69 FR 26069, May 11, 2004
DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-815]
Pure Magnesium and Alloy Magnesium From Canada: Preliminary
Results of Countervailing Duty Administrative Reviews
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results of countervailing duty
administrative reviews.
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SUMMARY: The Department of Commerce is conducting administrative
reviews of the countervailing duty orders on pure magnesium and alloy
magnesium from Canada for the period January 1, 2002, through December
31, 2002. We preliminarily find that certain producers/exporters have
received countervailable subsidies during the period of review. If the
final results remain the same as these preliminary results, we will
instruct the U.S. Bureau of Customs and Border Protection to assess
countervailing duties as detailed in the ``Preliminary Results of
Reviews'' section of this notice. Interested parties are invited to
comment on these preliminary results (see the Public Comment section of
this notice).
EFFECTIVE DATE: May 11, 2004.
FOR FURTHER INFORMATION CONTACT: Melanie Brown, AD/CVD Enforcement,
Group I, Office 1, Import Administration, U.S. Department of Commerce,
14th Street and Constitution Avenue, NW., Washington, DC 20230,
telephone: (202) 482-4987.
Case History
On August 31, 1992, the Department of Commerce (``the Department'')
published in the Federal Register the countervailing duty orders on
pure magnesium and alloy magnesium from Canada (see Final Affirmative
Countervailing Duty Determinations: Pure Magnesium and Alloy Magnesium
from Canada, 57 FR 39392 (July 13, 1992)). On August 1, 2003, the
Department published a notice of ``Opportunity to Request
Administrative Review'' of these countervailing duty orders (see
Antidumping or Countervailing Duty Order, Finding, or
[[Page 26070]]
Suspended Investigation; Opportunity to Request Administrative Review,
68 FR 45218). We received timely requests for review from Norsk Hydro
Canada, Inc. (``NHCI''), Magnola Metallurgy, Inc. (``Magnola'') and
from the petitioner, U.S. Magnesium, LLC. On September 30, 2003, we
initiated these reviews covering shipments of subject merchandise from
NHCI and Magnola (see Initiation of Antidumping and Countervailing Duty
Administrative Reviews, Request for Revocation in Part and Deferral of
Administrative Review, 68 FR 56262).
On November 13, 2003, we issued countervailing duty questionnaires
to NHCI, Magnola, the Government of Qu[eacute]bec (``GOQ''), and the
Government of Canada (``GOC''). We received questionnaire responses
from NHCI and Magnola on December 19, 2003, and from the GOQ and the
GOC on December 22, 2003. A supplemental questionnaire was issued to
Magnola on January 15, 2004. We received Magnola's supplemental
questionnaire response on January 27, 2004.
Scope of the Reviews
The products covered by these reviews are shipments of pure and
alloy magnesium from Canada. Pure magnesium contains at least 99.8
percent magnesium by weight and is sold in various slab and ingot forms
and sizes. Magnesium alloys contain less than 99.8 percent magnesium by
weight with magnesium being the largest metallic element in the alloy
by weight, and are sold in various ingot and billet forms and sizes.
The pure and alloy magnesium subject to review is currently
classifiable under items 8104.11.0000 and 8104.19.0000, respectively,
of the Harmonized Tariff Schedule of the United States (``HTSUS'').
Although the HTSUS subheadings are provided for convenience and customs
purposes, the written descriptions of the merchandise subject to the
orders are dispositive.
Secondary and granular magnesium are not included in the scope of
these orders. Our reasons for excluding granular magnesium are
summarized in Preliminary Determination of Sales at Less Than Fair
Value: Pure and Alloy Magnesium From Canada, 57 FR 6094 (February 20,
1992).
Period of Review
The period of review (``POR'') for which we are measuring subsidies
is January 1, 2002 through December 31, 2002.
