NOTICES

DEPARTMENT OF COMMERCE

[C-122-507]

Preliminary Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish From Canada

Thursday, January 9, 1986

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(Cite as: 51 FR 1010, *1010)

AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided

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to producers or exporters in Canada of certain fresh Atlantic groundfish as described in the "Scope of Investigation" section of this notice. The estimated net subsidy is 6.85 percent ad valorem.

We have notified the U.S International Trade Commission (ITC) of our determination. We are directing the U.S. Customs Service to suspend liquidation of all entries of certain fresh Atlantic groundfish from Canada that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice, and to require a cash deposit or bond on entries of this product in the amount equal to the estimated net subsidy.

If this investigation proceeds normally, we will make our final determination by March 18, 1986.

EFFECTIVE DATE: January 9, 1986.

FOR FURTHER INFORMATION CONTACT:Gary Taverman or Mary Martin, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-0161 or 377-2830.

(Cite as: 51 FR 1010, *1010)

SUPPLEMENTARY INFORMATION:
Based upon our investigation, we preliminarily determine that there is 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 producers or exporters in Canada of certain fresh Atlantic groundfish (groundfish). For purposes of this investigation, the folllowing programs are found to confer subsidies:

A. Federal Programs

1. Fishing Vessel Assistance Program.
2. Agricultural and Rural Development Agreements.
3. Department of Fisheries and Oceans Promotions Branch.
4. Economic and Regional Development Agreements Program and General Development Agreements Program.
5. Assistance for the Construction of Icemaking and Fish Chilling Facilities.
6. Fishing Vessel Insurance Plan.
7. Certain Types of Investment Tax Credits.
8. Program for Export Market Development.
9. Regional Development Incentive Program.
10. Industrial and Regional Development Program.

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11. Fisheries Improvement Loan Program.
12. Government Equity Infusions.

B. Provincial Programs

1. New Brunswick: Loans from the Fisheries Development Board.
2. New Brunswick: Fish Unloading Systems and Icemaking Programs.
3. New Brunswick: Insurance Premium Prepayment Program.
4. Newfoundland: Grants for Purchasing and Constructing Boats.
5. Newfoundland: Grants for Rebuilding and Repair of Fishing and Coastal Vessels.
6. Newfoundland: Loans from the Fisheries Loan Board.
7. Newfoundland: Loan Guarantees from the Fisheries Loan Board.
8. Nova Scotia: Fishing Vessel Construction Program.
9. Nova Scotia: Loans from the Fisheries Loan Board.
10. Nova Scotia: Industrial Development Division Grants.
11. P.E.I.: Fishing Vessel Subsidy Program.
12. P.E.I.: Near and Offshore Vessel Assistance Program.
13. P.E.I.: Engine Conversion Program.
14. P.E.I.: Commercial Fisherman's Investment Incentive Program.
15. P.E.I.: Assistance for the Construction of Icemaking and Fish Chilling

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Facilities.
16. Quebec: Vessel Construction Assistance Program.
17. Quebec: Gear Subsidy Program.
18. Quebec: Insurance Premium Subsidy Program.
19. Quebec: Tax Abatement Program.
We determine the estimated net subsidy to be 6.85 percent ad valorem.

Case History

On August 5, 1985, we received a petition from the North Atlantic Fisheries Task Force on behalf of the United States groundfish industry which harvests and produces for sale Atlantic groundfish in fresh form. The North Atlantic Fisheries Task Force is an unincorporated association representing fishermen, fishermen's cooperatives, and processors located in the northeastern United States. A majority of the members of the Task Force are producers, wholesalers, or trade or business associations whose members are producers or wholesalers of groundfish.

In compliance with the filing requirements of § 355.26 of the Commerce Regulations (19 CFR 355.26), the petition alleged that producers or exporters in Canada of groundfish receive, directly or indirectly, benefits which constitute subsidies within the meaning of section 701 of the Act. On August

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26, 1985, we initiated a countervailing duty investigation (50 FR 35281).

Since Canada is a "country under the Agreement" within the meaning of section 701(b) of the Act, title VII of the Act applies to this investigation, and the ITC is required to determine whether imports of the subject merchandise from Canada materially injure, or threaten material injury to, a U.S. industry. On September 19, 1985, the ITC determined that there is a reasonable indication that an industry in the United States is materially injured by reason of imports from Canada of certain fresh whole Atlantic groundfish. At the same time, it determined that there is a reasonable indication that an industry in the United States is threatened with material injury by reason of imports of certain fresh Atlantic groundfish fillets from Canada (50 FR 38904).

We presented a questionnaire concerning the allegations to the government of Canada in Washington, DC, on September 9, 1985. On November 8, 1985 we received a response to our questionnaire containing information submitted by the government of Canada, the governments of the Provinces of New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island, and Quebec, and three Canadian firms (Fishery Products International Limited, National Sea Products Limited, and United Maritime Fishermen Co-op). Supplementary information was received throughout November and December 1985.

On October 7, 1985, based upon a request made by the petitioner and in accordance with section 703(c)(1)(A) of the Act, we postponed the deadline date

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for the preliminary determination to no later than January 2, 1986 (50 FR 41921).

In accordance with § 355.38 of the Commerce Regulations, several Canadian firms claiming not to have benefited from subsidies applied for *1011

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exclusion from any possible countervailing duty order. On October 8, 1985, we informed representatives of the Canadian government of the applications, and requested questionnaire responses from each of the firms applying for exclusion. We also informed the Canadian officials that for the exclusion requests to be considered, the Department would require that both the federal and the appropriate provincial governments submit formal certifications attesting to the non-receipt of benefits by those firms in question. Both the questionnaire responses and government certifications were due no later than November 8, 1985. Responses to the questionnaire were received during the period November 8-15, 1985. However, in a letter dated November 6, 1985, the Canadian government informed the Department that it was not feasible for the federal and certain provincial governments to comply with the certification requirement. On November 27, 1985, we notified the Canadian government that, due to the volume of requests for exclusion and the difficulty of verifying the responses of firms requesting exclusion, the current policy of the Import Administration is to accept and verify exclusion requests in countervailing duty investigations only if the respondent government provides certification

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that the firm or firms are not receiving subsidies. Given that we had not previously denied an exclusion request on the basis of a government's refusal or inability to provide certification, we extended the certification deadline until December 6, 1985, to allow the Canadian federal and the appropriate provincial governments to comply with this requirement. However, we stated that if the certifications were not received by that date, the exclusion requests would not be considered. On December 4, 1985, the Canadian government notified the Department that it would be unable to provide the certifications. Therefore, the requests for exclusion have been denied.

Standing Issue

In our notice of initiation, we stated that because the Department had received telephone calls and telexes from certain domestic processors objecting to the petition, we would examine the question of whether the petition was filed "on behalf of" a U.S. industry, as required by section 702(b)(1) of the Act. As we have previously stated, neither the Act nor the Commerce Regulations require a petitioner to establish affirmatively that it has the support of a majority of a particular industry. The Department relies on petitioner's representation that it has, in fact, filed on behalf of the domestic industry, until it is affirmatively shown that this is not the case.

