(Cite as: 48 FR 10395)
NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
Certain Softwood Products From Canada; Preliminary Negative
Countervailing Duty Determinations
Friday, March 11, 1983
*10395
(Cite as: 48 FR 10395, *10395)
AGENCY: International Trade Administration, Commerce.
ACTION: Preliminary negative countervailing duty determinations.
SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the
countervailing duty law are not being provided to manufacturers, producers, or exporters in Canada of certain
(Cite as: 48 FR 10395, *10395)
softwood products, as described in the "Scope of Investigations" section of this notice. The total estimated net subsidy for each
product is de minimis, and therefore our preliminary countervailing duty determinations are negative.
If these investigations proceed normally, we will make our final determinations by May 23, 1983.
EFFECTIVE DATE: March 11, 1983.
FOR FURTHER INFORMATION CONTACT:Roland MacDonald or Mary S. Clapp, Office of Investigations, Import Administration,
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230, telephone: (202) 377- 4087
or (202) 377-2438.
SUPPLEMENTARY INFORMATION:
Preliminary Determinations
For purposes of these investigations, the following programs are preliminarily found to confer subsidies to the producers of the
products under investigation. The total estimated net subsidies are 0.32 percent ad valorem
(Cite as: 48 FR 10395, *10395)
for softwood lumber, 0.24 percent ad valorem for softwood shakes and shingles, and 0.29 percent ad valorem for softwood fence.
These ad valorem subsidies are de minimis. Therefore, we preliminarily determine that there is no reason to believe or suspect
that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act),
are being provided to manufacturers, producers, or exporters in Canada of certain softwood products, as described in the
"Scope of the Investigations" section of this notice. Our preliminary determinations are negative.
A. Federal Programs
1. Investment Tax Credit.
2. Program for Export Market Development.
3. Forest Industry Renewable Energy Program.
4. Regional Development Incentives Program-Grants.
B. Federal/Provincial Programs
1. Agricultural and Rural Development Agreements.
2. General Development Agreements.
a. Federal/Provincial Industrial Subsidiary Agreements.
(Cite as: 48 FR 10395, *10395)
b. British Columbia--Assistance to Small Enterprise Program.
c. New Brunswick.
*10396
(Cite as: 48 FR 10395, *10396)
(1) Northeast New Brunswick Development Program.
(2) Kent Region Pilot Project.
(3) Industrial Development Subsidiary Agreements.
d. Canada/Nova Scotia Forestry Subsidiary Agreement--Sawmill Improvement Component Grants.
C. Provincial Programs
1. Alberta--Timber Salvage Incentive Program.
2. British Columbia
a. Low-interest Loan Assistance.
b. Stumpage Payment Deferral.
3. Ontario--Stumpage Billing Deferral.
4. Quebec.
a. Societe de Recuperation, d'Exploitation et de Developpement Forestiers du Quebec.
b. FRI Tax Abatement Program.
c. SDI Export Expansion Program.
(Cite as: 48 FR 10395, *10396)
Case History
On October 7, 1982, we received a petition from counsel for the United States Coalition for Fair Canadian Lumber Imports on
behalf of a number of producers in the United States of certain softwood products. The petitioner alleged that certain benefits
which constitute subsidies within the meaning of section 701 of the Act are being provided, directly or indirectly, to
manufacturers, producers, or exporters in Canada of certain softwood products. We found the petition to contain sufficient
grounds upon which to initiate countervailing duty investigations, and on October 27, 1982, we initiated
countervailing duty investigations (47 FR 49878). We stated that we expected to issue preliminary determinations by
December 31, 1982. We subsequently determined that the investigations are "extraordinarily complicated," as defined in section
730(c) of the Act, and postponed our preliminary determinations for 65 days until March 7, 1983 (47 FR 56688).
Since Canada is a "country under the Agreement" within the meaning of section 701(b) of the Act, injury determinations are
required for these investigations. Therefore, we notified the U.S. International Trade Commission (ITC) of our initiations. On
November 22, 1982, the ITC determined that there is a reasonable indication that these imports are materially injuring U.S.
industries.
(Cite as: 48 FR 10395, *10396)
We presented questionnaires concerning the allegations to the Embassy of Canada in Washington, D.C. on December 6, 1982.
