(Cite as: 48 FR 24159)
NOTICES
DEPARTMENT OF COMMERCE
Final Negative Countervailing Duty Determinations; Certain Softwood
Products From Canada
Tuesday, May 31, 1983
*24159
(Cite as: 48 FR 24159, *24159)
AGENCY: International Trade Administration, Commerce.
ACTION: Final negative countervailing duty determinations: Certain softwood products from Canada.
SUMMARY: We determine that no benefits which constitute subsidies within the meaning of the countervailing duty law are
being provided to manufacturers, producers, or exporters in Canada of certain softwood products, as described in the "Scope
of Investigations" section of this notice. The total estimated net
(Cite as: 48 FR 24159, *24159)
subsidy for each product is de minimis, and therefore our final countervailing duty determinations are negative.
EFFECTIVE DATE: May 31, 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 Avenu, N.W., Washington, D.C. 20230, telephone: (202) 377-4087 or (202) 377- 2438.
SUPPLEMENTARY INFORMATION:
Final Determinations
Based upon our investigations, we determine that the following programs confer subsidies on the products under investigation:
A. Federal Programs
(Cite as: 48 FR 24159, *24159)
1. Certain Aspects of the Investment Tax Credit.
2. Program for Export Market Development.
3. Forest Industry Renewable Energy Program.
4. Regional Development Incentives Program (RDIP)--Grants.
5. Federal Employment Program--CIAP.
B. Federal/Provincial Programs
1. Agricultural and Rural Development Agreements (ARDA).
2. General Development Agreements:
a. British Columbia--Assistance to Small Enterprise Program (ASEP).
b. New Brunswick--NED, KED and SIFAP.
c. Ontario--Eastern Ontario Subsidiary Agreement.
C. Provincial Programs
1. Alberta--Stumpage Payment Deferral.
2. British Columbia:
a. Low-Interest Loan Assistance (LILA).
b. Stumpage Payment Deferral.
3. Ontario:
(Cite as: 48 FR 24159, *24159)
a. Stumpage Pricing for Non-Integrated Licensees.
b. Stumpage Payment Deferral.
4. Que>=1bec:
a. Stumpage Pricing on Timber Limits.
b. Aide a>=2 la Promotion des Exportations.
c. Socie>=1te>=1 de Re>=1cupe>=1ration, d'Exploitation et de De>=1veloppement Forestiers du Que>=1bec.
d. FRI Tax Abatement Program.
e. SDI Export Expansion Program.
The total estimated net subsidies are 0.349 percent ad valorem for softwood lumber, 0.260 percent ad valorem for softwood
shakes and shingles, and 0.304 percent ad valorem for softwood fence. These ad valorem subsidies are de minimis. Therefore, we
determine that no 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
*24160
(Cite as: 48 FR 24159, *24160)
in the "Scope of Investigations" section of this notice.
Case History
On October 7, 1982, we received a petition from counsel for the United States
(Cite as: 48 FR 24159, *24160)
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 investigations (47 FR 49878). 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.
In our notice of initiations, 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 703(c) of the Act, and
postponed our preliminary determinations for 65 days until March 7, 1983 (47 FR 56688).
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.
(Cite as: 48 FR 24159, *24160)
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.
Preliminary negative countervailing duty determinations were published on March 11, 1983 (48 FR 10395) and a
correction was published on March 21, 1983 (48 FR 11731). Both petitioner and respondent filed briefs pertaining to these
investigations prior to and after our preliminary determinations. We received a request to hold a public hearing in accordance
with § 355.35 of the Commerce Department Regulations, but that request was subsequently withdrawn.
Scope of 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 are a large number of producers and/or exporters of certain
softwood products in Canada. The period for which we are measuring subsidization is the most recent year for which data are
available, as stated in the appropriate program descriptions.
(Cite as: 48 FR 24159, *24160)
Analysis of Programs
In its responses, the government of Canada (GOC) provided data at the federal and provincial levels for the applicable
periods. In addition, information was provided by counsel for the Canadian producers and counsel for the petitioner.
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. Other
principles are discussed in the appropriate sections of this notice.