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We have since confirmed that almost all of the firms that had expressed opposition import the subject merchandise from Canada. For the purpose of determining standing, we are excluding from consideration as part of the domestic industry those domestic products or wholesalers which are also importers of the subject merchandise. The opposition of these producers or wholesalers to the petition logically stems from their position as importers because, if the investigation results in an order, they will be liable for payment of countervailing duties. For these reasons, it is appropriate to exercise our discretion to exclude importers in addressing the standing issue. We find that petitioner has filed "on behalf of" a U.S. industry.

In its preliminary determination, the ITC found two like products, whole fresh groundfish and fresh groundfish fillets. On December 27, 1985, we received a submission from the Taskforce for the Survival of American Fishermen, Processing Plants and Jobs, a group claiming to account for a major proportion of groundfish fillets produced in the United States, and a significant amount of domestic landings of whole groundfish. The group has stated its opposition to the investigation of filleted and whole groundfish, but it is opposed to terminating the investigation just on groundfish fillets. The group has provided no information on the volume of domestic landings that it accounts for, nor has it provided sufficient evidence that it accounts for a major proportion of the domestic whole groundfish industry. Accordingly, we continue

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to believe that it has not been affirmatively demonstrated that the petition was not filed on behalf of the domestic industry.

Scope of the Investigation

The product covered by this investigation is certain fresh Atlantic groundfish, which covers fresh whole and fresh fillets of Atlantic groundfish, including cod, haddock, pollock, hake, and flatfish (including flounder and sole). These species are generally referred to collectively as "groundfish" because they live on or near the seabed. The term "fresh" includes fish that are chilled, but excludes fish that have been frozen. Whole fish include fish which are whole, or processed by removal of heads, viscera, fins, or any combination thereof, but not otherwise processed. Fillets (including fish steaks) include fish, other than frozen blocks, which are otherwise processed (whether or not heads, viscera, fins, scales, or any combination thereof have been removed). These products are currently provided for in items 110.1585, 110.1593, 110.3560, 110.5000, 110.5545, 110.5565, and 110.7033 of the Tariff Schedules of the United States Annotated (TSUSA).

Analysis of Programs

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Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina: Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006). Consistent with our practice in preliminary determinations, when a response to an allegation denies the existence of a program, receipt of benefits under a program, or eligibility of a company or industry under a program, and the Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All such responses are subject to verification. If the response cannot be supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.,

For purposes of this preliminary determination, the period for which we are measuring subsidization ("the review period") is the government of Canada's 1985 fiscal year (April 1, 1984-March 31, 1985).

With respect to the calculations of benefits from grant programs, we allocated grants for fishing vessels over 18 years (the average useful life of vessels, barges, tugs, and similar water transportation equipment), for private wharves

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and slipways over 16 years (the average useful life of ship and boat building dry docks and land improvements), and for all other assets over 12 years (the average useful life of assets used in the manufacture of food and other sundry products). We used as the discount rate the long-term corporate bond rate in Canada, as published by the Bank of Canada.

All dollar amounts referred to represent Canadian dollars.

Based on our analysis of the petition and the responses to our questionnaire, we preliminarily determine the following:

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(Cite as: 51 FR 1010, *1012) I. Programs Preliminarily Determined to Confer Subsidies

We preliminarily determine that subsidies are being provided to producers or exporters in Canada of groundfish under the following programs:

A. Federal Programs

1. Fishing Vessel Assistance Program. Under the administration of the Economic Programs Branch of the Department of Fisheries and Oceans (DFO), the government of Canada operated the Fishing Vessel Assistance Program. The response indicates that the program terminated in March 1985. This program provided grants to any provincial agency, Canadian corporation or resident citizen to

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construct, modify or convert and re-equip fishing vessels. All construction, modifications, or conversions were to be done in Canada. The regulations for this program authorized funding of up to 60 percent of the cost of constructing a vessel, to a miximum of $750,000. The funding limit for modification or conversion of a vessel was $400,000 dollars. However, during our review period, financial assistance was limited to 25 percent of the cost of construction of a vessel, not to exceed $125,000 for steel hull vessels or $100,000 for other vessels. Grants for modifications or conversions could not exceed 25 percent of the vessel's replacement cost.

Because grants under this program were limited to vessels used by professional fishermen, we preliminarily determine that they were limited to a specific enterprises or industry, or group of enterprise or industries, within the meaning of section 771(5)(B) of the Act, and are countervailable. We recognize that this program terminated in 1985. However, using our grants methodology, grants bestowed under this program from 1967 through 1984 confer benefits during the review period. To calculate the benefit from this program, we allocated the grants over 18 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.743 percent ad valorem.

2. Agricultural and Rural Development Agreements (ARDA). Under the

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administration of the Department of Regional Economic Expansion (DREE), the government of Canada operated the ARDA. The program began in 1961 and ended in 1982. The ARDA agreements, between the federal and provincial governments, were designed to promote economic development and to alleviate conditions of social and economic disadvantage in certain rural areas. Because the benefits under ARDA appear to be limited to companies located within certain regions in Canada, we preliminarily determine that the program is countervailable.

According to the response, one ARDA grant was given to a groundfish processor in the Atlantic region. We recognize that this program terminated in 1982. However, using our grant methodology, the grant bestowed under this program in 1975 confers a benefit during the review period. To calculate the benefit from this program, we allocated the grant over 12 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.002 percent ad valorem.

3. Department of Fisheries and Oceans (DFO) Promotions Branch. The marketing services of DFO are responsibility of the Marketing Directorate. The Directorate has two branches: the Market Intelligence and Industry Services Branch, and the Promotions Branch. The Market Intelligence and Industry Services Branch is discussed in section II.A.2 of this notice. The function of the Promotions Branch is to promote fish products generically. Specifically,

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the Promotions Branch has run advertising campaigns, published and distributed promotional materials, developed and tested new recipes, organized an educational program for retailers, and funded attendance at fairs and exhibitions, including "Boston Seafood '85." The majority of the Promotions Branch's activities are directed at the Canadian domestic market. However, attendance of the Boston fair provided a benefit to exporters of fish to the United States during the review period. Because attendance at the Boston fair benefited only exports to the United States, we preliminarily determine that the expenses incurred for attending the fair are countervailable.

Because the DFO assistance covered costs normally expensed in the year incurred, we treated the funds disbursed as a grant expensed in the year of receipt. Applying the grant methodology and dividing by the value of exports of fish and shellfish from Canada to the United States during the review period, we calculated an estimated subsidy of 0.001 percent ad valorem.

4. Economic and Regional Development Agreements Program (ERDAP) and General Development Agreements Program (GDAP). The predecessor program to the ERDAP was the General Development Agreements Program (GDAP). The GDAP begain in 1973 under the authority of the DREE. The program, which ended in 1985, was succeeded by the ERDAP which is presently administered by the Department of Regional Industrial Expansion. Under both GDAP and ERDAP, agreements between the federal and provincial governments are negotiated which identify potential

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areas of economic development in which the federal and provincial governments can work together. Pursuant to the general agreements, subsidiary agreements are negotiated that fund specific projects. Currently, ten Economic and Regional Development Agreements and eighty-three subsidiary agreements are in effect. According to the response, the fishing industry has benefited from subsidiary agreements under both GDAP and ERDAP. Specifically, under ERDAP, three subsidiary agreements targeted at the development of the fishing industry in Nova Scotia, New Brunswick and Prince Edward Island are currently in effect. Because the subsidiary agreements provide benefits which appear to be limited to companies in specific regions in Canada, we preliminarily determine both the GDAP and the ERDAP to be countervailable.