On January 4, 1983, we received responses. Additional information was received on January 17, 1983. A supplemental
questionnaire was presented on February 9, 1983, and a response was received on February 23, 1983. Additional information was
submitted on numerous dates.
Scope of the Investigations
The products covered by these investigations are:
Softwood lumber.
Softwood shakes and shingles.
Softwood fence.
The products are fully described in appendix A of this notice. There is a large number of producers and/or exporters of certain
softwood products in Canada (approximately 1800). The period for which we are measuring subsidization is calendar year
1981.
Analysis of Programs
In its responses, the government of Canada (GOC) provided data at the federal
(Cite as: 48 FR 10395, *10396)
and provincial levels for the applicable periods. In addition, information was provided by counsel for the Canadian producers and
counsel for the petitioners.8
General principles applied by the Department of Commerce (the Department) to the immediate investigations concerning certain
softwood products from Canada, many of which are repeated throughout this notice, are described in detail below. Specific
principles are discussed in the appropriate sections of this notice.
Petitioners alleged that respondent companies have received numerous grants for various purposes. Grants determined to be
countervailable have been treated according to the Department's established methodology.
To calculate the benefit received from the type of grants being considered in these investigations, we allocated the present value
of grants "tied" to the purchase of capital equipment over the number of years reflecting the average useful life of equipment used
by the sector which produces the products under investigation. A grant is considered tied where the intended use is known to the
donor, and where such use is acknowledged prior to, or concurrently with, its bestowal. The majority of grants encountered in
these investigations have been tied to capital investment in plants and equipment, and have been allocated over a 15-year period
representing the average useful life of sawmill plants and equipment. The Canadian government has indicated
(Cite as: 48 FR 10395, *10396)
that its own survey of the industry establishes a conservatively estimated combined average useful life for sawmill equipment and
buildings of 15 years.
In the grant methodology, we determine the present value of grants in order to calculate the current value of the benefit to the
grant recipient. The calculation of the present value of funds received is a mechanism for allocating money received in one year to
other years and is calculated using a discount rate. For these preliminary determinations, we determine that the most appropriate
discount rate is the "risk-free" rate, as established by the secondary market rate for long-term (10 years and over) Canadian
government debt. The foundation of a country's interest rate structure is usually its government's debt interest rate (the "risk-free
rate"). The source used to determine the Canadian "risk-free" rate was Financial Statistics published by the Organization for
Economic Co-operation and Development (OECD).
Certain small grants were expensed in the year received for reasons discussed in the "Programs Preliminary Determined to Confer
Subsidies" section of this notice in the appropriate program descriptions.
We normally use data from a uniform period in calculating subsidies. The response contained mutually exclusive data based on
both fiscal years and calendar years. Where the grants were reported on a fiscal year basis, we used those amounts as the best
information available and allocated the calculated net benefit over annual sales values. Where information provided was based on
(Cite as: 48 FR 10395, *10396)
fiscal year performance and it was necessary to apply a discount rate, a fiscal year discount rate was calculated by averaging the
appropriate monthly rates. We will seek information regarding these benefits on a calendar year basis.
Unless otherwise stated in the "Programs Preliminarily Determined to Confer Susidies" section of this notice, the denominator
used to calcuate an ad valorem subsidy depended on whether the response reported loans and grants to producers of the
products under investigation on a product-by-product basis or on a combined basis. Where loans and grants were reported on a
product-by- product basis, we allocated the benefits over the total sales, for the most recent year for which data are available, of
the producers of that specific product.
Where loans and grants were reported on a combined basis for some or all of the products under investigation, we allocated the
benefits over the total sales, for the most recent year for which data are available, of the producers of those certain softwood
products.
To determine the total sales figures for the producers of the products under investigation, we used sales statistics provided by the
GOC, which are the most recent and best data available. We *10397
(Cite as: 48 FR 10395, *10397)
adjusted these statistics as necessary to reflect more accurately the total sale of the producer of each of the products under
investigation.
Based on our analysis to date of the petition and responses to our
(Cite as: 48 FR 10395, *10397)
questionnaires, we have preliminarily determined the following.