Petitioner 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 methods. To calculate the benefit received from the
countervailable grants being considered in these investigations, we allocate the present value of grants "tied" to the purchase of
capital equipment over the relevant period. If the grant was "tied" to the purchase of capital assets, but not to specific capital
assets, we use the number of years reflecting the average useful life of capital assets in the sector producing the products under
investigation. A grant is considered tied where the intended use is known to the donor, and where such use is
(Cite as: 48 FR 24159, *24160)
acknowledged prior to, or concurrently with, its bestowal. In these investigations no grants were tied to specific items of capital
equipment. Based on evidence in the record, we determine that the average useful life of sawmill plants and equipment is 15 years.
"Present value" is a mechanism for allocating money received in one year to other years and is calculated using a discount rate.
For this purpose, we determine that the most appropriate discount rate is the "risk-free" rate. For these investigations, we
determine the risk-free rate is the secondary market rate for long-term (ten years and over) Canadian government debt. The
source used to determine the Canadian "risk-free" rate was Financial Statistics, published by the Organization for Economic
Cooperation and Development (OECD).
Certain small grants are expensed in the year received for reasons discussed in the appropriate program descriptions in the
"Programs Determined to Confer Subsidies" section of this notice.
We normally use data from a uniform period in calculating subsidies. The responses contained 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 fiscal year data and it
was necessary to apply a discount rate, a fiscal year discount rate was calculated by averaging the appropriate monthly rates.
(Cite as: 48 FR 24159, *24160)
Unless otherwise stated in the "Programs Determined to Confer Subsidies" section of this notice, the denominator used to calculate
an ad valorem subsidy depended on whether the response provided information 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 value of shipments statistics provided by the GOC, which are the
most recent and best data available.
Based on our analysis of the petition, responses to our questionnaires, arguments made by interested parties, and our
verification, we determine the following.
I. Programs Determined To Confer Subsidies
We determine that subsidies are being provided to manufacturers, producers, or exporters in Canada of certain softwood
products included in these
(Cite as: 48 FR 24159, *24160)
investigations under the programs described below. The total estimated net subsidy for each product under *24161
(Cite as: 48 FR 24159, *24161)
investigation, however, is de minimis, and therefore our determinations are negative.
A. Federal Programs
1. Certain Aspects of the Investment Tax Credit. The investment tax credit incentive is available to all secondary industries which
purchase new buildings, machinery and equipment for use in manufacturing and processing activities. Credits for the purchase
price of eligible assets are subject to a yearly maximum of $15,000 [FN1] and 50 percent of the excess over $15,000 of federal
taxes payable. Unused credits are carried forward for five years.
FN1 Throughout this notice, all amounts are expressed in Canadian dollars, unless otherwise specified.
The program provides a credit of seven percent of the capital cost of qualified property acquired by companies located anywhere
in Canada. A credit of 20 percent is given for qualified property acquired for use anywhere in the provinces of Newfoundland,
Prince Edward Island, Nova Scotia, New Brunswick and the Gaspe>=1 Peninsula. Other areas, as designated by the Department of
Regional Economic Expansion (DREE) under the Regional Development Incentives
(Cite as: 48 FR 24159, *24161)
Act (RDIA), are eligible for a ten percent credit. A company can receive a credit of 50 percent when an asset is used in census
divisions which record family unemployment rates over 30 percent greater than the national average, and per capita incomes less
than 89 percent of the national average. This category is further limited to five percent of the Canadian population living in areas
that meet the above tests. Companies in a province can only receive benefits in this category for areas including no more than 40
percent of that province's population.
Since investment tax credits up to seven percent are available to all companies on equal terms, the Department has determined
that such credits do not confer a subsidy. However, credits over seven percent are limited to companies located within specific
regions, and confer a subsidy.
In our preliminary determinations, we evenly allocated the investment tax credits taken to each of the four rate categories since
we did not know more precisely the amount of investment tax credits claimed under each category. During verification, we
obtained additional information on capital investment by Standard Industrial Code (SIC) 25 industries (sawmilling industries) and
the shipments by SIC 251 (sawmills and planing mills) and 259 (miscellaneous wood products) industries. We determine that
capital investment and shipments parallel each other, so we believe it is reasonable to assume that the distribution of investment
tax credits granted corresponds to the volume of
(Cite as: 48 FR 24159, *24161)
shipments. Therefore, we allocated investment tax credits claimed in 1980 (the most recent year for which data are available) as
appropriate to the four rate categories based on shipment data.