To calculate the benefit from these programs, we allocated the grants received over 12 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.283 percent ad valorem.

5. Assistance for the Construction of Icemaking and Fish Chilling Facilities. Under the administration of the Inspection Branch of the DFO, this program provided grants for the construction and equipping of commercial ice-making facilities in amounts up to 50 percent of a project's cost, with a ceiling of $25,000. In 1977, the ceiling was raised to $50,000. The program began in

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1973 and terminated in 1980.

Because this program was limited to a specific enterprise or industry, or group of enterprises or industries, we preliminarily determine it to be countervailable. We recognize that this program terminated in 1980. However, using our grant methodology, grants bestowed between 1974 and 1980 confer benefits during the review period. To calculate the benefit from this program, we are allocating the grants over 12 years. Applying the grant methodology *1013

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and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.060 percent ad valorem.

6. Fishing Vessel Insurance Plan. Established in 1953 and administered by the Economic Programs Branch of the DFO, the Fishing Vessel Insurance Plan insures fishermen against abnormal losses. The Plan covers losses or damage caused by perils at sea, accidents in loading, discharging or handling cargo, accidents occurring on dry-docks, explosions on shipboard, and the negligence of master, officers, crew or pilots, provided that any loss or damage has not resulted from lack of due diligence. The premium rates are established as a percentage of the appraised and insured value of the hull and machinery. They are adjusted annually by taking the sum of indemnities paid in the preceding five- year period and dividing by the sum of the total insured value at the end of each of the preceding five years. The government of Canada states that the

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program is administered in such a way that premiums received cover indemnity costs.

To determine whether this program is countervailable we are required to determine whether (a) the program is limited in scope to certain enterprises or industries, and (b) the premiums charged are at preferential rates. The provision of benefits under this program is limited to fishing vessels and, therefore, is limited to a specific enterprise or industry, or group of enterprises or industries. To determine whether the premiums charged under this program to fishermen are preferential, we would normally compare the premiums to those charged for identical or similar insurance. Since that information was not provided in the response, we are employing the standards applied when analyzing and export insurance program. We determine a government-operated export insurance program to confer countervailable benefits when the premiums charged under the program are inadequate to cover long-term operating costs and losses of the program. According to the annual reports for this program for the last five years, in each of those years, the premiums have not covered the indemnities paid or the administrative expenses incurred in the operation of the program. Therefore, we preliminarily determine this program to be countervailable.

To calculate the benefit under this program, we took the difference between premiums collected and the sum of net indemnities paid and administrative

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expenses of the program. Dividing that amount by the total value of all landings in Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.187 percent ad valorem.

7. Certain Types of Investment Tax Credits (ITC). There are four categories of ITCs in Canada: two are directed at encouraging capital investment in certain regions of the country; one is designed to stimulate scientific research; and the fourth is aimed at promoting the purchase of certain types of transportation equipment. The first category of ITCs is for investment in "qualified property," such as new plant and equipment used for manufacturing or processing. The basic ITC for investment in qualified property is seven percent. An additional three or thirteen percent is available for qualified property used in certain regions. The second category of ITCs is for investment in "certified property." The distinguishing factor between "certified property" and "qualified property" is that the former must be located in prescribed regions categorized by high levels of unemployment and low per capita income. The third category of ITCs is for scientific research. Eligible expenditures under this category include the cost of capital equipment used for scientific research and expenses attributable to scientific research. A basic twenty percent ITC rate is available for qualifying scientific research exepnditures. For small Canadian-controlled private corporations, the rate is thirty-five percent. For all other corporations, the rate is thirty percent,

(Cite as: 51 FR 1010, *1013)

if the expenditure is made in certain regions. The fourth category of ITCs is for investment in "qualified transportation equipment." Fishing vessels are not considered qualified transportation equipment.

Because the basic seven percent rate for "qualified property" is not limited to a specific industry or region, we preliminarily determine it to be not countervailable. However, because the additional rates of three and thirteen percent for qualified property are limited to companies within certain regions, we preliminarily determine those additional benefits to be countervailable. The fifty percent ITC rate for "certified property" is limited to specific regions. Thus, we preliminarily determine that the additional benefit above the basic rate of seven percent is countervailable. According to the response, it appears that the fishing industry did not benefit from scientific research ITCs; therefore, we preliminarily determine that these ITCs were not used. The ITC for transportation equipment is not available for investment in fishing vessels. Consequently, we preliminarily determine that this ITC category was not used.

Our standard methodology to calculate the benefit from a tax program would be to consider the benefit to be the amount of tax credits claimed on the tax return filed during the review period. However, because the response contains tax information only through 1983, we are using, as best information available, those tax credits claimed in 1983. Dividing the amount of countervailable

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ITC's by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.166 percent ad valorem.

8. 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. PEMD facilitates the development of export markets for Canadian products by sharing with the companies the costs of travel, per diem allowances and some special expenses. PEMD assistance is in the form of interest-free loans with repayment terms which depend on the success of the export promotion activity. If sales result from the export promotion, 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. Since 1983, Canadian producers received fourteen loans for attendance at U.S. seafood trade shows.

The purpose of PEMD assistance is to stimulate exports; therefore, we preliminarily determine that assistance provided under the program confers benefits which constitute export subsidies. The response provides no evidence demonstrating that these loans have been repaid. Therefore, we treated the funds disbursed as grants. Because PEMD assistance covered costs normally expensed in the year incurred, we expensed them in the year of receipt. Moreover, since the response provided no information on when the PEMD

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assistance was provided, we are assuming that all the assistance was provided during the review period. Applying the grant methodology and dividing by the value of exports of fish and shellfish from Canada to the United States during the review period, we calculated an estimated subsidy of 0.005 percent ad valorem.

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9. Regional Development Incentive Program (RDIP). The RDIP, which was the predecessor of the Industrial and Regional Development Program (discussed later in this notice), was administered by the DREE for the purpose of creating stable employment opportunities in areas of Canada where employment and economic opportunities were chronically low. The program provided development incentives (usually grants) to manufacturers whose capital investment projects for establishing new facilities or expanding or modernizing existing facilities would create jobs and economic opportunities in areas designated as economically disadvantaged. The use of subjective criteria left the designation of eligible areas to the discretion of national and provincial DREE ministers.

The prime criterion for DREE approval of a proposed project was the likelihood that the project would provide economic opportunities and social adjustment. Projects which would proceed without RDIP assistance were ineligible. Because the benefits were limited to companies located within specific regions, we preliminarily determine that grants provided through the RDIP program of DREE

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are countervailable.

Although the program was terminated in 1983, RDIP grants were still provided to the fishing industry through 1985. To calculate the benefits from RDIP, we allocated the grants over 12 years. Applying the grant methodology, and dividing by the value of all landings in Atlantic Canada of the subject merchandise during the review period, we calculated an estimated subsidy of 2.102 percent ad valorem.

10. Industrial and Regional Development Program (IRDP). Under the administration of the Department of Regional and Industrial Expansion (DRIE), the IRDP was established as the successor to the RDIP discussed earlier in this notice. Its purpose is to increase industrial development and improve the overall economic climate in Canada by providing funds for new facilities or for the expansion or modernization of existing facilities.