Subsidies Valuation Information
Discount Rate: As noted below, the Department preliminarily finds
that NHCI and Magnola benefitted from countervailable subsidies during
the POR. In accordance with 19 CFR 351.524(d)(3), it is the
Department's preference to use a company's long-term, fixed-rate cost
of borrowing in the same year a grant was approved as the discount
rate. However, where a company does not have a loan that can be used as
a discount rate, the Department's next preference is to use the average
cost of long-term fixed-rate loans in the country in question. In the
investigation and previous reviews, the Department determined that NHCI
received and benefitted from countervailable subsidies from the Article
7 grant from the Qu[eacute]bec Industrial Development Corporation
(``Article 7 grant''). (See e.g., Final Affirmative Countervailing Duty
Determinations: Pure Magnesium and Alloy Magnesium from Canada, 57 FR
30946 (July 13, 1992) (``Magnesium Investigation'')). In line with the
Department's practice, we used NHCI's cost of long-term, fixed-rate
debt in the year in which the Article 7 grant was approved as the
discount rate for purposes of calculating the benefit pertaining to the
POR.
In the Final Results of Pure Magnesium from Canada: Notice of Final
Results of Countervailing Duty New Shipper Review (``New Shipper
Review''), 68 FR 22359 (April 28, 2003), we found that Magnola
benefitted from grants under the Emploi-Qu[eacute]bec Manpower Training
Measure Program (``MTM Program''). Magnola did not have any long-term
fixed rate debt during the years the grants were approved. Therefore,
consistent with our previous decision, we continue to use long-term
commercial bond rates for purposes of calculating the benefit
attributable to the POR.
Allocation Period: In the investigations and previous
administrative reviews of these cases, the Department used as the
allocation period for non-recurring subsidies the average useful life
(``AUL'') of renewable physical assets in the magnesium industry as
recorded in the Internal Revenue Service's 1977 Class Life Asset
Depreciation Range System (``the IRS tables''), i.e., 14 years.
Pursuant to Sec. 351.524(d)(2) of the Department's regulations, we use
the AUL in the IRS tables as the allocation period unless a party can
show that the IRS tables do not reasonably reflect either the company-
specific or country-wide AUL for the industry. During this review, none
of the parties contested using the AUL reported for the magnesium
industry in the IRS tables. Therefore, we continue to allocate non-
recurring benefits over 14 years.
For non-recurring subsidies, we applied the ``0.5 percent expense
test'' described in Sec. 351.524(b)(2) of the Department's
regulations. In this test, we compare the amount of subsidies approved
under a given program in a particular year to sales (total or export,
as appropriate) in that year. If the amount of the subsidies is less
than 0.5 percent of sales, the benefits are expensed in their entirety,
in the year of receipt, rather than allocated over the AUL period.
Analysis of Programs
I. Programs Preliminarily Determined To Confer Countervailable
Subsidies
A. Article 7 Grant From the Qu[eacute]bec Industrial Development
Corporation (``SDI'')
SDI (Soci[eacute]t[eacute] de D[eacute]veloppement Industriel du
Qu[eacute]bec) administers development programs on behalf of the GOQ.
SDI provides assistance under Article 7 of the SDI Act in the form of
loans, loan guarantees, grants, assumptions of costs associated with
loans, and equity investments. This assistance is provided for projects
that are capable of having a major impact upon the economy of
Qu[eacute]bec. Article 7 assistance greater than 2.5 million dollars
must be approved by the Council of Ministers and assistance over 5
million dollars becomes a separate budget item under Article 7.
Assistance provided in such amounts must be of ``special economic
importance and value to the province.'' (See Magnesium Investigation,
57 FR at 30948.)
In 1988, NHCI was awarded a grant under Article 7 to cover a large
percentage of the cost of certain environmental protection equipment.
In the Magnesium Investigation, the Department determined the Article 7
grant confers a countervailable subsidy within the meaning of section
771(5) of the Tariff Act of 1930, as amended (``the Act''). The grant
is a direct transfer of funds from the GOQ bestowing a benefit in the
amount of the grant. We previously determined that NHCI received a
disproportionately large share of assistance under this program, and on
this basis, we determined that the Article 7 grant was limited to a
specific enterprise or industry, or group of enterprises or industries,
within the meaning of section 771(5A)(D)(iv) of the Act. In these
reviews, neither the GOQ nor NHCI has provided new information
[[Page 26071]]
which would warrant reconsideration of this determination.