The subsidy calculation for this program takes into account the fact that an investment tax credit immediately reduces the
depreciable value of an asset and thus reduces the capital cost allowance benefits for purposes of both federal and provincial
taxation. In the preliminary determinations, we assumed a 25 percent rate for capital cost allowance, since we did not realize that
50 percent was the rate applicable for property acquired prior to November 12, 1981. We are now using the 50 percent rate. The
net benefit from the capital cost allowance is equal to the amount of the deduction multiplied by the taxpayer's combined federal
and provincial tax rate. we used the 1979 combined federal and provincial tax rate of 41 percent, the most recent data available.
The subsidy to the producers of softwood lumber and softwood shakes and shingles, allocated over the value of total 1980 sales
for sawmills and planing mills, amounts to 0.030 percent ad valorem. The subsidy to softwood fence producers, allocated over
total 1980 sales of miscellaneous wood products, amounts to 0.018 percent ad valorem.
2. Program for Export Market Development (PEMD). PEMD is administered by the Department of External Affairs and is available
to all businesses in the manufacturing or service sectors which export, including producers of the
(Cite as: 48 FR 24159, *24161)
products under investigation. PEMD facilitates the development of export markets for Canadian products by sharing with the
companies the costs of travel, per diem and some special expenses. PEMD assistance is in the form of interest-free loans with
forgivable repayment terms. If sales result from the export market development activities, the funds must be repaid at a rate of
two percent of sales generated for a period of three years up to the amount of assistance provided.
Between 1980 and 1982 two small projects were funded by PEMD to develop market opportunities in the United States for
softwood fence and softwood lumber. The disbursements for both projects were made in 1982. The sole purpose of PEMD is to
stimulate exports; therefore, we determine that assistance provided under the program confers benefits which constitute export
subsidies. Because there is no absolute obligation to repay the loan and because PEMD assistance covered costs normally
expensed in the year incurred, we treated the funds disbursed as grants expensed in the year of receipt. We allocated the 1982
benefit of each project over the total 1981 export sales to the United States of softwood fence and softwood lumber, respectively,
and calculated a subsidy of 0.009 percent ad valorem for softwood fence and less than 0.001 percent ad valorum for softwood
lumber.
3. Forest Industry Renewable Energy Program. The Forest Industry Renewable Energy (FIRE) program is administered by the
federal Department of Energy,
(Cite as: 48 FR 24159, *24161)
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 assistance is given in the
form of taxable grants that are tied to the purchase of capital equipment (facilities for burning biomass in place of fossil fuels).
We verified that 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 Board submission of August 16, 1978. Thereafter, FIRE assistance became available
to all industries throughout Canada according to the Treasury Board submission of January 8, 1981.
This program involves the provision of a monetary benefit which could be used by all industries if made available to them. Since
the restrictions on the availability of FIRE grants from August 16, 1978 to January 8, 1981 were due entirely to governmental
action, we determine that the grants received by the producers of the products under investigation during that period confer
subsidies within the meaning of the Act. Grants awarded after that period do not confer subsidies because eligibility was not
limited by governmental action.
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 our
(Cite as: 48 FR 24159, *24161)
grant methods 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 *24162
(Cite as: 48 FR 24159, *24162)
investigation, and calculated a subsidy of 0.003 percent ad valorem.
4. Regional Development Incentives Program (RDIP)--Grants. The RDIP is administered by 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 manufacturers whose capital investment projects for
establishing new facilities or expanding or modernizing existing facilities will create jobs and economic opportunities in areas
designated as economically disadvantaged. Loan guarantees are discussed in the "Programs Determined Not to Confer Subsidies"
section of this notice. The Governor-in-Council may designate a region upon the report of the Minister of 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 British Columbia (BC).