I. Programs Preliminarily Determined to Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Canada of certain
softwood products included in these investigations under the programs described below. The total estimated net subsidy for each
product under investigation, however, is de minimis, and therefore our preliminary determinations are negative.
A. Federal Programs
1. Investment Tax Credit. The investment tax credit program is a federal program which provides income tax credits in amounts
ranging from 7 to 50 percent for new depreciable manufacturing assets. This tax incentive is available to all entities that
purchases equipment for manufacturing; processing; or activities involving oil and gas production, mining of minerals, processing
mineral ore, prospecting or exploring for mineral resources, logging, farming, fishing, storing grain, and processing industrial
minerals.
The amount of the credit received depends upon where the depreciable assets
(Cite as: 48 FR 10395, *10397)
will be used. A credit of 50 percent of the capital cost of the depreciable assets is given to companies located in areas of Canada
containing five percent of the population suffering the most from high family unemployment and low per capita income. These
areas were not specifically identified in the GOC's responses. Since all areas of each province in Canada are specified in the
regions eligible for one of the 20 percent, 10 percent or 7 percent credits, we assume that the 50 percent credits apply to
locations within the above areas which meet the eligibility requirements relating to unemployment and low income. Companies
located in the Atlantic area (Newfoundland, Prince Edward Island (PEI), Nova Scotia, New Brunswick and the Gaspe Peninsula)
receive 20 percent of the capital cost of depreciable assets as a tax credit. Companies located in the Regional Development
Incentive Program (RDIP) area (all of Canada except the southern portions of British Columbia (BC), Alberta and Ontario)
receive 10 percent. All other areas in Canada receive the basic 7 percent credit (southern BC, southern Alberta and southern
Ontario).
The investment tax credit is not available to all companies on equal terms. A larger tax credit is available to companies in
designated areas. The criteria of "high family unemployment" and low per capita income are subjective criteria which are not
"triggered" automatically. Based on information currently available to the Department, this criteria for eligibility could be
operated to limit benefits to companies within specific regions. Therefore, we find that
(Cite as: 48 FR 10395, *10397)
the tax credits in excess of 7 percent are limited to companies located within specific regions, and we preliminarily determine that
the tax credits in excess of 7 percent confer benefits which constitute a subsidy.
The GOC reported that there are no statistics indicating the amount of tax credit clamied by the producers of the products under
investigation in each of the four rate categories of the investment tax credit program.
Therefore, for the purposes of these preliminary determinations, the investment tax credits claimed in 1980 (the most recent
period for which information is available) were evenly allocated to each of the four rate categories, and were used by the
Department as best information available. Having assigned an amount to each category, the capital cost of the depreciable assets
eligible for credits was calculated for each of the four categories.
The subsidy calculation for this program accounts for the fact that an investment tax credit immediately reduces the depreciable
value of an asset. The capital cost allowance benefits lost because of the investment tax credit were captured in the subsidy
calculation. For purposes of these preliminary determinations, we assumed: (1) That the investment tax credit is taken in the year
in which the asset is acquired, and (2) that the capital cost allowance taken in conjunction with the investment tax credit would be
equal to 25 percent, the rate applicable for the year in which an asset is acquired. The net benefit from the capital cost allowance is
equal to the amount of the
(Cite as: 48 FR 10395, *10397)
deduction multiplied by the taxpayer's tax rate. Since provincial governments use a taxpayer's federal taxable income as the base
for calculating provincial taxes, we used the combined federal and provincial tax rate of 41 percent (in 1979) as the best
information available for the purposes of our calculation.
Only the amounts in excess of the 7 percent level were found countervailable since the 7 percent tax credit is not limited to
specific industries, groups of industries, or regions. The benefit to softwood lumber, and to shakes and shingles was allocated over
the value of total 1980 sales for sawmills and planing mills and a subsidy of 0.9 percent ad valorem was calculated. The benefit to
fence was allocated over the value of total 1980 sales of miscellaneous wood products, and a subsidy of 0.05 percent ad valorem
was calculated. (In both instances, 1980 is the most recent period for which information is available.)