Each of Canada's 260 census districts is classified into one of four tiers on the basis of economic development of the region. The most economically disadvantaged five percent of the population is included in Tier IV; the districts in which the next fifteen percent of the population in terms of economic disparity resides are classified as Tier III; the districts in which the next thirty percent of the population in terms of economic disparity resides are classified as Tier II; and the districts in which the remaining fifty percent of the population resides are classified as Tier I. Those

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districts classified as Tier IV receive the highest share of assistance under IRDP (as a percentage of assistance per approved project), and those in Tier I the lowest. Despite the fact that the criteria for assignment to a tier may be neutral, the level of benefits varies from region to region. Therefore, we preliminarily determine that this program provides regional subsidies and is countervailable.

IRDP grants have been provided to the fishing industry. To calculate the benefits from this program, we allocated the total value of IRDP grants received in each year over 12 years because information in the response did not enable us to distinguish between those grants received in Tier I from those received in the other 3 tiers. Applying the grant methodology, and dividing by the value of all landings in Atlantic Canada of the subject merchandise during the review period, we calculated an estimated net subsidy of 0.034 percent ad valorem.

11. Fisheries Improvement Loan Program (FILP). The FILP, established in 1955 under the Fisheries Improvement Loans Act, is currently administered by the Economic Programs Branch of the DFO in accordance with the Fisheries Improvement Loans Regulations. Under the program, the Minister of Fisheries and Oceans guarantees loans that chartered banks and other designated commercial lenders make to fishermen for fisheries improvement projects. These

(Cite as: 51 FR 1010, *1014)

projects include the purchase, construction and repair or alteration of fishing vessels, equipment, water supply systems, or other structures related to a primary fishing enterprise. The maximum amount of guaranteed loans that a borrower may have outstanding is $150,000. The interest rate charged on loans guaranteed by the government is set at the prime lending rate of the lending bank plus one percent. These rates are varible, and are tied to the prime lending rate of the bank. The maximum term of any loan is set at fifteen years. There are apparently no fees charged for the guarantees.

Respondents contend that because loans under this program are provided on terms similar to those found under the Farm Improvement Loans Act, the loans to the fishing industry should not be considered limited to a specific industry. We disagree.

There is no evidence that loans under the farm program or the fishing program are linked in any way to an overall government lending policy to provide loans and loan guarantees on comparable terms to the various qualifying groups. Thus, we must look at each of these programs separately. Loans under the farm loan program were found to be not countervailable in the Final Affirmative Countervailing Duty Determination: Live Swine and Fresh, Chilled and Frozen Pork Products from Canada (50 FR 25097) because they were available on similar terms to all industries in the agricultural sector. In contrast, loans under the FLIP are limited to one specific industry, the

(Cite as: 51 FR 1010, *1014)

fishing industry.

in addition to determining whether the FILP is limited to a specific industry, we must also determine whether the provision of benefits under the program is on terms inconsistent with commercial considerations.

With respect to the loan guarantees, according to the response, there are no private commercial sources for loan guarantees in Canada. the response does, however, provide information on the fees charged for loan guarantees under other federal programs. Under the Enterprise Development Program, private lenders pay the government a fee of one percent per annum on the outstanding balance of loans guaranteed under that program. We are using, as best information available, the guarantee fee charged under the Enterprise Development Program as our benchmark to determine whether loan guarantees provided under the Fisheries Loan Program are made on a commercial basis. As stated earlier, there are apparently no fees charged on loan guarantees under the Fisheries Loan Program. Therefore, we preliminarily determine that loan guarantees provided under this program are countervailable because they are limited to the fishing industry and are made on terms inconsistent with commercial considerations. To calculate a benefit under this program, we took the difference between our benchmark guarantee fee (one percent) and the charge for guarantee fees under this program (zero). We applied the difference to the amount of loans outstanding during the review period. Dividing the result by

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the value of all landings in Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.030 percent ad valorem for loan guarantees provided under this program.

With respect to loans under this program, if commercial banks want their loans guaranteed by the federal government, they must charge an interest rate of prime plus one percent. We must now determine whether the interest rate mandated by the government provides an additional *1015

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benefit to fishermen. To make that determination, we compared the interest rate provided to fishermen under the Fisheries Loan Program to an alternative commercial interest rate which fishermen would have had to pay absent this program. In this case, we have chosen as the benchmark interest rate the 90-day prime corporate paper rate, as reported by the Bank of Canada. Comparing the benchmark to the interest rate charged under the program, we preliminarly determine that rates charged under the FILP are not made on terms inconsistent with commercial considerations. We, therefore, preliminarily determine that loans made under this program are not countervailable.

12. Government Equity Infusions. Petitioner alleges that the government of Canada made equity infusions into National Sea Products, Fishery Products International Limited and United Maritime Fishermen Co-op. Petitioner further alleges that these equity infusions may have been on terms inconsistent with commercial considerations.

(Cite as: 51 FR 1010, *1015)

According to the response, the government of Canada and the Province of Nova Scotia made equity investments in National Sea Products Limited (NSP). The government of Canada and the Province of Newfoundland made equity investments in Fishery Products International Limited (FPIL). No equity was purchased by the federal or provincial governments in United Maritime Fishermen Co-op. Therefore, we are limiting our review to NSP and FPIL. The provision of equity by the government of Canada and the provinces of Newfoundland and Nova Scotia was part of the restructuring of several major harvesters and processors into NSP and FPIL. The three major companies involved in the restructuring of FPIL were Fisheries Products Ltd., The Lake Group Limited, and John Penny and Sons, Limited, of Newfoundland. The restructuring of NSP involved primarily NSP itself and the acquisition of certain assets from H.B. Nickerson & Sons Ltd. The restructuring of these firms and the creation of NSP and FPIL occurred in 1983 and 1984, respectively. During the late 1970's, the five major companies rapidly increased their debt, principally through loans from commercial banks. By the early 1980's, with a downturn in the industry, the position of the companies became an items of concern to the commercial banks, and subsequently to the federal government, because their especially high debt-to-equity ratios began to affect the economic underpinnings of the companies and the Atlantic Canada fishing industry. In 1983, the federal government established a restructuring team in response to

(Cite as: 51 FR 1010, *1015)

the depressed economic conditions of the industry. The federal restructuring team determined that the financial structure of the major companies was ill- suited to the economic conditions which faced the fishing industry, and that the principal challenge to the companies was to increase shareholders' equity to ensure the companies' economic viability. They also believed that liquidation would result in extremely serious disruptions to employment and financial institutions in Atlantic Canada. The government of Canada states that, based on the long-term prospects of this industry and the financial forecasts prepared for NSP and FPIL, equity participation by the government appeared to be a sound investment.

We have consistently held that government provision of equity does not per se confer a subsidy. Government equity infusions bestow countervailable benefits only when they occur on terms inconsistent with commercial considerations. Therefore, we must determine whether the government equity infusions made at the time of each of these reorganizations were consistent with commercial considerations. To make these determinations, we analyzed (a) the companies' financial statements, (b) the financial forecasts submitted by the government of Canada, and (c) the terms of the equity infusions between the government of Canada, the provinces of Nova Scotia and Newfoundland, and NSP and FPIL.