The prime criterion for DREE approval of a proposed project is the likelihood
(Cite as: 48 FR 24159, *24162)
that the project will provide needed economic opportunities and social adjustment. Projects which would proceed without RDIP
assistance are ineligible.
RDIP grants were provided to producers of the products under investigation. We 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 calculated according to the grant methods described in the
"Analysis of Programs" section of this notice.
The 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 0.180 percent ad valorem
for softwood lumber, 0.070 percent ad valorem for softwood shakes and shingles, and 0.151 percent ad valorem for softwood
fence.
5. Federal Employment Program--CIAP. The Community-Based Industrial Adjustment Program (CIAP), which began early in
1981, is one of the two components of the Industry and Labour Adjustment Program, which is administered by the Department of
Industry, Trade and Commerce. Its purpose is to alleviate the distress caused in "designated" Canadian communities by
large-scale permanent industry dislocation in a given sector when such dislocation causes high unemployment in
(Cite as: 48 FR 24159, *24162)
these communities. CIAP assistance comes in the form of grants for consulting costs of interest-free loans for the funding or
capital costs.
At verification, we ascertained that communities in Canada are designated for CIAP assistance at the discretion of the federal
Cabinet from a list of depressed communities. We also verified that one producer of softwood lumber received one small grant in
1982 under the CIAP program. Since the benefits under this program are limited to companies located in specific regions, we
determine that CIAP assistance constitutes a subsidy within the meaning of the Act. Because the grant covered costs normally
expensed in the year incurred, we allocate the grant exclusively to the year of receipt. Allocating this CIAP grant over the total
sales value of the producers of softwood lumber, we calculated a subsidy of less than 0.001 percent ad valorem.
B. Federal/Provincial Programs
1. Agricultural and Rural Development Agreements (ARDA). The ARDA's 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 in Canada.
Of the six programs under the General ARDA, the Alternative Income and
(Cite as: 48 FR 24159, *24162)
Employment Opportunities in the Rural Development Region (Alternative Income and Employment) is the only program that
provided benefits to the producers of the products under investigation.
The Alternative Income and Employment program was available to all provinces, but was used only in Ontario and BC. The
program was designed to provide grants to establish, expand or modernize production facilties in order to increase income and
alternative employment opportunities for low income people in designated rural areas of a province. Both BC and Ontario
received federal funds to finance 50 percent of the assistance given under this program for rural areas which are "economically
depressed." Since the eligibility for General ARDA is limited to companies located within specific regions, we have determined that
both federal and provincial benefits under this program confer a subsidy.
As a supplement to the General ARDA program, the Special ARDA program is aimed at improving employment and income
opportunities for people of native ancestry in rural areas (defined by specific criteria). These agreements have been signed with
Manitoba, the Northwest Territories, the Yukon, BC and Saskatchewan.
Since the benefits of the Special ARDA program are limited to companies located in rural areas, we determine that Special ARDA
confers subsidies.
We used the grant methods described in the "Analysis of Programs" section of
(Cite as: 48 FR 24159, *24162)
this notice to calculate the benefits under the ARDA programs. Allocating the benefits over the total sales value of producers of
the products under investigation, we calculated a subsidy of 0.005 percent ad valorem.
2. General Development Agreements. As part of its activities to spur developent in Canada, DREE entered into ten-year
General Development Agreements (GDA's) with all provinces except Prince Edward Island. A similar 15-year comprehensive
development plan exists for Prince Edward Island.
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 have been negotiated with individual provinces.
These mainly fund general planning, infrastructure and community development, although some assistance has been provided to
individual companies.
Under the GDA's, subsidiary agreements with provisions for assistance to small enterprises are available to all provinces and have
been negotiated with Manitoba, Ontario BC and New Brunswick. Funds were provided to producers of the products under
investigation in the latter three provinces.
a. British Columbia--Assistance to Small Enterprise Program (ASEP). This program is jointly funded by BC (Ministry of Industry
and Small Business Development) and the federal government (DREE) under the authority of the Canada-British Columbia
Industrial Development Subsidiary Agreement. ASEP
(Cite as: 48 FR 24159, *24162)
offers interest-free loans to companies in the manufacturing and processing sector with annual revenues of less than $500,000.
