicle when Rexfor determines
that a project is worthwhile, but is not large enough to necessitate
more complex equity arrangements. Rexfor has invested in companies
involved in paper production, panel production, hardwood and softwood
sawmills, newsprint, bio-pesticides, composites, engineered wood
products, electronic measuring equipment, and forestry equipment.
According to the GOQ's response, Rexfor has no outstanding loans
and advances provided by the GOQ. During the POI, Rexfor had two long-
term loans (debentures) outstanding to softwood lumber producers. We
are not investigating equity investments made in softwood lumber
producers by Rexfor because (i) there was no such allegation, and (ii)
there is not any information on the record to suggest that Rexfor's
investment decisions were inconsistent with the usual investment
practice of private investors as required under section 771(5)(E)(i) of
the Act.
Because assistance from Rexfor is limited to companies in the
forest products industry, we preliminarily determine that this program
is specific under section 771(5A)(D) of the Act. With respect to the
long-term loans provided by Rexfor, these loans qualify as financial
contributions under section 771(5)(D) of the Act. To determine whether
these loans provided a benefit to the softwood lumber industry in
accordance with section 771(5)(E)(ii) of the Act, we compared the
interest rates charged on the Rexfor loans to the benchmark interest
rates charged on commercial loans as described in the ``Benchmarks for
Loans and Discount Rates'' section of this notice. Using this
methodology, we preliminarily determine that no benefit was provided by
these loans because the interest rates charged under this program were
equal to or higher than the interest rates charged on comparable
commercial loans.
One of the loans provided by Rexfor was provided to a company which
subsequently entered bankruptcy negotiations with Rexfor and other
creditors. However, the settlement with the creditors was subsequent to
the POI. Thus, there is no need to examine whether a benefit was
provided to that softwood lumber producer by Rexfor as a result of the
creditor settlement.
V. Programs Preliminarily Determined Not To Be Used
1. Canadian Forest Service Industry, Trade and Economics Program
2. Loan Guarantees To Attract New Mills From the Province of Alberta
VI. Program Which Has Been Terminated
1. Export Support Loan Program From the Province of Ontario
VII. Program for Which Additional Information Is Needed
1. Job Protection Commission
The British Columbia Job Protection Commission (the Commission) was
created in 1991, pursuant to The Job Protection Act, to minimize job
loss, particularly in one-industry communities, and to reduce the
negative effect on regional and local communities when companies
encounter financial difficulties. According to the GBC response, the
Commission acts as a facilitator between debt holders, other B.C.
government agencies, and private financial institutions, and the
troubled companies and their employees. The Commission assists in
designing a work-out plan that will allow the companies to continue as
going concerns and improve their financial conditions. According to the
GBC response, the Commission may make recommendations to the various
parties and debt-holders, but each debt-holder makes its own decision
as to its role in any company work-out or restructuring. Several
companies involved in the production of softwood lumber participated in
restructuring plans under this program. In addition, two other softwood
lumber producers received loans under programs administered by the
Commission.
We determine that additional information is needed before we can
determine whether countervailable benefits are provided by the Job
Protection Commission.
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with 777A(e)(2)(B) of the Act, we have calculated a
single country-wide subsidy rate to be applied to all producers and
exporters of the subject merchandise from Canada. This rate is
summarized in the table below:
------------------------------------------------------------------------
Producer/exporter Net subsidy rate
------------------------------------------------------------------------
All Producers/Exporters................... 19.31% ad valorem.
------------------------------------------------------------------------
In accordance with section 703(e)(2), the Department has issued a
preliminary affirmative countervailing duty determination, and a
preliminary affirmative critical circumstances determination on certain
softwood lumber products from Canada. We are directing the U.S. Customs
Service to suspend liquidation of all entries of the subject
merchandise from Canada, that are entered, or withdrawn from warehouse,
for consumption on or after 90 days prior to the date of publication of
this notice in the Federal Register. We will instruct the U.S. Customs
Service to require a cash deposit or bond for such entries of the
subject merchandise in the amount indicated above. This suspension will
remain in effect until further notice.
As indicated above, the Department exempted softwood lumber
products from the Maritime Provinces from this investigation. This
exemption, however, does not apply to softwood lumber products produced
in the Maritime Provinces from Crown timber harvested in any other
province. Additionally, as explained above in the ``Exclusions''
section of the notice, we are excluding one company, Frontier Lumber.
Therefore, we are directing the U.S. Customs Service to exempt from the
suspension of liquidation only entries of softwood lumber products from
Canada which are accompanied by an original Certificate of Origin
issued by the Maritime Lumber Bureau (MLB), and those of Frontier
Lumber. The MLB certificate will specifically state that the
corresponding entries cover softwood lumber products produced in the
Maritime Provinces from logs originating in Nova Scotia, New Brunswick,
Prince Edward Island, Newfoundland, or the state of Maine.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our
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determination. In addition, we are making available to the ITC all non-
privileged and non-proprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. Any requested hearing will be held at
the U.S. Department of Commerce, 14th Street and Constitution Avenue,
NW., Washington, DC 20230. Individuals who wish to request a hearing
must submit a written request within 30 days of the publication of this
notice in the Federal Register to the Assistant Secretary for Import
Administration, U.S. Department of Commerce, Room 1870, 14th Street and
Constitution Avenue, NW., Washington, DC 20230. The time, date, and
place of the hearing will be announced after the Department has
conducted its verification of the questionnaire responses. However, any
party that wants to participate in a hearing must submit a written
request within the time period specified above.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, ten copies of the business
proprietary version and six copies of the non-proprietary version of
the case briefs must be submitted to the Assistant Secretary. The date
for submission of the case briefs will be scheduled when the Department
announces the date of the hearing. As part of the case brief, parties
are encouraged to provide a summary of the arguments not to exceed five
pages and a table of statutes, regulations, and cases cited. Ten copies
of the business proprietary version and six copies of the non-
proprietary version of the rebuttal briefs must be submitted to the
Assistant Secretary no later than seven days from the date of filing of
the case briefs. An interested party may make an affirmative
presentation only on arguments included in that party's case or
rebuttal briefs. Written arguments should be submitted in accordance
with 19 CFR 351.309 and will be considered if received within the time
limits specified above. Please note that an interested party may still
submit case and/or rebuttal briefs even though the party is not going
to participate in the hearing.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: August 9, 2001.
Faryar Shirzad,
Assistant Secretary for Import Administration.
[FR Doc. 01-20674 Filed 8-16-01; 8:45 am]
BILLING CODE 3510-DS-P