1 See Pure Magnesium and Alloy Magnesium from Canada: Preliminary Results of
Countervailing Duty Administrative Reviews, 70 FR 24530 (May 10, 2005) (“Preliminary
Results”).

70 FR 54367, September 14, 2005

C-122-815

Administrative Review

POR: 01/01/03 - 12/31/03

Public Document

Office 1: A. McAllister x1174


MEMORANDUM

DATE: September 7, 2005

TO: Joseph A. Spetrini

Acting Assistant Secretary

for Import Administration


FROM: Barbara E. Tillman

Acting Deputy Assistant Secretary

for Import Administration


SUBJECT: Issues and Decision Memorandum for the Final Results of the 2003
Administrative Reviews for the Countervailing Duty Orders of Pure Magnesium
and Alloy Magnesium from Canada

____________________________________________________________________________

SUMMARY

On May 10, 2005, the Department of Commerce (“the Department”) published the preliminary
results of these countervailing duty administrative reviews.1 The “Analysis of Programs” and
“Subsidies Valuation Information” sections below describe the subsidy programs and the
calculation methodologies used to calculate the benefits from these programs. We have analyzed
the comments by the interested parties in this review in the “Comment Analysis” section below,
which also contains the Department's responses to the issues raised in these briefs. We
recommend that you approve the positions which we have developed in this memorandum.

2 See e.g., Final Affirmative Countervailing Duty Determinations: Pure Magnesium and
Alloy Magnesium from Canada, 57 FR 30946 (July 13, 1992) (“Magnesium Investigation”); Pure
Magnesium and Alloy Magnesium from Canada: Final Results of Countervailing Duty
Administrative Reviews, 68 FR 53962 (Sept.15, 2003).

2

Methodology and Background Information

Allocation Period

In the investigations and previous administrative reviews of the orders on pure magnesium and
alloy magnesium,2 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 section 341.524(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 reported for the
magnesium industry. During these reviews, none of the parties contested using the AUL reported
for the magnesium industry in the IRS tables. Therefore, we continue to allocate the nonrecurring
benefits over 14 years.

Discount Rates

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 preference is to use the average cost of long-term fixed-rate loans in the country in
question.

In the investigation, in prior administrative reviews, and in the Preliminary Results, the
Department found that Norsk Hydro Canada Inc. (“NHCI”) benefitted from countervailable
subsidies from the Article 7 grant from the Québec Industrial Development Corporation (“SDI”).
We used NHCI’s cost of long-term, fixed-rate debt in the year in which the SDI grants were
approved as the discount rate for purposes of calculating the benefit pertaining to the period of
review (“POR”). No new information has been presented in these reviews and neither the
petitioner nor NHCI has argued against the use of this discount rate. Therefore, we have not
made any changes to the discount rate.

Furthermore, in the Preliminary Results and in the Alloy Magnesium from Canada: Final Results
of Countervailing Duty New Shipper Review (“Final New Shipper Review”), 68 FR 22359
(April 28, 2003), we found that Magnola Metallurgy Inc., (“Magnola”) received countervailable
subsidies under the Emploi-Québec Manpower Training Measure Program (“MTM Program”).
Magnola did not have any long-term fixed-rate debt during the years the grants were approved.
As a result, the Department used an average of Canadian long-term commercial bond rates as the

3

discount rate. No new information has been presented in these reviews. Therefore, we have not
made any changes to the discount rate.

Analysis of Programs

Programs Determined To Be Countervailable

A. Article 7 grant from the Québec Industrial Development Corporation

As noted above, in the Preliminary Results we found that this program conferred a
countervailable subsidy on pure magnesium and alloy magnesium produced and exported by
NHCI. No new information, evidence of changed circumstances, or comments from interested
parties were presented in these reviews to warrant any reconsideration of this finding.
Accordingly, the net subsidy for this program (1.21 percent ad valorem) remains unchanged from
the Preliminary Results.

B. Emploi-Québec Manpower Training Measure Program

As noted above, in the Preliminary Results we found that this program conferred a
countervailable subsidy on alloy magnesium produced and exported by Magnola. No new
information, evidence of changed circumstances, or comments from interested parties were
presented in these reviews to warrant any reconsideration of this finding. Accordingly, the net
subsidy for this program (5.40 percent ad valorem) remains unchanged from the Preliminary
Results.

Programs Determined To Be Not Used

In the Preliminary Results, we found that NHCI and Magnola did not use the following programs
during the POR. No new information, evidence of changed circumstances, or comments from
interested parties were presented in these reviews to warrant any reconsideration of these
findings. Accordingly, we find that these programs did not confer countervailable benefits upon
NHCI or Magnola during the POR.