The *24163
(Cite as: 48 FR 24159, *24163)
terms of the loans provide that the loans will be forgiven. These loans are available for the construction of new facilities (the lesser
of 50 percent of the eligible capital costs or $30,000), and for modernization projects (the lesser of 30 percent of the eligible
capital costs or $18,000).
The ASEP program began in 1977 and continued until March 31, 1983. During that period, only companies located outside the
"Lower Mainland and Southern Vancouver Island" regions were eligible for funds. During June 1980-July 1981, the area excluded
from ASEP was included in the Small Manufacturers Assistance Program (SMAP), a similar program established and funded by BC
(Ministry of Industry and Small Business Development).
We determine that all federal assistance provided through ASEP is countervailable because it was limited to companies in specific
regions. We determine that provincial assistance provided through ASEP is countervailable during the period in which SMAP was
not in operation because provincial benefits were then likewise limited to companies within specific regions. Provincial assistance
provided through ASEP is not countervailable during June 1980-July 1981, when it was generally available because the SMAP
program was also in operation.
Because the loans by their terms are to be forgiven, we treated them as grants
(Cite as: 48 FR 24159, *24163)
and used the grant methods described in the "Analysis of Programs" section of this notice to calculate the benefits. The total
amount of ASEP loans to producers of the products under investigation was adjusted to account for loans made to operations that
were destroyed, were in receivership, were permanently closed prior to 1981, or had the assets which were purchased with the
proceeds of the loans repossessed.
The subsidy amounts to 0.002 percent ad valorem for softwood lumber, 0.044 percent ad valorem for softwood shakes and
shingles, and 0.010 percent ad valorem for softwood fence.
b. New Brunswick-NED, KED and SIFAP. Three subsidiary agreements between New Brunswick and the federal government
provide assistance to small enterprises in the province. These are the Northeast New Brunswick Development Subsidiary
Agreement (NED), the Kent Region Pilot Project Subsidiary Agreement (KED), and the Industrial Development Subsidiary
Agreement (SIFAP). No applications for funds under these programs were accepted after the 1980-81 fiscal year, and no funds
have been 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 $1,000,000 over the past two years and had to be located in
(Cite as: 48 FR 24159, *24163)
specific regions, which varied for each of the three programs. Companies were required to contribute new equity of at least 20
percent of the cost of a project. Producers of the products under investigation received interest-free forgivable loans under this
program between 1978 and 1981.
We 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 they have all been forgiven, we treated the benefits as
grants.
In calculating the benefits, we used the grant methods described in the "Analysis of Programs" section of this notice. The subsidy
under this program amounts to 0.008 percent ad valorem for softwood shakes and shingles, 0.007 percent ad valorem for
softwood fence, and less than 0.001 percent ad valorem for softwood lumber.
c. Ontario--Eastern Ontario Subsidiary Agreement. Under the Eastern Ontario Subsidiary Agreement, interest-free forgivable
loans are provided to industries located in the eastern region of Ontario. Producers of softwood lumber received such loans in
fiscal year 1981. Benefits under this program are countervailable because they are limited to companies located within a specific
region. Because loans under the program are, by their terms, to be forgiven, we treated them as grants.
In calculating the benefits, we used the grant methods described in the
(Cite as: 48 FR 24159, *24163)
"Analysis of Programs" section of this notice. The subsidy under this program amounts to less than 0.001 percent ad valorem for
softwood timber.
C. Provincial Programs
1. Alberta.--Stumpage Payment Deferral. The government of Alberta has deferred the payment of stumpage dues and holding and
protection charges for one year from May 1, 1982 to May 1, 1983. This applies to holders of stumpage rights under Forest
Management Agreements, Quota Certificates, and Commercial Timber Permits. Stumpage dues are paid on a monthly basis and
holding and protection charges are paid on an annual basis. The terms of the deferral specify that the cumulated deferred dues
must be repaid in 12 equal monthly installments beginning on May 1983. The deferred holding and protection charges were to be
repaid in May 1983.