In the Magnesium Investigation, the Department determined that the
Article 7 assistance received by NHCI constituted a non-recurring grant
because it represented a one-time provision of funds. In the
Preliminary Results of First Countervailing Duty Administrative
Reviews: Pure Magnesium and Alloy Magnesium From Canada, 61 FR 11186,
11187 (March 19, 1996), we found this determination to be consistent
with the principles enunciated in the Allocation section of the General
Issues Appendix (``GIA'') appended to the Final Countervailing Duty
Determination; Certain Steel Products from Austria, 58 FR 37225, 37226
(July 9, 1993). In the current reviews, no new information has been
placed on the record that would cause us to depart from this treatment.
To calculate the benefit, we performed the expense test, as explained
in the AUL section above, and found that the benefits approved were
more than 0.5 percent of NHCI's total sales. Therefore, we allocated
the benefits over time. We used the grant methodology as described in
Sec. 351.524(d) of the Department's regulations to calculate the
amount of benefit allocable to the POR. We then divided the benefit
attributable to the POR by NHCI's total sales of Canadian-manufactured
products in the POR. On this basis, we preliminarily determine the
countervailable subsidy from the Article 7 grant to be 1.07 percent ad
valorem for NHCI.
B. Emploi-Qu[eacute]bec Manpower Training Program
The MTM Program is a labor-focused program designed to improve and
develop the labor market in the region of Qu[eacute]bec. It is
implemented by the Emploi-Qu[eacute]bec (``E-Q''), a labor unit within
Qu[eacute]bec's Ministry of Employment and Solidarity (Minist[eacute]re
de L'Emploi et de la Solidarit[eacute] sociale), and funded by the GOQ.
The Program provides grants to companies in Qu[eacute]bec that have
training programs approved by the E-Q. Up to 50 percent of a company's
training expenses, normally over a period of 24 months, are reimbursed
under the MTM program if the training programs satisfy the E-Q's five
policy objectives of job preparation, job integration, job management,
job stabilization, and job creation.
Once the five objectives are met, companies with small-scale
projects are eligible to receive reimbursement of 50 percent of their
labor training expenses, up to a maximum reimbursement of $100,000.
Major economic projects are required to: (1) Create either 50 jobs or
100 jobs in 24 months, depending on whether the company is a new
company or a company that has been in operation; (2) have the approval
of the Ministry's Commission des partenaires du marche du travail; and
(3) agree to close monitoring by the E-Q. The $100,000 reimbursement
limit does not apply to major economic projects. (See New Shipper
Review and accompanying Issues and Decision Memorandum at ``Analysis of
Programs.'')
In 1998 and 2000, the E-Q approved grants to reimburse 50 percent
of Magnola's training expenses. Magnola received the MTM grants in
1999, 2000 and 2001. In the New Shipper Review, the Department found
that the MTM program assistance received by Magnola, constituted
countervailable benefits within the meaning of section 771(5) of the
Act. They are a direct transfer of funds from the GOQ bestowing a
benefit in the amount of the grants. We also found Magnola received a
disproportionately large share of assistance under the MTM program and,
on this basis, we found the grants to be limited to a specific
enterprise or industry, or group of enterprises or industries, within
the meaning of section 771(5A)(D)(iv) of the Act. In these reviews,
neither the GOQ nor Magnola has provided new information which would
warrant reconsideration of this determination.
In accordance with 19 CFR 351.524(c)(1) and (2), we treated the
grants as non-recurring. In the current reviews, no new information has
been provided that would warrant reconsideration of these
determinations. To calculate the benefit, we performed the expense
test, as explained in the AUL section above, and found that the
benefits approved were more than 0.5 percent of Magnola's total sales.
Therefore, we allocated the benefits over time. We used the grant
methodology as described in Sec. 351.524(d) of the Department's
regulations to calculate the amount of benefit allocable to the POR. We
then divided the benefit attributable to the POR by Magnola's total
sales in the POR. On this basis, we preliminarily find the net subsidy
rate from the MTM program to be 1.84 percent ad valorem for Magnola.
II. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily determine that
neither NHCI nor Magnola applied for or received benefits under these
programs during the POR:
St. Lawrence River Environment Technology Development Program.
Program for Export Market Development.
The Export Development Corporation.
Canada-Qu[eacute]bec Subsidiary Agreement on the Economic
Development of the Regions of Qu[eacute]bec.
Opportunities to Stimulate Technology Programs.
Development Assistance Program.