A. St. Lawrence River Environment Technology Development Program

B. Program for Export Market Development

C. The Export Development Corporation

D. Canada-Québec Subsidiary Agreement on the Economic Development of the Regions of Québec

E. Opportunities to Stimulate Technology Programs

F. Development Assistance Program

G. Industrial Feasibility Study Assistance Program

H. Export Promotion Assistance Program

I. Creation of Scientific Jobs in Industries

4

J. Business Investment Assistance Program

K. Business Financing Program

L. Research and Innovation Activities Program

M. Export Assistance Program

N. Energy Technologies Development Program

O. Transportation Research and Development Assistance Program


Programs Determined to be Terminated

A. Exemption from Payment of Water Bills

Comment Analysis

Comment 1: Issuance of Liquidations Instructions at the Final Results for NHCI

NHCI’s and Government of Quebec’s Argument: NHCI contends that it has requested, and the
Department has granted, a stay of liquidation pending the outcome of a NAFTA panel appeal of a
previous sunset review of the instant order. See Magnesium From Canada (Injury) Full Sunset
Review of Antidumping Duty and Countervailing Duty Orders, Secretariat File No. USA-CDA-
00-1904-09 (July 16, 2002). In following with the final results of the 2001 and 2002
administrative reviews, the Department should express in the final results of the instant review
that it will not order U.S. Customs and Border Protection (“CBP”) to liquidate entries covered by
this review pending the decision of the NAFTA panel.

Petitioner’s Argument: The petitioner did not comment.

Department’s Position: We agree with NHCI. The Department will not order CBP to liquidate
NHCI’s entries covered under the present review, pending final disposition of the binational panel
appeal, File No. USA-CDA-00-1904-09, of the NAFTA panel review.

Comment 2: NHCI’s Cash Deposit Rate

NHCI’s and Government of Quebec’s Argument: NHCI contends that, because the Department
has confirmed that no countervailable subsidy exists for NHCI after 2004, the Department should
direct CBP to release the suspension of liquidation for all entries made on or after January 1,
2005. At a minimum, a cash deposit rate of zero should be applied for any entries made on or
after the date of publication in the Federal Register of the final results of the current
administrative review. NHCI asserts that concerns by the Department and the petitioner of taking
action in the middle of the administrative review process have been met. In particular, NHCI
points to the Department’s letter from Susan Kuhbach to Gregory McCue, of Steptoe & Johnson,
dated December 14, 2004 (“Cash Deposit Letter”), to support its argument that the Department
would consider the action of setting NHCI’s cash deposit rate to zero at the end of the
administrative review process. NHCI argues that the Department must recognize that the cash

5

deposits will only impact future entries (i.e., entries made in the remainder of 2005 and in 2006).
NHCI contends that, as confirmed in the Preliminary Results, the 2005-2006 period is subsequent
to all alleged subsidies to NHCI. According to NHCI, there is no authority in the Tariff Act of
1930, as amended (“the Act”), to allow the Department to impose cash deposits against NHCI on
shipments made during periods for which no subsidy has been alleged.

In other administrative reviews, the Department has set the cash deposit rate to zero because, due
to the expiration of subsidies during the POR, the expected CVD rate for future entries was de
minimis. See Stainless Steel Sheet and Strip in Coils from France: Final Results of
Countervailing Duty Administrative Review, 68 FR 53963 (September 15, 2003), and
accompanying Issues and Decision Memorandum (“SSSSC from France”) at Comment 3; see also
Final Results of Countervailing Duty Administrative Reviews: Low Enriched Uranium From
Germany, the Netherlands, and the United Kingdom, 69 FR 40869 (July 7, 2004), and
accompanying Issues and Decision Memorandum (“Uranium”) at Comment 3. In both cases, the
Department maintained that two factors supported its decision to adjust the cash deposit rate to
zero. First, the information needed to make the adjustment was derived entirely from the POR
being examined, and second, the future cash deposit rate without the subsidy was zero or de
minimis. According to NHCI, the present situation satisfies both of the Department’s factors.

First, the Department can determine, based solely on data on the record in this POR, that the
Article 7 grant was fully amortized by the end of 2004 and conferred no benefit as of January 1,
2005. Second, the correct deposit rate without the benefit of the Article 7 grant will be zero.
NHCI contends that, in this review, the Government of Canada (“GOC”) and the Government of
Québec (“GOQ”) submitted information reporting that no new benefits were conferred on NHCI.

Moreover, the petitioner has not alleged any new benefits conferred on NHCI. The Department’s
Preliminary Results confirm that no new benefits exist, and therefore, the level of benefit since
January 1, 2005, has been zero. NHCI contends that the Department’s regulations do not address
the situation in which the expiration of a non-recurring benefit has been consistently recognized
by the Department’s own calculations. NHCI argues that the cash deposits for 2005 could
necessitate a request for a 2005 administrative review by NHCI, an unnecessary expenditure.