The deferral involves the provision of a benefit which could be used by all industries if made available to them. Since the
restrictions on availability are due entirely to governmental action, we find that the program was limited to a specific industry or
group of industries. Furthermore, because recipients paid no interest, the deferral is on terms inconsistent with commercial
considerations. Therefore, the benefits under this program confer a subsidy on the products under investigation.
(Cite as: 48 FR 24159, *24163)
Because stumpage dues are paid on a monthly basis, we treated each month's deferred dues, through December 1982, as a
separate loan at zero interest rate with deferment of principal. To calculate the benefit, we compared what the companies would
pay a commercial lender in principal and interest with what was actually to be paid. For the commercial benchmark, we used the
rate for prime corporate paper (90 days) in Canada, as reported in the OECD Financial Statistics. We then calulated the
percent value of the monthly stream of benefits of these loans using as the discount rate the secondary market bond yield for
Canadian government bonds (one to three years), as reported in the OECD Financial Statistics.
Because holding and protection charges are paid annually and were to be repaid in May 1983, we treated this deferral as a
one-year loan. For the commercial benchmark we used the rate for prime corporate paper (90 days), as reported in the OECD
Financial Statistics. Allocating the benefits of these loans over total sales of the producers of the products under investigation, we
calculated a subsidy of 0.003 percent ad valorem.
2. British Columbia.--a. Low-Interest Loan Assistance (LILA). When the joint Canada-British Columbia Industrial
Development Subsidiary Agreement (IDSA) was signed in 1977, a program was established to provide loans at low interest rates.
Funding for LILA loans is provided by BC through the Ministry of Small Business Development and the Special Purpose
Appropriation Act. The British
(Cite as: 48 FR 24159, *24163)
Columbia Development Corporation (BCDC) acts as trustee for the province in administering the LILA program. During February
1978-April 1979 the program's eligibility criteria were determined by the IDSA, and participation was limited to areas outside the
Lower Mainland and Southern Vancouver Island regions. In *24164
(Cite as: 48 FR 24159, *24164)
April 1979, the province changed the program criteria and LILA became generally available throughout BC.
LILA loans are used for captial improvements for plant expansions or modernizations, or for the establishment of production
facilities which will create new economic activity and benefits. The loan rate, established twice a year, is the BCDC's prime
commercial rate divided by two, subject to a maximum of ten percent per year.
From April 1977, when the program began, to August 1982, 24 loans were received by producers of the products under
investigation. Of those loans, four were given during February 1978-April 1979 when eligibility was limted to companies located
outside the Lower Mainland and Southern Vancouver Island regions. LILA loans given during this period are countervailable
because of their availability was limited to companies located in specific regions, and because they were provided on terms
inconsistent with commercial considerations.
The terms for the four loans given during February 1978-April 1979 matched the economic life of the fixed assets purchased.
After 1981, the loan
(Cite as: 48 FR 24159, *24164)
term was the lesser of three years or the economic life of of the asset.
We compared what a company would pay a normal commercial lender in principal and interest in any given years with what was
actually paid on the loan in that year to calculate the subsidy rate for the four LILA loans identified. We also accounted for a
six-month interest payment deferral on LILA loans. 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 as the discount rate the secondary market bond yield for Canadian government bonds (one to
three years), as reported in the OECD Financial Statistics. The subsidy provided by LILA loans amounts to less than 0.001 percent
ad valorem for the products under investigation.
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.
(Cite as: 48 FR 24159, *24164)
We determine that this deferral of stumpage payments confers a subsidy since the deferral is limited to companies located within a
specific region and is on terms inconsistent with commercial considerations. 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. We treated these monthly differences as one- month loans at a zero interest rate,
and multiplied the amount of the difference by a benchmark short-term interest rate. For the benchmark rate we used the rate for
prime corporate paper (90 days) in Canada, as reported in the OECD Financial Statistics. 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. The subsidy on the products under investigation amounts to less than 0.001 percent ad valorem.
3. Ontario.--a. Stumpage Pricing for Non-Integrated Licensees. Stumpage prices in Ontario are based largely on Crown dues, which
are derived by multiplying an administratively set base rate by an index tied to end prices for forest products. The base rate for
"non-integrated" licensees is set at 90 percent of the base rate for "integrated" licensees; the province defines "integrated" as "a
licensee who owns or operates any pulp mill in Manitoba, Ontario or Quebec or is related to any person who owns or operates any
such pulp mill."