With respect to FPIL, we preliminarily determine that it was unequityworthy at

(Cite as: 51 FR 1010, *1015)

the time of its organization. Our preliminary determination rests primarily on the poor financial conditions of the companies merged into FPIL during 1981 through 1983. These companies, viewed generally, had low profits or lost money on their operations in these years (even prior to the payment of interest expenses). The information on the record in this investigation does not provide objective support for any expectations of improvement in the business environment for the restructured company. The primary source of projected future operations presented by respondent consists of incomplete portions of a study performed by an independent consulting firm. Portions of this study that were made available to the Department, labeled Annexes E through G, do not support the conclusions attributed to the consulting firm in the response. In addition, critical assumptions necessary for such a financial forecast are not addressed, or are addressed in only the most conclusory manner. And, even though a private investor exchanged debt for an equivalent amount of equity in FPIL at the time of the government's infusion, we do not consider that transaction to be an appropriate gauge by which to measure the reasonableness of the government's infusion because at the time it seems that the one private investor's only chance for recouping the money it had already loaned to FPIL was to help it reorganize. Therefore, based upon our analysis, we preliminarily determine that equity infusions in 1983 by the government of Canada and the Province of Newfoundland into FPIL were made on terms

(Cite as: 51 FR 1010, *1015)

inconsistent with commercial considerations.

We also preliminarily determine that equity infusions in 1984 by the government of Canada and the Province of Nova Scotia into NSP were made on terms inconsistent with commercial considerations. The equity infusions in NSP by the governments of Canada and Nova Scotia consisted of the purchase of preferred shares, including "second preferred shares." A private investor purchased second preferred shares in combination with a larger amount of common stock. The government of Canada argues that the price paid for the second preferred shares was consistent with commercial considerations because there was a private investor willing to purchase them at the same price. For purposes of this preliminary determination, we find that it is not possible to determine the actual value placed on each portion of this transaction by the private investor. Our determination is not based on whether NSP is equityworthy in general. Rather, analysis of these preferred shares indicates that the expected return on them is below that which would be required by a private investor. Therefore, investment in this preferred stock was inconsistent with commercial considerations Thus, we preliminarily determine that these infusions confer benefits which constitute a subsidy. To calculate the benefit of these equity infusions, we followed our normal rate of return shortfall methodology. For NSP, the benchmark rate of return was arrived at by using the actual return for another class of preferred

(Cite as: 51 FR 1010, *1015)

stock purchased at the same time by a private investor. For FPIL, the benchmark rate of return was the national average rate of return on *1016

(Cite as: 51 FR 1010, *1016)

equity. Using that methodology, adding the benefits from the two equity infusions, and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 2.188 percent ad valorem.

B. Provincial Programs

1. New Brunswick: Loans from the Fisheries Development Board (NBFDB). In accordance with the Fisheries Development Act of 1977, the NBFDB provides financial asistance for such things as the construction of new fishing vessels, purchase of used boats, repairs and conversions, insurance premiums, and equipment purchases. The Board also administers a fish chilling grant program to assist in providing fish chilling facilities either for boats or plants. Applicants for financial assistance must be bona fide fishermen and residents of the province. Fishing companies must be incorporated provincially or federally. Pursuant to New Brunswick Regulation 84-166 (July 16, 1984) under the Fisheries Development Act, eligible applicants can receive direct loans up to 25 years in duration, the amount not to exceed $25,000 per application at the provincial lending rate less five percent, with a minimum annual rate of

(Cite as: 51 FR 1010, *1016)

seven and one-half percent. Exceptions are those instances where the Minister determines that the borrower's net worth is sufficient to support a smaller interest incentive. In this case the annual interest rate shall be one and one-half percent below the provincial lending rate per annum. Interest rates are guaranteed for a period of three years, after which time they may be adjusted if the new provincial lending rate differs by more than one percent from the rate secured at the time the loan was granted. A service fee is required in an amount equal to 0.5 percent of the principal outstanding on all guaranteed loans on the date of issue, and annually thereafter on each anniversary of the date of issue for the outstanding principal amount. In addition, the Minister may share a portion of the cost of interest on outstanding financial assistance approved on or before December 6, 1979, by reimbursing up to 50 percent of the cost of interest on loans made for new or used vessels, or up to 25 percent for various equipment and vessel repairs.

Respondents contend that because loans under the NBFDB are provided on terms similar to those charged on loans provided by the New Brunswick Farm Adjustment Board, loans under this program are not limited to a specific enterprise or industry, or group of enterprises or industries. We disagree. There is no evidence that loans under the farm and fishing programs are linked in any way to an overall provincial lending policy to provide loans on comparable terms to the various qualifying groups. Thus, we must look at each

(Cite as: 51 FR 1010, *1016)

of these programs separately. Loans under the Farm Adjustment Board program were found to be not countervailable in Swine, supra, because they were available on similar terms to all industries in the agricultural sector. In contrast, loans under the NBFDB are limited to one specific industry, the fishing industry. Comparing the benchmark interest rate (i.e., the 90-day prime corporate paper rate) to the interest rate charged under this program, we also preliminarily determine that these loans were made on terms inconsistent with commercial considerations.

To calculate the benefit from this program, because these are variable- rate long-term loans, we took the difference between the short-term commercial benchmark and the interest rate in effect during the review period and applied that difference to the amount of principal outstanding on these loans during the review period. Dividing the result by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.028 percent ad valorem for loans provided under this program.

2. New Brunswick: Fish Unloading Systems and Icemaking Program (FUSIP). The New Brunswick Department of Fisheries, through the NBFDB, administers this fish chilling grant program under the authority of the Fisheries Development Act of 1977 and New Brunswick Regulation 84-166. This is the only fish chilling assistance program available in New Brunswick. According to the response,

(Cite as: 51 FR 1010, *1016)

neither the Fish Unloading Systems and Icemaking Facilities Board nor a program we referred to in our notice of initiation as "Assistance for Icemaking and Fish Chilling Facilities" exists.

FUSIP provides grants for fish chilling facilities for both boats and plants to improve the quality of landed fish and fish products. Eligible applicants include both owners of fishing vessels and fish processing facilities. Assistance is provided on the basis of 50 percent of the total cost of the ice chilling facility or equipment up to a maximum of $15,000 per application.

Because benefits under this program are available exclusively to the fishing industry, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. In order to calculate the benefit from this program, we allocated the grants received in fiscal years 1980 through 1985 over 12 years. Applying our grant methodology and dividing the benefit from grants received by the value of all landings in Atlantic Canada of fish and shellfish, we calculated an estimated subsidy of 0.006 percent ad valorem.

3. New Brunswick: Insurance Premium Prepayment Program. Petitioner alleged that the Province of New Brunswick provides assistance in defraying the cost of vessel equipment insurance to fishermen. In its response, the Canadian Government indicates that there is no specific program of this type but that short-term loans are available through the NBFDB to pay for insurance premiums.

(Cite as: 51 FR 1010, *1016)

These loans, which are provided in accordance with the Fisheries Development Act of 1977 and Regulation 84-166, are available on terms identical to those available for long/term loans described under the NBFDB above. The only difference is that loans are required to be repaid in one year or less, compared to the long-term limit of up to 25 years.