NHCI acknowledges that the Department has denied similar requests based on its program-wide
change regulation (19 CFR 351.526). See Stainless Steel Plate in Coils From Belgium: Final
Results of Countervailing Duty Administrative Review, 66 FR 45007 (August 27, 2001), and
accompanying Issues and Decision Memorandum (“SSSPC from Belgium”); see also Final
Affirmative Countervailing Duty Determination: Carbon and Certain Alloy Steel Wire Rod from
Canada, 67 FR 55813 (August 30, 2002), and accompanying Issues and Decision Memorandum
(“Wire Rod from Canada”). NHCI argues that, in SSPC from Belgium and Wire Rod from
Canada, the expiration of the allocated subsidy would have resulted in a lower, but not a de
minimis rate. Similar to SSSSC from France, NHCI’s request adheres to the Department’s
exception to its program-wide change regulation because NHCI cannot post estimated duties
based on a rate of zero.

6

Because of the time to complete each review, NHCI contends that there is no reason for it to face
the significant cash flow burden of making cash deposits on shipments from January 2005 to
September 2006 when the expiry of any subsidy benefit at the end of 2004 is already known. In
granting this request, NHCI states that the Department would be supported in its decision and the
decision is unlikely to have broader application.

Government of Canada’s Argument: The GOC contends that it, the GOQ, and NHCI have
confirmed that there were no new subsidy benefits to NHCI. The GOC argues that, as of January
1, 2005, the Department should set the cash deposit rate to zero. According to the GOC, while
neither the statute nor the regulations specifically address a situation in which a non-recurring
benefit has been fully amortized while an order is still in place, there is no legal, regulatory or
practical bar to declaring the rate to be zero. Because the Preliminary Results confirm that no
countervailable benefits to NHCI exist after December 31, 2004, the GOC contends that the
Department should refund any cash deposits collected after that date.

Petitioner’s Argument: The petitioner rebuts by stating that NHCI cites no authority for refunding
its cash deposits made in 2005. The petitioner contends that, even if its future cash deposit rate
under this order was zero, NHCI’s shipments remain subject to the order and subject to
administrative review. NHCI must demonstrate that it is not being subsidized by participating in
administrative reviews so long as its shipments are subject to the order. Accordingly, the
petitioner argues that it would be premature to refund cash deposits made by NHCI on entries
subsequent to the POR.

Department’s Position: We agree with the petitioner that NHCI’s request that we set its cash
deposit rate to zero as of January 1, 2005, or the publication of these final results, should be
rejected. NHCI’s reference to the Cash Deposit Letter does not further its argument. In this letter,
the Department merely stated that it would “consider NHCI’s request in the context of the
ongoing administrative review.”

Moreover, we note that it is the Department’s general practice to adjust cash deposit rates to
reflect the expected discontinuation of future subsidy benefits only where it has been
demonstrated that a program-wide change has occurred, pursuant to 19 CFR 351.526. In SSSSC
from France and again in Uranium, the Department provided for a narrowly-circumscribed
exception to this general practice in light of certain, specific conditions that existed in those cases.
Specifically, the Department adjusted the cash deposit rate to zero in those cases because (1) the
information needed to make the adjustment was derived entirely from the POR, and (2) expiry of
the subsidy meant that the expected countervailing duty rate for entries subject to the deposit rate
set in that review was de minimis (see SSSSC from France at Comment 3). As further stated in
SSSS from France, “. . . it is only in those cases where the allocated benefit goes to zero in the
POR that we can rely exclusively on POR data to calculate the future rate.” (Id. Emphasis
added.)

7

We find that the circumstances in the instant review are different in at least one key respect from
those in SSSSC from France and Uranium. In both of those prior cases, the allocation periods for
the subsidies in question ended during the POR (i.e., the subsidy benefits were fully extinguished
by the end of the POR). In the instant case, the allocation period does not end until the
subsequent review period and, therefore, we cannot rely exclusively on POR data to calculate the
future rate. Therefore, the rational for the limited exception applied in those prior cases is not met
in this review. Accordingly, we are not setting NHCI’s cash deposit rate to zero for future entries
as a result of this review.