2. Program for Export Market Development (PEMD). PEMD is administered by the Canadian Department of Industry, Trade and
Commerce and is available to all businesses in the manufacturing or service sectors which export, including producers of the
products under investigation. The program facilitates the development of export markets for Canadian products by funding
various companies' export market development activities through interest-free loans with forgivable repayment terms. If sales
result from such activities, the funds must be repaid at a rate of two percent of sales generated for a period
(Cite as: 48 FR 10395, *10397)
of three years up to the amount of assistance provided.
Only two projects were funded at a total of Canadian $4,077 by PEMD to develop market opportunities in the United States for the
products under investigation. Because the sole purpose of PEMD is to stimulate exports, we preliminarily determine that
assistance provided under the program confers benefits which constitute export subsidies. We allocated the benefit over the total
1981 exports sales to the United States of the products under investigation. However, the amount of the benefit provided to
exporters of the products under investigation is so small relative to the value of exports to the United States of the products under
investigation that the subsidy is less than 0.001 percent ad valorem.
3. Forest Industry Renewable Energy Program. The Forest Industry Renewable Energy (FIRE) program is administrated by the
federal Department of Energy, Mines and Resources. The purpose of the program, which began in 1979, is to encourage the
substitution of biomass energy sources for fossil fuels by companies that would otherwise have no economic incentive to do so.
FIRE assistanace is given in the form of taxable grants that are tied to the purchase of captial equipment *10398
(Cite as: 48 FR 10395, *10398)
(facilities for burning biomass in place of fossil fuels).
Prior to April 1, 1981, funds were made available under the FIRE program only to "forest industry firms," as defined by the GOC
according to the Treasury
(Cite as: 48 FR 10395, *10398)
Board submission of August 16, 1978. Thereafter, FIRE assistance became available to al1 industries throughout Canada
according to the Treasury Board submission of January 8, 1981. Because the FIRE program by its terms limited eligibilty for
grants to a designated group of industries for the first two years of its existence, we preliminarily determine that the benefits
received by the producers of the products under investigation during that period conferred subsidies within the meaning of the
Act. Benefits after that period did not confer subsidies because eligibility was not limited to a specific industry, group of industries
or companies in specific regions.
The benefit is based on the amount of grants received by the producers of the products under investigation during the first two
years of the program's existence. We calculated the benefit to these producers in accordance with the grant methodology
described in the "Analysis of Programs" section of this notice. We allocated the benefit received over the total sales value of the
producers of the products under investigation, and calculated a subsidy of 0.003 percent ad valorem.
4. Regional Development Incentives Program (RDIP)--Grants. The RDIP is administered by the federal government's Department
of Regional Economic Expansion (DREE) for the purpose of creating stable employment opportunities in areas of Canada
where employment and economic opportunity are chronically low. The program provides development incentives (grants) and
loan guarantees to
(Cite as: 48 FR 10395, *10398)
manufacturers whose capital investment projects for establishing new facilities are expanding or modernizing existing facilities
will create jobs and economic opportunities in areas designated as economically disadvantaged. Loan guarantees are discussed in
the "Program Preliminarily Determined Not to Confer Subsidies" section of this notice. The Governor in Council may designate a
region upon the report of the Minister of the DREE, if satisfied that existing opportunities for productive employment in the region
are exceptionally inadequate and the provision of development incentives will make a significant contribution to economic
expansion and social adjustment within that region. Development incentives and loan guarantees are currently not available to
manufacturing and processing industries located in southern Ontario, southern Alberta and southern BC.
The prime criterion for DREE approval of a proposed project is the likelihood that the project will provide needed economic
opportunities and social adjustment. Projects which would proceed without RDIP assistance are ineligible.
The GOC stated in its responses that grants have been provided to producers of the products under investigation. We preliminarily
determine that grants provided through the RDIP program of DREE confer subsidies because the benefits are limited to companies
located within specific regions.
The subsidy to producers of the products under investigation has been
(Cite as: 48 FR 10395, *10398)
calculated according to the grant methodology as described in the "Analysis of Programs" section of this notice.
The amounts of grants received since fiscal 1970 (when the program started) were provided on a product-by-product basis.