Industrial Feasibility Study Assistance Program.
Export Promotion Assistance Program.
Creation of Scientific Jobs in Industries.
Business Investment Assistance Program.
Business Financing Program.
Research and Innovation Activities Program.
Export Assistance Program.
Energy Technologies Development Program.
Transportation Research and Development Assistance Program.
III. Program Previously Determined To Be Terminated
Exemption from Payment of Water Bills.
Alleged Over-Assessment of Countervailing Duties
In its December 22, 2003 questionnaire response, NHCI revisits an
argument it previously raised in the 2001 administrative reviews. NHCI
contends that the Department should adjust the assessment rate applied
to the value of entries made during the current POR in order to avoid
alleged over-countervailing in connection with cash deposits retained
on 1997 entries. NHCI states that the Department issued appropriate
liquidation instructions to the U.S. Bureau of Customs and Border
Protection (``CBP'') following the completion of the 1997
administrative reviews, but that the CBP erroneously liquidated
hundreds of NHCI entries at the cash deposit rate at the time of entry,
rather than at the rate established in the final results of the 1997
administrative reviews.
In the 2001 administrative reviews, the Department determined that
it does not have the statutory authority to address what is properly a
customs protest issue concerning entries from a prior, completed review
in the context of a subsequent administrative review. (See Pure
Magnesium and Alloy Magnesium from Canada: Final Results of
Countervailing Duty Administrative Reviews, 68 FR 53962 (September 15,
2003) (``Final Results''), and accompanying Issues and Decision
Memorandum, at Comment (1). We note that NHCI has challenged this
[[Page 26072]]
determination at the Court of International Trade. No new information
or argument has been presented in these reviews which would warrant
reconsideration of this determination. Therefore, for the reasons
stated in the Final Results of the 2001 administrative reviews, we
continue to find that the Department does not have the statutory
authority to adjust the assessment rate as requested by NHCI.
Preliminary Results of Reviews
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each producer/exporter subject to these
administrative reviews. For the period January 1, 2002, through
December 31, 2002, we preliminarily determine the net subsidy rates for
producers/exporters under review to be those specified in the chart
shown below. If the final results of these reviews remain the same as
these preliminary results, the Department intends to instruct the CBP
to assess countervailing duties at these net subsidy rates. We will
disclose our calculations to the interested parties in accordance with
Sec. 351.224(b) of the Department's regulations.
------------------------------------------------------------------------
Ad valorem
Company rate
(percent)
------------------------------------------------------------------------
Norsk Hydro Canada, Inc.................................... 1.07
Magnola Metallurgy, Inc.................................... 1.84
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Cash Deposit Instructions
The Department also intends to instruct the CBP to collect cash
deposits of estimated countervailing duties at the rate specified on
the f.o.b. value of all shipments of the subject merchandise entered,
or withdrawn from warehouse, for consumption on or after the date of
publication of the final results of these administrative reviews.
We will instruct the CBP to continue to collect cash deposits for
non-reviewed companies (except Timminco Limited which was excluded from
the orders during the investigations) at the most recent company-
specific or country-wide rate applicable to the company. Accordingly,
the cash deposit rate that will be applied to non-reviewed companies
covered by these orders is that established in Pure and Alloy Magnesium
From Canada; Final Results of the Second (1993) Countervailing Duty
Administrative Reviews, 62 FR 48607 (September 16, 1997) or the
company-specific rate published in the most recent final results of an
administrative review in which a company participated. These rates
shall apply to all non-reviewed companies until a review of a company
assigned these rates is requested.
Public Comment
Interested parties may request a hearing within 30 days of the date
of publication of this notice. Any hearing, if requested, will be held
two days after the scheduled date for submission of rebuttal briefs
(see below). Interested parties may submit written arguments in case
briefs within 30 days of the date of publication of this notice.
Rebuttal briefs, limited to issues raised in case briefs, may be filed
no later than five days after the date of filing the case briefs.
Parties who submit briefs in these proceedings should provide a summary
of the arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR
351.303(f).
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(1)(ii), are due.
The Department will publish a notice of the final results of these
administrative reviews within 120 days from the publication of these
preliminary results.
These administrative reviews and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: May 3, 2004.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. E4-1071 Filed 5-10-04; 8:45 am]