Comment 3: Adjustment of NHCI’s CVD Rate

NHCI’s and Government of Quebec’s Argument: NHCI contends that the Department is required
to follow the Court of International Trade (“CIT”) precedent, specifically, the CIT’s analysis in
Norsk Hydro Canada Inc. v. United States, 350 F. Supp. 2d 1172 (CIT 2004) (“NHCI I”) and its
order in Norsk Hydro Canada Inc. v. United States, 374 F. Supp. 2d 1275 (CIT 2005) (“NHCI
II”). See Cabot Corp. v. United States, 694 F. Supp. 949, 954 (CIT 1998) (“Cabot”). NHCI
claims that the Act makes clear that the Department is to impose countervailing duties (“CVDs”)
in an amount “equal to” the subsidy received. Under 19 USC § 1671(a), the amount of CVDs
actually assessed must be taken into account. The CIT refers to 19 USC § 1671(a) as a “mandate
to properly calculate CVDs so as to equal the net countervailable subsidy.” See NHCI I, 350 F.
Supp. 2d at 1184. In response to the Department’s position in the 2001 and 2002 administrative
reviews that it lacked the statutory authority to take into account events outside the POR in
calculating a CVD rate, the CIT ruled against the Department. Id. at 1185.

Further, NHCI argues that the CIT stated that “{t}itle 19 USC § 1675(a) and 19 USC § 1671
thereby complement one another, reinforcing the notion that Commerce must take into account an
overpayment from a previous year in further years’ recalculations of the ‘net countervailable
subsidy.’” Id. at 1183. NHCI asserts that the CIT referred to Certain Pasta From Italy: Final
Results of the Fourth Countervailing Duty Administrative Review, 66 FR 64214, 64215
(December 12, 2001), in supporting its decision.

NHCI argues that when a statutory term is ambiguous, as the CIT has found for the word
“imposed,” the statute must be interpreted in a manner consistent with the United States’
international obligations, such as Article 19:4 of the WTO Agreement on Subsidies and
Countervailing Measures (“SCM Agreement”). See Dupont Teijin Films USA v. United States,
297 F. Supp. 2d 1367, 1372 (CIT 2003). NHCI asserts that in this review, the term “imposed” in
section 701(a) of the Act must be interpreted to mean “collected,” consistent with the SCM
Agreement, and therefore, the Department must take into account CVDs actually collected in
calculating its administrative review results.

NHCI points out that “the Court notes that Commerce recently elected to change its interpretation
of ‘imposed,’ so that countervailing duties are ‘imposed’ not when Customs actually assesses the
duties, but when Commerce publishes the results of an administrative review in the Federal

8

Register.” See NHCI I at 1181, n.19. NHCI contends that this statement by the CIT appears to be
referencing the Final Results of Redetermination Pursuant to Court Remand. See Dupont Teijin
Films USA, LP, Mitsubishi Polyester Film of America, LLC and Toray Plastics (America), Inc. v.
United States and Polyplex Corporation Limited, Court No. 02-00463 at 7 (August 11, 2003)
(“Dupont Teijin Redetermination”). Accordingly, NHCI argues that this statement is not relevant
to the final results in the instant review. The CIT’s statement was not necessary for the resolution
of issues before the agency, and did not result from briefing by the parties. NHCI asserts that the
Dupont Teijin Redetermination dealt specifically with the definition of the term “imposed” within
the context of section 1677a(c)(1)(C) of the Act, a section requiring the Department to adjust U.S.
price in an antidumping duty proceeding when export subsidies are discovered in a concurrent
CVD proceeding. According to NHCI, the instant review does not involve the interpretation of
section 1677a(c)(1)(C) of the Act, but rather section 1671(a) of the Act. NHCI argues that the
latter prescribes a limit on the amount of CVDs that can be lawfully collected by the United
States. In Certain Polyethylene Terephthalate Film, Sheet and Strip from India: Final Results of
Antidumping Duty Administrative Review, 70 FR 8072 (February 17, 2005) and accompanying
Issues and Decision Memorandum (“PET Film”) at Comment 10, NHCI notes that the
Department rejected the respondent’s view and concluded that the respondent’s U.S. price could
only be increased by the amount of CVDs actually collected. According to NHCI, this most
recent precedent demonstrates that in the administrative review context, the Department clearly
has the authority and inclination to interpret the term “imposed” in section 1677a(c)(1)(C) to
mean duties actually assessed and collected. NHCI contends that had the CIT been fully aware of
these arguments, it is likely, if not certain, that the CIT would have recognized that the definition
of “imposed” developed by the Department in the Dupont Teijin Redetermination was unique to
section 1677a(c)(1)(C) in the context of antidumping investigations.