During the course of these investigations, we asked about the basis for
(Cite as: 48 FR 24159, *24164)
the difference in the two rates. We were told that integrated mills are larger and more efficient, and thus can afford to pay more for
stumpage.
The fact that base rates for non-integrated licensees are lower does not necessarily mean that they are preferential within the
meaning of subsection 771(5)(B)(ii). We recognize that there may be valid bases for charging different stumpage prices to
integrated and non-integrated licensees. However, we do not have sufficient evidence on the record to explain the rate
differential.
Consequently, we determine that the price charged to non-integrated licensees is preferential and constitutes a subsidy within the
meaning of subsection 771(5)(B)(ii). To calculate the subsidy, we took the difference between the base rate for integrated
licensees and that charged to non-integrated licensees. We then multiplied this difference by the volume of softwood timber sold
in fiscal 1981-82 to non-integrated licensees. Because stumpage dues are current obligations, we treated this amount as a grant
expensed in the year received and calculated a subsidy of 0.015 percent ad valorem.
b. Stumpage Payment 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 in July
1982. We determine that the program conferred a subsidy on the products under investigation because the benefits were
provided only to
(Cite as: 48 FR 24159, *24164)
sawmills and on terms inconsistent with commercial considerations.
We treated the amount of stumpage payments deferred for each month during the period for which we are measuring
subsidization as a short-term loan at a zero interest rate. We multiplied the amount of each loan by a benchmark short-term
interest rate for the months in which billings were deferred. For the benchmark rate we used the rate for prime corporate paper
(90 days) in Canada, as reported in the OECD Financial Statistics. The subsidy amounts to 0.005 percent ad valorem for
softwood lumber.
4. Quebec.--a. Stumpage Pricing on Timber Limits. The timber limit is one of two forms of stumpage tenure and allocation in
Que>=1bec (see Appendix B, section on Que>=1bec). Stumpage dues charged by the province for sawlogs harvested on timber
limits are lower than those charged by the province for pulpwood. In most instances, the cutting rights for sawlogs or the cut
sawlogs themselves are sold by the timber limit holders to sawmills and other users. The timber limit holder pays only $0.77 per
m 3 to the province for sawlogs harvested on the limit. However, the limit holder can in turn charge a higher price to the
purchaser. In the 1981-82 fiscal year, there were five timber limit holders that produced softwood lumber from sawlogs harvested
on their own limits, and they paid the $0.77 per m 3 charged by the province.
During the course of these investigations, we asked about the basis for the difference in the two prices. We were told that timber
limits are
(Cite as: 48 FR 24159, *24164)
primarily held by pulp and paper producers and that they were not harvesting sawmill quality timber on their limits. Since the
province wanted that timber harvested, it set a price *24165
(Cite as: 48 FR 24159, *24165)
which it considered would encourage the harvesting of sawlogs. In contrast, the stumpage price for pulpwood is based on a
percentage of the price per ton of newsprint delivered in New York.
The fact that sawlog prices are lower does not necessarily mean that they are preferential within the meaning of subsection
771(5)(B)(ii). We recognize that there may be valid bases for charging different stumpage prices for pulpwood and sawlogs.
However, we do not have sufficient evidence on the record to explain the lower price for sawlogs.
Consequently, we determine that the price charged for sawlogs is preferential and constitutes a subsidy within the meaning of
subsection 771(5)(B)(ii). To calculate the subsidy, we took the difference between the price charged for pulpwood ($3.36 per m 3
) and that charged for sawlogs ($0.77 per m 3 ). We then multiplied this difference by the volume of sawlogs harvested in fiscal
1981-82 by timber limit holders and processed in their own sawmills. Because stumpage dues are current obligations, we treated
this amount as a grant expensed in the year received and calculated a subsidy of 0.061 percent ad valorem.
b. Aide a la Promotion des Exportations. The Aide a>=2 la Promotion des Exportations (APEX) program is administered by
the recently created Ministe