Therefore, we have calculated a separate subsidy for each product. The amount of subsidy provided by RDIP grants is 0.18
percent ad valorem for softwood lumber, 0.07 percent ad valorem for softwood shakes and shingles, and 0.15 percent ad valorem
for softwood fence.
B. Federal/Provincial Programs
1. Agricultural and Rural Development Agreements (ARDA) Programs. The Agricultural and Rural Development Act was the
federal legislation establishing the ARDA's. These agreements resulted from joint determinations by the federal and provincial
governments that government action is required to promote economic development and to alleviate conditions of social and
economic disadvantages in certain rural areas. These agreements are available to all provinces throughout Canada and can be
negotiated at provincial initiative; however, only BC and Ontario have entered into these agreements.
There are six programs under the General ARDA's and the producers of the products under investigation have received grants
under the "Alternative Income
(Cite as: 48 FR 10395, *10398)
and Employment Opportunities in Rural Development Region" program of the agreements. This program provides grants for the
establishment, expansion, or modernization of production facilities in an effort to increase income and alternative employment
opportunities for low income people in designated rural areas of a province. Both BC and Ontario have received federal funds to
finance 50 percent of the assistance given under this program for rural areas which are "economically depressed." As the
eligibility is limited to companies located within specific regions, we preliminarily determine that benefits under this program
confer a subsidy.
There is a Special ARDA program which supplements the General ARDA and which is aimed at improving employment and income
opportunities for people of native ancestry in rural BC. The rural area is defined in the Canada-British Columbia Special Rural
Development Agreement which provides that ten specifically defined areas are not eligible for assistance under this program.
The Special ARDA advisory committee considers the relative isolation of the community, the number of residents affected and the
projected impact the proposal will have on future economic development.
The maximum contribution through Special ARDA is 50 percent of the expected costs of buildings, machinery and initial working
capital.
The GOC responses state that sixteen projects, tied to the purchase of equipment and construction of buildings, were undertaken
by producers of the
(Cite as: 48 FR 10395, *10398)
products under investigation. These projects were available in areas with a population of less than 2,000 residents of whom at
least 30 percent were of native ancestry. The Special ARDA grants were funded equally by the federal and provincial governments
as were those under the General ARDA. Because the program limits availability to companies located in rural areas, we
preliminarily determine that it confers subsidies.
We used the grant methodology which is described in the "Analysis of Programs" section of this notice to calculate the benefits
under the ARDA programs. The benefits were allocated over the total sales value of producers of the products under investigation
and a total subsidy of 0.004 percent ad valorem was calculated for grants received under General and Special ARDAs.
2. General Development Agreements. As part of its activities to spur development in Canada, DREE entered into 10-year
General Development Agreements (GDA's) with all provinces except PEI. A similar 15-year comprehensive development plan
exists for PEI. GDA's have become the principal instruments of DREE's development policies, both in terms of expenditure and
coordination of planning and programming. Within each GDA, specific subsidiary agreements *10399
(Cite as: 48 FR 10395, *10399)
have been negotiated with individual provinces. These mainly fund general planning, infrastructure and community
development, although some assistance has been provided to individual companies.
a. Federal/Provincial Industrial Development Subsidiary Agreements. Under the
(Cite as: 48 FR 10395, *10399)
GDA's described above, Industrial Development Subsidiary Agreements with provisions for assistance to small enterprises are
available to all provinces and were negotiated with Ontario, Manitoba, BC and New Brunswick. The GOC states that funds were
provided to producers of the products under investigation only in the latter two provinces.
b. British Columbia--Assistance to Small Enterprise Program (ASEP). This program was established by a BC Order in Council on
July 7, 1977. Under the program, small enterprises with sales of less than Canadian $500,000 located in areas other than "Lower
Mainland" and "Southern Vancouver Island" are eligible for interest-free forgivable loans for approved projects for new facilities
or the expansion or modernization of existing facilities.
For new projects, benefits can be as much as 50 percent of the "eligible capital cost" of the project or Canadian $30,000,
whichever is less. For expansion or modernization projects, the limit is the lesser of 30 percent or Canadian $18,000. The
applicant is required to provide new equity of at least 20 percent of the total cost of the project. Producers of the products under
investigation received interest-free forgivable loans under this program between 1976 and 1981.