NHCI argues that, in fiscal year 2001 under the Continue Dumping and Subsidy Offset Act (19
USC § 1675c (“CDSOA”)), CBP distributed $2,750,864.51 to Magcorp (now U.S. Magnesium,
LLC) from cash deposits collected on entries liquidated during that time. It appears that a
significant part of this disbursement included CVDs incorrectly assessed on NHCI’s 1997 Port
Huron entries. NHCI asserts that, if the Department continues to impose CVDs on NHCI at the
rate set forth in the amortization table without taking into account NHCI’s overpayment, U.S.
Magnesium, LLC will receive an unreasonable and unwarranted windfall of distributed duties.
Petitioner’s Argument: The petitioner disagrees by asserting that the Department’s prior
determinations are currently under appeal (i.e., at the CIT and at the NAFTA panel). Accordingly,
the CIT has issued a decision in a previous administrative review on this issue, but the
Department is not required to follow the CIT’s decision because it is incorrect and not controlling.
The instant review will be subject to an independent appeal and the reviewing court will not be
bound by the NHCI I and NHCI II decisions, but will be free to reach its own conclusions and
issue a different judgement order. See Algoma Steel Corp. v. United States, 865 F.2d 240, 243
(Fed. Cir. 1989), cert. denied, 492 U.S. 919 (1989). The petitioner contends that NHCI’s citation
to Cabot is out of place because (a) the law of the Federal Circuit is that CIT judges are not bound

9

by one another’s decisions and (b) estoppel does not apply to this situation because NHCI II was
not a final judgement.

The petitioner contends that errors in CBP’s liquidation of entries or the implementation of an
order is remedied by a customs protest or reliquidation. See Shinyei v. United States, 355 F.3d
1297, 1302, n.2 (Fed. Cir. 2004). The petitioner asserts that 19 USC § 1514(a) defines Customs
“decisions” that are subject to review solely through Customs procedures such as protest and
appeal. In Xerox Corp. v. United States, 289 F.3d 792, 795 (Fed. Cir. 2002), the petitioner notes
that “where the scope of the antidumping duty order is unambiguous and undisputed, and the
goods clearly do not fall within the scope of the order, misapplication of the order by Customs is
properly the subject of a protest under 19 USC § 1514(a)(2).” Citing to International Trading Co.
v. United States, 24 CIT 596, 610, 110 F. Supp. 2d 977, 989 (CIT 2000), aff’d, 281 F.3d 1268
(Fed. Cir. 2002), the petitioner argues that liquidation of a CBP entry is conclusive unless a timely
protest is filed under 19 USC § 1514(a)(2) within 90 days of the date of liquidation. Further,
according to the petitioner, claims under 28 USC § 1581(i) must be brought no later than two
years after the cause of action first accrues, a requisite not met by NHCI. The petitioner asserts
that NHCI has no remedy against the Department for CBP’s liquidation decisions.

The petitioner contends that the CIT correctly notes that, although the Department equated the
terms “imposed” and “assessed” for purposes of interpreting a different section of the CVD law,
the CIT was wrong to conclude that “imposed” must mean “assessed” for purposes of section
1671(a). According to the petitioner, the CIT’s decision employs the rule of statutory construction
that disfavors distinguishing the Department’s determinations and CBP’s decisions. Under this
rule of statutory construction, a term is presumed to carry the same meaning throughout, but this
presumption “is not rigid, and the meaning {of the same words} well may vary to meet the
purposes of the law.” See United States v. Cleveland Indians Baseball Co., 532 U.S. 200, 213
(2001). Citing to Mitsubishi Elec. Am. v. United States, 18 CIT 167, 173, 848 F. Supp. 193, 198
(1994), aff’d, 44 F.3d. 973 (Fed Cir. 1994), the petitioner argues that the CIT has noted, “{i}n
adopting § 1581, Congress clearly intended to distinguish between claims that were subject to
protest under 19 USC § 1514 and judicial review under 28 USC § 1581(a) on the one hand and
claims that were subject to § 751 administrative reviews and/or judicial review under 19 USC §
1516a and 28 USC § 1581(c) on the other.” The petitioner contends that the CIT’s interpretation
in NHCI I of the term “imposed” as equivalent to “assessed” undermines the well understood
avenues for administrative and judicial review.

According to the petitioner, the CIT’s decision appears to have been informed by the possibility
that, under the Department’s interpretation of the statutory scheme, CBP’s liquidations mistakes
would escape correction. As noted above, the petitioner reasserts that mistakes can be corrected
through the CBP protest and appeal procedure. Lastly, the petitioner notes that the Department is
not involved in the disbursement of funds under the CDSOA, and therefore, should not take this
argument into account for the final results.

10

Department’s Position: We agree with the petitioner that it is not appropriate to offset the duties
assessed for 2003 by NHCI’s overpayments from the 1997 administrative review. Although the
CIT affirmed our remand, the decision is not conclusive. See Norsk Hydro Canada Inc. v. United
States, Court No. 03-00828, Slip. Op. 05-102 (CIT 2005); see also 28 USC § 2645(c). Moreover,
our position in that litigation remains unchanged – namely that it is not appropriate to offset the
countervailable subsidies by NHCI’s overpayments related to 1997 entries.