Because loans under this program are available exclusively to fishermen, and are provided on terms inconsistent with commercial considerations, we preliminarily determine that benefits under this program are countervailable. To calculate the benefit from this program, we used our methodology for short- term loans. For our benchmark, we used the 90-day prime corporate paper rate. Dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.004 percent ad valorem.

4. Newfoundland: Grants for Purchasing and Constructing Boats. Under the direction of the Fisheries Loan Board (FLB), an agency in the Ministry of Fisheries, and pursuant to the Fishing Ships (Bounties) Act of 1970, the government of Newfoundland operates two programs that provide grants for purchasing and constructing fishing vessels--the Fishing Ship Bounty Program and the Small Fishing Boat Bounty Program. (This and the following program were referred to in our notice of initiation as the Newfoundland Fishing Vessel Assistance Plan). Grants are provided to fishermen for the construction and

(Cite as: 51 FR 1010, *1016)

purchase of fishing vessels subject to stringent technical standards including: a) that the *1017

(Cite as: 51 FR 1010, *1017)

applicant be a resident of Newfoundland; b) that the vessel be newly built in Newfoundland and be used primarily in the fishing industry; and c) that the vessel be built or purchased in accordance with permits requiring compliance with technical specifications. Fishing vessels between 35 and 65 feet qualify for grants under the Fishing Ships Bounty Program; vessels less than 35 feet qualify under the Small Boat Bounty Program. The right to receive the bounty accrues upon completion of the ship and final survey, although advances may be authorized upon intermediate surveys. Those who receive bounties undertake to use the vessel primarily in fishing for a period of five years.

Because benefits under these programs are available only for certain vessels used by professional fishermen, we preliminarily determine that these programs are limited to a specific enterprise or industry, or group of enterprises or industries, and are countervailable.

To calculate the benefit from these programs, we allocated the grants received in fiscal years 1967 through 1985 over 18 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.143 percent ad valorem.

5. Newfoundland: Grants for the Rebuilding and Repair of Fishing and Coastal

(Cite as: 51 FR 1010, *1017)

Vessels (RRFCV). Under the direction of the FLB and pursuant to the Fishing and Coastal Vessels Rebuilding and Repairs Act of 1970, the government of Newfoundland operates the RRFCV. This program provides grants for the reconstruction of ships measuring 35 feet or more, covering up to 35 percent of approved costs of repair or rebuilding. Any work approved by the FLB must be performed in Newfoundland shipyards. To be eligible, a ship owner must be a resident of Newfoundland for at least a year. As in the grant programs for new construction of ships, rebuilding and repair must meet the technical specifications laid down by the regulations. The RRFCV provides grants for both fishing vessels and commercial vessels that are engaged in coastal trade.

Because benefits under this program are provided only for commercial vessels used by two specific industries--commercial fishing and coastal transport, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. To calculate the benefit from this program, we allocated the grants received in fiscal years 1967 through 1985 over 18 years. Because the response provided no breakdown of grants for fishing vessels and coastal vessels, we are assuming that 100 percent of the grants were for fishing vessels. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.003 percent ad valorem.

(Cite as: 51 FR 1010, *1017)

6. Newfoundland: Loans from the Fisheries Loan Board. Under the direction of the FLB and pursuant to the Fisheries Loan Act of 1970, the government of Newfoundland provides long-term loans for the development and improvement of the fishing industry. Fishermen who are residents of Newfoundland that have had fishing experience during the previous two seasons and earned 75 percent of their income from the harvesting industry during the previous two seasons are eligible. The loans are given for the purchase, construction and repair of ships measuring up to 65 feet, the purchase of new engines and fishing gear, the construction of plants and purchase of plant equipment, and for other types of capital expenditures. Interest rates, which are set by regulation, are fixed for the term of the loan. The current interest rate charged is tied to the prime rate charged by the Bank of Montreal less three percent. Maximum terms of repayment range from 10 years for equipment to 20 years for steel ships; down payments equaling 10 to 15 percent of the loan amount are required. The maximum loan amount is $50,000.

Respondents contend that, because loans under this program are provided on terms similar to those charged on loans provided by the Newfoundland Farm Loan Board, loans under this program are not limited to a specific enterprise or industry, or group of enterprises or industries. We disagree. There is no evidence that loans under the farm and fishing programs are linked in any way to an overall provincial lending policy to provide loans on

(Cite as: 51 FR 1010, *1017)

comparable terms to the various qualifying groups. Thus, we must look at each of these programs separately. Loans under the Farm Loan Board program were found to be not countervailable in Swine, supra, because they were available on similar terms to all industries in the agricultural sector. In contrast, loans under the Fishing Loan Board program are limited to one specific industry, the fishing industry. Comparing the benchmark interest rate (which, because these are long-term fixed-rate loans, is in this case the long-term corporate bond rate published by the Bank of Canada) to the interest rate charged under this program, we also preliminarily determine that these loans were made on terms inconsistent with commercial considerations.

To calculate the benefit, we used the long-term loan methodology outlined in the Subsidies Appendix. Dividing the benefit by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.158 percent ad valorem.

7. Newfoundland: Loan Guarantees from the FLB. In addition to providing loans, the FLB also guarantees 20 percent of the aggregate amount of chartered banks' term loans to fishermen for the purchase or construction of fishing vessels. There apparently is no charge for the guarantees. Because these loan guarantees are provided at no charge and exclusively to the fishing industry, we preliminarily determine that they are limited to a specific enterprise or industry, or group of enterprises or industries, and are provided

(Cite as: 51 FR 1010, *1017)

on terms inconsistent with commercial considerations; hence, they are countervailable.

To calculate the benefit from this program, we used as a benchmark guarantee fee the one charged by the federal government under the Enterprise Development Program. Information has not been provided showing the aggregate value of loans from chartered banks guranteed under this program. Therefore, we are using, as the best information available, the value of the FLB loans provided during the review period. Taking 20 percent of that amount, multiplying by the average guarantee fee of one percent, and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.001 percent ad valorem.

8. Nova Scotia: Fishing Vessels Construction Program (FVCP). The Fishing Vessel Construction Program (FVCP) was a grant program administered under the authority of the Industrial Development Division of the Department of Fisheries for Nova Scotia (DFNS). The FVCP was designed to assist individuals, companies, and associations in the fishing industry to construct and operate fishing vessels. The DFNS assessed applications for assistance on the basis of the *1018

(Cite as: 51 FR 1010, *1018)

contribution that construction and operation of the vessels would have on the fishing industry of Nova Scotia. Vessels eligible for assistance had to be operated as fishing boats, have a length not exceeding 64 feet, 11 inches and be built and registered in Canada. Eligible applicants had to agree

(Cite as: 51 FR 1010, *1018)

to keep their vessels registered in Canada and engage in fishing for five years. Depending on the size of the vessel and the availability of federal subsidies, the amount of the FVCP grant ranged from 0 to 35 percent of the vessel's cost. The FVCP was in effect from November 22, 1977, through March 31, 1980. Because benefits under this program were available only for certain vessels used by professional fisherman, we preliminarily determine that this program was limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable.

We recognize that this program terminated in 1980. However, using our grant methodology, grants bestowed from 1977 through 1980 confer benefits during the review period. To calculate the benefit from this program, we allocated the grants received in fiscal years 1977 through 1980 over 18 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.015 percent ad valorem.