We preliminarily determine that benefits under this program are countervailable because they are limited to companies located
within specific regions. Because loans under the programs are forgivable and the majority
(Cite as: 48 FR 10395, *10399)
apparently have already been forgiven, we treated the benefits as grants.
In calculating the benefits, we used the grant methodology which is described in the "Analysis of Programs" section of this notice.
The benefits under this program amount to a subsidy of 0.003 percent ad valorem for softwood lumber, 0.05 percent ad valorem
for shakes and shingles, and 0.02 percent ad valorem for fence.
c. New Brunswick--NED, KED and SIFAP. Three parts of the subsidiary agreement between New Brunswick and the federal
government provide assistance to small enterprises in the province. These are the Northeast New Brunswick Development (NED),
the Kent Region Pilot Project (KED), and the Industrial Development Subsidiary Agreements (SIFAP). The responses of the GOC
state that no applications for funds under these programs were accepted during the 1980-81 fiscal year, and that no funds were
disbursed since March 31, 1982.
The benefits under these programs were interest-free forgivable loans. The total amount of funding provided could not exceed 50
percent of the cost of new manufacturing or processing facilities or 30 percent for modernization or expansion of existing
facilities. To be eligible, firms had to have average sales of less than Canadian $1,000,000 over the past two years and had to be
located in development regions, which varied for each of the three programs. Companies were required to make a contribution of
new equity of at least 20 percent of the cost of a project. Producers of the products under
(Cite as: 48 FR 10395, *10399)
investigation received interest-free forgivable loans under this program between 1978 and 1981.
We preliminarily determine that benefits under NED, KED, and SIFAP are countervailable because they are limited to companies
located within specific regions. Because loans under the programs are forgivable and the majority apparently have already been
forgiven, we treated the benefits as grants.
In calculating the benefits, we used the grant methodology which is described in the "Analysis of Programs" section of this notice.
The benefits under this program amount to subsidies of 0.006 percent ad valorem for softwood shakes and shingles, and 0.007
percent ad valorem for softwood fence. However, the amount of the benefit provided to producers of softwood lumber is so small
relative to the value of total sales of the producers of softwood lumber that the subsidy is less than 0.001 percent ad valorem.
d. Canada/Nova Scotia Forestry Subsidiary Agreement--Grants. Subsidiary agreements for forest management could be
negotiated under the GDAs. Forestry subsidiary agreements have been reached with seven provinces.
Under the Nova Scotia forestry subsidiary agreement, grants were provided to producers of the products under investigation
under two components, the sawmill improvement component and the forest management component. The forest management
component grants are discussed in the "Programs Preliminarily Determined Not to Confer Subsidies" section of this notice. The
forestry
(Cite as: 48 FR 10395, *10399)
subsidiary agreements with other provinces are discussed in the "Programs Preliminarily Determined Not to Confer Subsidies" and
the "Programs Preliminarily Determined Not to Be Used" sections of this notice.
The sawmill improvement component of the Canada/Nova Scotia Forestry Subsidiary Agreement provided grants of up to
Canadian $50,000 per mill to encourage the adoption of improved sawmilling technology, better safety and improved
conditions. The GOC states that the grants under this component were designed and used to offset the short-term operating
expenses and the lower productivity associated with the installation of improved sawmilling technology and better safety and
working conditions in the recipient mill.
The GOC stated in its responses that producers of the producers under investigation received improvement grants. We
preliminarily determine that this grant program confers a subsidy on producers of the products under investigation because
eligibility is limited to sawmills.
Because the grants were used to offset short-term operating expenses, we allocated them to the year received. We assumed that all
funds were received in 1981, because the response did not provide a breakdown by year of receipt. We allocated the benefits over
total sales by sawmills to calculate a subsidy of 0.008 percent ad valorem.