We note that administrative reviews are limited to entries made during a fixed period of review
and that duties can only be assessed upon entries made during that period. See 19 CFR
351.213(e)(1)(ii). NHCI’s 1997 entries are not within the scope of the periodic review of duties
for NHCI’s 2003 entries, and thus the 1997 entries are not covered by the instant administrative
review.

As the Department has argued before the courts, NHCI’s complaint should have been raised with
CBP. We note that, pursuant to 19 USC § 1520(c), CBP may “reliquidate an entry or
reconciliation to correct - (1) a clerical error, mistake of fact, or other inadvertence, ... not
amounting to an error in the construction of a law, adverse to the importer and manifest from the
record or established by documentary evidence, in any entry, liquidation, or other customs
transaction, when the error, mistake, or inadvertence is brought to the attention of the Customs
Service within one year after the date of liquidation.” Following the Federal Circuit’s decision in
Omni U.S.A., Inc. v. United States, 840 F.2d 912 (Fed. Cir. 1988) (“Omni”), we note that NHCI
failed to seek reliquidation pursuant to 19 USC § 1520(c) within one year. In both Omni and the
instant review, the incorrect liquidation arises from “customs officers ... liquidat{ing} entries ‘as
entered’ when they should not have done so,” as a result of apparent clerical errors. Id.
Accordingly, there was an appropriate avenue available to NHCI through CBP; having apparently
missed the statutory deadline, it cannot circumvent the appropriate process by raising the matter
with the Department.

Also, in calculating the “net countervailable subsidy,” the statute provides for three discrete
“subtractions” that Commerce may make to the gross countervailable subsidy determined
pursuant to 19 USC § 1677(6). See Kajaria Iron Castings Pvt. Ltd. v. United States, 156 F.3d
1163, 1174 (Fed. Cir. 1998). The permissible offsets do not include amounts allegedly overpaid
by affiliated importers due to CBP’s errors. Moreover, NHCI does not possess any protected right
to any rate of duty beyond that provided for by statute. See Norwegian Nitrogen Prods. Co. v.
United States, 288 U.S. 294, 318 (1933). Lastly, we acknowledge NHCI’s arguments concerning
the meanings of “imposed” and “assessed,” but we do not find this relevant to our analysis of
offsetting duties collected in a prior POR.

Comment 4: MTM Program Benefits for Magnola

Magnola’s and Government of Quebec’s Argument: Citing to Alloy Magnesium from Canada:
Preliminary Results of Countervailing Duty New Shipper Review, 68 FR 4175 (January 28, 2003)
(“Preliminary New Shipper Review”), Magnola contends that the Department had no rational or

11

evidentiary basis for a finding that Magnola’s share of Manpower Training Measure (“MTM”)
Program benefits was “disproportionately large.” Magnola contends that all qualified applicants
of the MTM Program receive the same percentage reimbursement of eligible training expenses
across a wide range of industries. Also, applicants for benefits received under the MTM Program
included enterprises in every sector of the economy and in every region of Québec. Magnola
contends that, in the Magnesium Investigation, the Department concluded that the Manpower
Training Program (the predecessor program) was not countervailable because 1) the funds were
generally available to all applicants who met the criteria; 2) there were no de jure or de facto
limitations pertaining to the enterprise or industrial sector employing the workers; and 3) the
program was offered and provided to enterprises and workers in a “large number and broad range”
of industries. See 57 FR 30950.

Magnola argues that the Department’s specificity analysis in the Magnesium Investigation
followed several investigations into manpower training programs, all of which resulted in
determinations that the relevant training program was neither specific nor countervailable. The
Department, according to Magnola, has found manpower training programs countervailable when
expressly limited to particular regions or industries. See Final Affirmative Countervailing Duty
Determination: Certain Pasta from Italy, 61 FR 30288, 30294 (June 14, 1996); see also Stainless
Steel Sheet, Strip, and Plate from the United Kingdom: Final Affirmative Countervailing Duty
Determination, 48 FR 19048, 19051 (April 27, 1983). Magnola disagrees with the Department’s
position that the previous manpower training programs’ “characteristics and provisions ...
differed” from those of the MTM Program, and that “the similarity of the MTM program to
previously investigated programs is not necessarily relevant because legally and factually distinct
programs merit distinct analysis.” See Final New Shipper Review. Magnola argues that, like the
other programs, the MTM Program attracted participants from different industries and enterprises
and the participant being examined by the Department was among the largest recipients of training
program funds. See AK Steel Corp. v. United States, 192 F.3d 1367 (Fed. Cir. 1999) (“AK
Steel”).

Magnola asserts that it, like all MTM applicants, was permitted reimbursement of no more than
fifty percent of its approved manpower training costs. According to Magnola, the Department’s
use of the simplistic analysis that 99 percent of program participants received a smaller size of the
benefit than Magnola is inconsistent with the language and purpose of the SCM and section
1677(5A)(D) of the Act.