9. Nova Scotia: Loans from the Fisheries Loan Board (NSFLB). The NSFLB, established by the Fisheries Development Act (FDA), administers a loan program designed to make loans and loan guarantees to professional fishermen in order to encourage, sustain, improve and develop the fishing industry of Nova Scotia. Under the regulations pursuant to the FDA, loans are to be made to

(Cite as: 51 FR 1010, *1018)

professional fishermen for the purpose of building, purchasing, or upgrading boats, developing aquaculture, and assisting the fishing industry generally. In fact, loans made by the NSFLB over the past twelve years appear to have been used primarily for the purchase or upgrading of fishing vessels. To be eligible for a loan from the NSFLB, a professional fisherman must have at least two years commercial fishing experience within the last five years and be engaged primarily in commercial fishing. Interest rates on approved loans are eight percent on the first $150,000, eleven percent on the second $150,000, and the current government borrowing rate for loans over $300,000. They are fixed for the term of the loan. Depending on whether the loan in used to upgrade or to purchase vessels, the repayment periods for the loans ranges between five and twelve years. Security of 20 percent for each loan in required.

Respondents contend that, because loans under the NSFLB are provided on terms similar to those charged on loans provided by the Nova Scotia Farm Loan Board, loans under this program are not limited to a specific enterprise or industry, or group of enterprises or industries. We disagree. There is no evidence that loans under the farm and fishing programs are linked in any way to an overall provincial lending policy to provide loans on comparable terms to the various qualifying groups. Thus, we must look at each of these programs separately. Loans provided by the Farm Loan Board program were found to be not countervailable in Swine, supra, because they were

(Cite as: 51 FR 1010, *1018)

available on similar terms to all industries in the agricultural sector. In contrast, loans under the NSFLB are limited to one specific industry, the fishing industry. Comparing the benchmark interest rate (which, because these are long-term fixed-rate loans, is in this case the long-term corporate bond rate published by the Bank of Canada) to the interest rate charged under this program, we also preliminarily determine that these loans were made on terms inconsistent with commercial considerations.

To calculate the benefit, we used the long-term loan methodology outlined in the Subsidies Appendix. Dividing the benefit by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.363 percent ad valorem.

10. Nova Scotia: Industrial Development Division Grants (IDDG). The Industrial Development Division (IDD) of the Nova Scotia Department of Fisheries administers assistance programs designed as incentives for development of the fishing industry of Nova Scotia. Grants may be provided on a 50 percent cost-sharing basis to a maximum of $15,000 per location per fiscal year. An applicant must be a licensed commercial fisherman, processing company, or fishermen's organization. Eight separate programs affecting the fishing industry in Nova Scotia are currently administered by the IDD. (These include three programs referred to individually in our notice of initiation-- Icemaking and Fish Chilling Facilities, Gutting Machine, and Plant Development

(Cite as: 51 FR 1010, *1018)

Programs). Each program is designed to encourage technological innovations and to improve the quality of the fishing industry as a whole. The following is a list of the programs and the general purpose of each:

- IDD Safety Program. Technical and financial assistance is provided to improve safety on board vessels and in processing plants.
- IDD Quality Improvement Program. Technical and financial assistance is available for equipment onboard and in plants that will improve the quality of fish and fish products. Equipment eligible for grants includes: fiberglass or plastic containers, onboard insulation and refrigeration, gutting machines, and plant development.
- IDD Increased Productivity Program. Technical and financial assistance is available to improve productivity and efficiency of fish harvesting and fish plant operations. Unloading equipment, bait sheds, and deck equipment are examples of some items covered by this program.
- IDD Harbor Facilities Program. Assistance in construcing and improving private harbor facilities is available under this program. Private wharves, gear sheds, slipways and haulouts are included under this program.
- IDD Infrastructure Program. Financial assistance is provided to enable processing plants and private wharves to hook into fresh water supplies and electrical services.
- IDD Fleet Development Program. Under this program assistance for developing

(Cite as: 51 FR 1010, *1018)

improved vessel design is provided.
- IDD Technology Development for Fishing Vessels Program. Under this program assistance for the development of onboard equipment is available. Equipment used to harvest less commonly harvested species and fuel economy equipment are included under the program.
- IDD Technology Development for Fishing Gear Program. This program is designed to assist the professional fisherman to purchase safer, more efficient fishing gear. Because each of the IDD programs outlined above apparently provides assistance exclusively for the fishing industry, we preliminarily determine that these programs are limited to a specific enterprise or industry, or group of enterprises or industries and are countervailable. In order to calculate the benefit from these programs we allocated the grants received during in fiscal years 1977-1985 over 12 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated *1019

(Cite as: 51 FR 1010, *1019)

an estimated subsidy of 0.187 percent ad valorem.

11. P.E.I.: Fishing Vessel Subsidy Program (FVSP). Under recommendation of the P.E.I. Treasury Board, the P.E.I. Minister of Fisheries in 1978 established the FVSP. This program, which provided grants for the acquisition of new vessels, was, in effect from 1978 to 1984. Participation in the program was

(Cite as: 51 FR 1010, *1019)

open to all P.E.I. individuals, partnerships or firms engaged in fishing who had not participated in either the Federal or Provincial Vessel Subsidy Programs during the last previous eight years. Vessel size was limited to between 30 and 75 feet and only those vessels constructed in P.E.I. shipyards were eligible. Participating fishermen received a payment equal to 15 percent of the total cost to the new vessel and engine plus all other new fixed equipment required on board the vessel, up to a maximum of $3,500.

Because benefits under this program were available only to certain vessels used by professional fisherman, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. We recognize that this program terminated in 1984. However, using our grant methodology, grants bestowed from 1978 through 1984 confer benefits during the review period. To calculate the benefits, we allocated the grants received in fiscal years 1978 through 1984 over 18 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.015 percent ad valorem.

12. P.E.I.: Near and Offshore Vessel Assistance Program (NOVAP). The NOVAP was established in 1982. Similar to the vessel subsidy program described above, NOVAP provides grants for offshore vessels as well as near-shore vessels. The level of assistance for near-shore vessels varies according to

(Cite as: 51 FR 1010, *1019)

capital costs and the weight and length of the vessel. Fishermen must agree to provide catch and other data and keep the vessel in the P.E.I. fishing industry for a period of 10 years. Payment of the grant is made to the vessel owner upon satisfactory inspection by the DFL and presentation of paid receipts for the eligible amounts. Because benefits under this program are available only for certain vessels used by professional fishermen, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. To calculate the benefit, we allocated the grants received in fiscal years 1983 through 1985 over 18 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.004 percent ad valorem.

13. P.E.I.: Engine Conversion Program. The Engine Conversion Program provides grants to fishermen to help defray the initial costs of conversion from gasoline to diesel engines. Participation is voluntary and is available to all P.E.I. fishermen with a commercial fishing license and who own vessels powered by gasoline engines. Only one diesel engine conversion grant will be made per commercial fishing vessel over the life of the vessel, and, as of May 21, 1982, only those diesel engines purchased from P.E.I. suppliers were eligible for assistance.