C. Provincial Programs
(Cite as: 48 FR 10395, *10399)
1. Alberta.--Timber Salvage Incentive Program. The Timber Salvage Incentive Program was created in response to the problem of
harvesting large amounts of timber damaged or destroyed by fire or insects. Ordinarily, it is the companies' responsibility to
salvage timber damaged by natural causes. The responses state that because of the depressed lumber markets, the companies
have been unable to salvage the damaged timber economically. Because it is the province's interest to have the timber harvested
(if it is not harvested there is a danger that fire and disease will spread, and reforestation cannot be carried out), the government
instituted the Timber Salvage Incentive Program effective November 1, 1981 through October 31, 1983. The program provides an
incentive of Canadian $34 per thousand board feet of lumber manufactured from fire-killed and beetle-killed timber. These
payments are available only to producers of lumber.
The GOC's responses state that despite the incentive payment, the companies did not recover the additional costs associated with
harvesting damaged timber. The GOC acknowledges, however, that the *10400
(Cite as: 48 FR 10395, *10400)
companies are expected to salvage damaged timber at their expense as part of their contribution to the long-term management of
Alberta's forests. Furthermore, as noted above, only lumber producers receive these grants. Accordingly, we preliminarily find
that payments received by softwood lumber producers under
(Cite as: 48 FR 10395, *10400)
this program during the period for which we are measuring subsidization are grants which confer subsidies. Because these grants
specifically apply only to lumber, they do not confer benefits on softwood shakes and shingles or softwood fence. We have
expense the 1981 incentive payments in the year received and allocated them over the total sales value of softwood lumber in
1980 (the most recent period for which information is available) to find to subsidy of 0.008 percent ad valorem for softwood
lumber.
2. British Columbia.--a. Low-Interest Loan Assistance (LILA). The joint Canada-British Columbia Industrial Development
Subsidiary Agreement (IDSA) of 1977 established the LILA program which provides business enterprises with loans at favorable
interest rates. LILA was authorized by administrative action after the IDSA Agreement was signed. The British Columbia
Development Corporation (BCDC) acts as trustee for the province in administering the LILA program and as the trustee, reports to
the BC Ministry of Industry and Small Business Development on activities under this program. Funding for the LILA program is
provided through the budget of the BC Ministry of Industry and Small Business Development and/or loans by BCDC from the BC
Ministry of Finance.
The purpose of LILA is to enhance the province's industrial base by assisting in the establishment, modernization, or expansion of
manufacturing and processing firms, or by assisting those companies providing services to the manufacturing/processing sector
located in the province. A LILA loan must be
(Cite as: 48 FR 10395, *10400)
used for capital improvements for plant expansion or modernization, or for the establishment of a new production facility which
will create new economic activity and benefits.
Generally an applicant must make a minimum equity contribution to the project of 15 percent. The loan size (within the range of
Canadian $18,000 to Canadian $200,000) is a maximum of one third of the capital costs of the fixed assets being purchased. The
maximum term of a LILA loan is the lesser of three years or the economic life of the fixed asset. The GOC's responses indicate that
loans may be amortized over a longer period but must be financed at commercial rates for any excess period. The LILA loan rate
is established twice a year on March 15 and September 15, and is the BCDC's prime commercial rate divided by two, subject to a
maximum interest rate of 10 percent per year. No principal or interest payments are required for the first six months (prior to
1981, 12 months) following the initial disbursement of the loan. LILA loans are secured by means of debentures, mortgages or
personal guarantees, and there are no forgiveness provisions.
During the period 1978 through September 30, 1982, producers of softwood lumber and fence received 24 loans. From February
1978 to April 1979, loans were not available to companies located within the "lower Mainland and southern Vancouver Island"
regions. After April 1979, companies in all regions of BC could apply for funds. Therefore, we preliminary determine that all four
loans
(Cite as: 48 FR 10395, *10400)
given during February 1978 to April 1979 are countervailable because the availability of LILA loans during that period was
limited to companies within specific regions, and loans were provided on terms inconsistent with commercial considerations.
To calculate the subsidy rate for LILA loans given at a non-commercial interest rate, we compared what a company would pay a
normal commercial lender in principal and interest in any given year with what was actually paid on the loan in that year. For
purposes of the preliminary determinations, we included the one-year deferral of principal and interest payments in our subsidy
calculations. The benchmark rate used was the chartered banks' prime rate in Canada, as reported in the OECD Financial
Statistics. After calculating the payment differential in each year of the loan, we then calculated the present value of this stream of
benefits in the year the loan was made using the secondary market bond yield for Canadian government bonds (one to three
years), as reported in the OECD Financial Statistics, as the discount rate.