Magnola argues that the Federal Circuit rejected any methodology that concluded that a “benefit
conferred on a large company might be disproportionate merely because of the size of the
company” because it will produce “an untenable result.” Id. at 1385. The Federal Circuit rejected
the Department’s arguments and contended that POSCO was not a disproportionate beneficiary
because its proportional share was no greater than the proportional shares of smaller companies.
Magnola further contends that its actual share of program reimbursements examined in the Final
New Shipper Review was nothing like the 86 percent received by POSCO in AK Steel. Magnola
points to Bethlehem Steel Corp. v. United States, 140 F. Supp. 2d. 1354, 1369-1370 (CIT 2001)

12

(“Bethlehem Steel”), where the CIT stated that the use of large quantities of electricity by steel
companies “reflects the commercial realities of the industry in question.” Magnola contends that
the Department has ignored Bethlehem Steel by failing to recognize that Magnola received the
same 50 percent reimbursement of eligible expenses as did all other participants in the MTM
Program.

Magnola maintains that the Department has never found an industry or enterprise share of total
funding less than 25 percent to be disproportionate. See Carbon and Certain Alloy Steel Wire
Rod from Brazil: Preliminary Negative Countervailing Duty Determination, 67 FR 5967, 5975
(February 8, 2002). Conversely, Magnola contends that where the Department has found
disproportionality, the recipient’s share consistently has been at least 25 percent of the total
program benefit. See Final Negative Countervailing Duty Determination: Live Cattle from
Canada, 64 FR 57040, 57060-57061 (October 22, 1999). Magnola asserts that in the Final New
Shipper Review, the Department makes no reference to the fact that Magnola’s share of overall
MTM reimbursements was so small.

Magnola states that Quebec has limited economic diversification, due to a variety of geographic,
resources, climactic, and other factors. The Department in its decision, according to Magnola,
ignored this evidence as well as section 1677(5A)(D)(iii)(III) of the Act. Instead, Magnola
contends that the Department has used the Statement of Administrative Action for the Uruguay
Round Agreements Act (“SAA”) to “trump the plain meaning of a statute” and ignore section
1677(5A)(D)(iii)(III) of the Act.

Magnola asserts the Department conducted no analysis to determine whether the MTM
reimbursements provided a disproportionate benefit to Magnola during the POR. Instead,
according to Magnola, the Department’s reliance on its analysis in the Preliminary New Shipper
Review and Final New Shipper Review is flawed for two reasons. First, Magnola contends that
the Department must make an assessment as to whether the amount attributed to the POR is
disproportionate in view of all of the program reimbursements attributed to the POR. Second,
Magnola argues that the Department has failed to consider the continued operation of the MTM
Program as required by 19 USC § 1677(5A)(D)(iii). Magnola points out that it never received
MTM reimbursements after a certain date, but the program continued in operation after this date,
and other companies have continued to receive reimbursements of training expenses well after
that date.

Petitioner’s Argument: The petitioner counters that, in AK Steel, the Federal Circuit recognized
that disproportionality determinations must be made “on a case-by-case basis.” Citing to
Bethlehem Steel, the petitioner notes that “{b}ecause neither ‘dominant’ or ‘disproportionate’ are
defined in the relevant statute, this Court is obligated to defer to Commerce’s reasonable
interpretation thereof.” The petitioner contends that the Department used facts and comparisons
based on substantial evidence in concluding that Magnola received a “disproportionately large
amount” of the MTM subsidy. See Final New Shipper Review, at Comment 2.

13

According to the petitioner, in AK Steel, the Department found that the average increase in asset
value for all companies that participated in the program was greater than POSCO’s, and that a
large percentage of companies revalued their assets by a greater percentage than POSCO. The
petitioner argues that the facts in AK Steel are not present here.

The petitioner contends that Bethlehem Steel discusses the Department’s long-standing practice
for analyzing electricity subsidies which is not applicable to a labor subsidy and therefore not
relevant to this case. The petitioner argues that, unlike Bethlehem Steel, the level of MTM
benefits received by Magnola is not what “would be expected,” nor does it “reflect commercial
realities.” Accordingly, the petitioner argues that neither AK Steel nor Bethlehem Steel
undermines the Department’s examination of the facts and circumstances to make a de facto
specificity determination.