The GOC did not report the precise terms of individual loans. Because the program limits the loans to a term of the lesser of three
years or the economic life of the fixed assets purchased, we allocated the benefits over three years as the best information
available. Any amount financed beyond this period must be at commercial rates.
Benefits from the four LILA loans used by producers of softwood lumber and
(Cite as: 48 FR 10395, *10400)
fence during February 1978 through April 1979 were allocated over the total sales value of the producers of softwood lumber and
fence. We calculated a subsidy of 0.001 percent ad valorem.
b. Stumpage Payment Deferral. The Fort Nelson Selling Price Zone was created in northeastern BC in recognition of the problems
of logging in spruce swamplands where logging is only possible after "freeze-up" (mid-November to March 1).
However, the lumber mills operate over a 12-month period. The volumes logged during the period November through February
are allocated during the period November through October and stumpage is billed accordingly, regardless of the month in which
the lumber was actually cut. Only licensees within the Fort Nelson Selling Price Zone are eligible for this deferral.
We preliminarily determine that this deferral of stumpage payments confers a subsidy since the deferral eligibility is limited to
companies located within a specific region and the deferral is preferential as compared with other companies in the province. The
subsidy was calculated by taking the difference between the monthly stumpage payments due based on when the timber was
actually cut and the monthly stumpage payments due based on the 12-month distribution plan. The best information available for
calculating the benefit from the deferral of stumpage payments due was billing information for the period November
1981-October 1982.
(Cite as: 48 FR 10395, *10400)
However, the amount of the benefit provided to producers of the products under investigation is so small relative to the value of
sales of the products under investigation to the United States that the subsidy is less than 0.001 percent ad valorem.
3. Ontario.--Stumpage Billing Deferral. In December 1981, the government of Ontario initiated a six-month program whereby
billings for stumpage payments could be deferred for approved applicants. The program was extended for an additional six
months.
The GOC in its responses indicates that this program was available only to sawmills. Therefore, we preliminarily determine that
the program conferred a subsidy on the products under investigation because the benefits were limited to sawmills.
The subsidy was calculated by treating the amount of stumpage payments deferred during the period for which we are measuring
subsidization as a short- term loan at a zero interest rate. We multiplied the amount of the loan by a benchmark short-term
interest *10401
(Cite as: 48 FR 10395, *10401)
rate, the three-month Treasury bill rate in Canada, for the one month in which billings were deferred in 1981. However, the
amount of the benefit provided to sawmills is so small relative to the total sales value of the products of sawmills that the subsidy
is less than 0.001 percent ad valorem.
4. Quebec. a. Societe de Recuperation, d'Exploitation et
(Cite as: 48 FR 10395, *10401)
de Developpement Forestiers du Que1bec. The Societe de Recuperation, d'Exploitation et Developpement Forestiers du Que1bec (REXFOR) was incorporated in 1973 under Quebec's REXFOR Act as a
provincial Crown corporation. Jointly administered by the Ministe>=1re des Finances and the Ministe>=1re de l'Energie et des
Ressources of Quebec, its entire stock is allotted to the former, which approves REXFOR's operating and investment budgets.
REXFOR was created to manage specific provincially owned forest lands, to preserve and protect provincial forest lands through
silviculture, and to encourage the development of the "forest industry" in Que>=1bec. REXFOR owns sawmills and pulp and paper
mills, and produces the softwood products under investigation as well as a wide variety of products not under investigation. In
carrying out these activities, REXFOR receives funds from both the Canadian and Que>=1bec governments, and is also an active
investor in and provider of funds to the "forest products industry" in Que>=1bec.
(1) Assistance to REXFOR from the Government of Canada. REXFOR and three of its subsidiaries producing softwood lumber
received six RDIP grants from DREE. These grants, which we preliminarily determine to confer subsidies, are included in the
federal portion of the "Programs Preliminarily Determined to Confer Subsidies" section of this notice.
(2) Assistance to REXFOR from the Government of Que>=1bec. (a) Loans and Loan