The petitioner states that, of the cases cited by Magnola to support a finding of no specificity, all
but one of the administrative determinations involved subsidies evaluated on an industry-specific,
not an enterprise-specific basis. The petitioner argues that these types of determinations are not
comparable with the Department’s analysis of Magnola’s case. According to the petitioner, the
percentage of subsidy received by one industry as opposed to another typically will be greater than
the percentage share of one enterprise as opposed to another. The petitioner argues that because
the MTM subsidy was bestowed upon more than 3,900 small-scale and major enterprises, it would
be highly unlikely that a single enterprise would receive more than 25 percent of the total MTM
subsidy available. Moveover, the petitioner maintains that the Department determined that the
MTM subsidy was disproportionately large on an industry-specific basis by finding that the metal
industry projects received a disproportionate amount of the total subsidies. See Preliminary New
Shipper Review. The petitioner asserts that even if the Department has determined
“disproportionately large” subsidies are those that exceed 25 percent of the total subsidy available,
it has the ability to alter that practice provided the Department explains its departure from past
practice. See British Steel Plc. v. United States, 127 F.3d 1471, 1475 (Fed. Cir. 1997).

Citing to the SAA at 931, the petitioner contends that economic diversification is not
determinative of specificity. As a result, the petitioner notes that the Department considered “the
extent of diversification of economic activities ...” (19 USC § 1677(5A)(D)(iii)(III)), but rejected
this “diversification” as immaterial. See Final New Shipper Review at Comment 2, p. 15-16. The
petitioner adds that the SAA “is more than mere legislative history” (see Micron Tech., Inc. v.
United States, 243 F.3d 1301, 1309 (Fed Cir. 2001)), and “there is no question that the SAA is the
authoritative guide in interpreting the URAA” (see Usinor Industeel S.A. v. United States, 215 F.
Supp. 2d 1356, 1357 (CIT 2002)). Therefore, according to the petitioner, the Department was
correct in considering the extent of diversification of economic activities and stating that this
comparison is not required under the de facto specificity analysis.

The petitioner contends that the Department does not make a determination on the
disproportionate benefits received by Magnola during the POR. Rather, according to the
petitioner, the Department has fulfilled its obligation to calculate benefits attributable to this POR.

14

Department’s Position: It is the Department’s policy not to revisit specificity determinations
absent the presentation of new facts or evidence (see, e.g., Pure and Alloy Magnesium From
Canada: Final Results of the First (1992) Countervailing Duty Administrative Reviews, 62 FR
13857 (March 24, 1997); Carbon Steel Wire Rod From Saudi Arabia; Final Results of
Countervailing Duty Administrative Review and Revocation of Countervailing Duty Order, 59 FR
58814 (November 15, 1994)). In this review, no new facts or evidence has been presented which
would lead us to question that determination.

In proposing that the Department base a POR-specific de facto specificity finding on the amounts
of benefits from non-recurring grants allocated to the POR, the respondent appears to be
confusing the initial specificity determination based on the action of the granting authority and
other circumstances at the time of bestowal with the allocation of the benefit over time. These are
two separate issues. We agree with the petitioner that once a determination has been made
regarding whether a non-recurring subsidy was specific (or not) at the time of bestowal, then that
finding holds for the duration of the subsidy benefit barring any new facts or evidence pertaining
to the circumstances of the subsidy’s bestowal. In the original determination, we considered each
of the claims raised by Magnola; the bases of the original specificity determination are still valid.
Since no new evidence has been presented which would cause us to revisit the original specificity
determination, we continue to find assistance under the MTM Program to be specific and,
therefore, countervailable.

Comment 5: Magnola’s Discount Rate

Magnola’s and Government of Quebec’s Argument: Magnola contends that 19 CFR
351.524(d)(3)(A) expresses a preference for the use of “{t}he long-term, fixed-rate loans of the
firm in question.” Magnola argues that the Department improperly applied the Canadian average
rate of return on long-term commercial bonds as the discount rate rather than Noranda’s interest
rates on long-term loans. According to Magnola, it used funds borrowed by the parent company,
Noranda Inc., and therefore, this is Magnola’s cost of capital.

Petitioner’s Argument: The petitioner asserts that the cost on long-term loans to Noranda would
not reflect actual rates charged to Magnola. According to the petitioner, the Department noted
that Magnola “is a separately incorporated company and is the recipient of the subsidy benefits
under review.” See Final New Shipper Review at Comment 4, p. 20.

Department’s Position: In this review, no new facts or evidence have been presented which
would lead us to revisit our previous decision regarding the appropriate discount rate for Magnola.
Therefore, we find that the bases of our decision in the Final New Shipper Review are still valid.
Accordingly, for the final results, we continue to apply the Canadian average rate of return on
long-term commercial bonds as Magnola’s discount rate.

RECOMMENDATION

Based on our analysis of the comments received, we recommend adopting all of the above
positions and making no adjustments to the related rate calculations. If these recommendations
are accepted, we will publish the final results of this administrative review and the final rates for
all firms reviewed in the Federal Register.

AGREE _________ DISAGREE _________

Joseph A. Spetrini

Acting Assistant Secretary

for Import Administration

Date