(Cite as: 51 FR 1010, *1019)

The assistance covers 25 percent of the capital cost to a maximum of $2,500 for new diesel engines installed in existing vessels with gasoline engines. The applicant must certify that the diesel engine and related equipment will be used for commercial fishing for a minimum of 5 years. Payment of the grant is made to the applicant upon presentation of paid receipts for the eligible equipment and a satisfactory inspection by the DFL.

Because benefits under this program are available only for vessels used by professional fishermen, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. In order to calculate the benefit from this program, we allocated the grants received in fiscal years 1982 through 1985 over 12 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.006 percent ad valorem.

14. P.E.I.: Commercial Fisherman's Investment Incentive Program (CFIIP). The CFIIP, which was created in 1983, provides interest reduction grants to all P.E.I. fishermen who are holders of bona fide fishing permits. Eligible projects include new or used capital asset purchases, acquisition of fishing enterprises and fishing privileges, repairs to capital items and working capital loans.

Interest reduction grants are paid on loans secured from recognized commercial

(Cite as: 51 FR 1010, *1019)

lending institutions. Upon securing the loan, the fisherman is eligible to apply for an interest rebate of up to four percent per annum if the lending rate is at or above twelve percent, the four percentage points to be reduced when the grant reduces the interest rate below eight percent (i.e., if the loan secured has an interest rate of eleven percent, then eligibility is limited to three percent, which reduces the rate to the subscribed minimum of eight percent). Eligibility is limited to the life of the loan or the first five years, whichever is less. The maximum aggregate of loans to individual fishing enterprises cannot exceed $30,000 at any one time. The grant is paid to the fisherman upon receipt of an itemized statement from the recognized lending institution along with the certification that the borrower has paid the amount of interest due.

Because benefits under this program are available only to commercial fishermen, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. Dividing the interest reduction grants received during the review period by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.003 percent ad valorem.

15. P.E.I.: Assistance for the Construction of Icemaking and Fish Chilling Facilities (ACIFCF). This program, established in 1973 and administered by the

(Cite as: 51 FR 1010, *1019)

DFL, provided financial assistance for the construction of storage rooms,the purchase of ice makers, temperature control equipment, and for associated installation costs. The program was terminated on March 31, 1983. The program was available to all inshore facilities located within P.E.I. and was designed to supplement the federal program under the Fisheries and Marine Service of the Department of the Environment. Originally, the level of assistance was equal to 35 percent of the cost of required construction, equipping or modification of ice making and refrigeration facilities. In 1980, it was increased to 75 percent of the total cost (up to a maximum of $75,000).

Because benefits under this program were available only to inshore fish processing facilities used by the fishing industry, we preliminarily determine that benefits under this program were limited to a specific enterprise or industry, or group of enterprise or industries, and are countervailable. We recognize that this program terminated in 1983. However, using our grant methodology, grants bestowed from 1974 through the program's termination confer benefits during the review period. To calculate the benefit from this program, we allocated the grants *1020

(Cite as: 51 FR 1010, *1020)

received by processing companies that have exported to the United States over 12 years. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.001 percent ad valorem.

(Cite as: 51 FR 1010, *1020)

16. Quebec: Vessel Construction Assistance Program (VCAP). Under the direction of the Ministry of Agriculture, Fisheries and Food (MAFF), the government of Quebec operates the VCAP. This program, which was established in 1972 and originally administered by the Ministry of Industry, Commerce and Tourism, provides grants to professional fishermen to reimburse a portion of the cost of a boat. Only boats measuring between 25 and 35 feet that are constructed with materials from Quebec and equipped with storage containers which correspond to the regulations of the Quebec Standards Bureau qualify under the VCAP. If the fishermen sells the boat within 5 years without MAFF authorization, a prorated portion of the grant must be repaid.

Because benefits under this program are available only for certain vessels used by professional fishermen, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. To calculate the benefit from this program, we allocated the grants received in fiscal years 1981 through 1985 over 18 years. The response indicates that grants were first provided under this program in 1972; however, no information on the grants bestowed from 1972 through 1980 was available. Therefore, for each of those years we used as the best information available the average value of the grants bestowed during the period 1981-1985, and allocated those grants over 18 years as well. Applying the grant methodology and dividing by the value of all landings in Atlantic

(Cite as: 51 FR 1010, *1020)

Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.034 percent ad valorem.

17. Quebec: Gear Subsidy Program (GSP). Under the direction of MAFF, the government of Quebec operates the GSP. This program, which was established in 1972 and originally administered by the Ministry of Industry, Commerce and Tourism, provides grants to professional fishermen to reimburse 25 percent of the purchase price of hooks, leaders, lines and metallic shellfish traps. To be eligible for this program, fishermen must purchase materials from Quebec suppliers for the construction of the gear.

Because benefits under this program are available only for gear used by professional fishermen, we preliminarily determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. In order to calculate the benefit from this program, we allocated the grants received in fiscal years 1981 through 1985 over 12 years. The response indicates that grants were first provided under this program in 1972; however, no information on the grants bestowed from 1972 through 1980 was available. Therefore, for each of those years we used as the best information available the average value of the grants bestowed during the period fiscal 1981-1985, and allocated those grants over 12 years as well. Applying the grant methodology and dividing by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated

(Cite as: 51 FR 1010, *1020)

an estimated subsidy of 0.028 percent ad valorem.

18. Quebec: Insurance Premium Subsidy Program (IPSP). Under the direction of MAFF, the government of Quebec operates the IPSP. This program, established in 1981, provides reimbursements to eligible participants equal to 50 percent of the cost of fishing vessel insurance. The response indicates that benefits are available to professional harvesters who own fishing vessels, and to fishing corporations whose members conduct fishing operations. If the harvester transfers or sells the boat or if the insurance is prematurely cancelled, a prorated portion of the grant must be repaid to MAFF.

Respondents contend that benefits provided under the IPSP do not constitute countervailable subsidies because there is no preferential treatment of the fishing industry. They claim that the fishing industry is considered just one of the "agro-alimentary" industries overseen by MAFF, and that programs providing similar benefits are available for 58 crops.

The programs referred to by the respondents are administered by the Regie des Assurances Agricoles du Quebec (the Regie), in accordance with the Crop Insurance Act. Under that Act, the government of Quebec may issue regulations establishing insurance schemes for mixed farming and commercial crops. Funding for the insurance schemes is provided jointly by the government of Quebec and the participating farmers on an equal basis. Only those crops for which specific regulations have been enacted are covered by an insurance scheme run

(Cite as: 51 FR 1010, *1020)

by the Regie; coverage is not available for all crops, nor is it available to other industries in the agriculture sector (i.e., livestock). By definition, benefits under the Crop Insurance Act are limited to a specific group of industries.

Similarly, under the IPSP, benefits are limited exclusively to the fishing industry. There is no evidence that this program is part of a broader government of Quebec policy to provide comparable benefits to all industries in the "agro-industrial" sector. In fact, the response does not contain any laws, regulations, government policy papers, brochures, or any other official literature describing this program, its terms, or criteria for participation. Therefore, we preliminarily determine this program to be limited to a specific enterprise or industry, or group of enterprises or industries, and countervailable. Dividing the value of the premium reimbursements to the fishing industry during the review period by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.044 percent ad valorem.

19. Quebec: Tax Abatement Program (TAP). Under the direction of the Fonds de Reliance Industrielle and in accordance with Chapter S-34 of the Act Respecting Fiscal Incentives to Industrial Development (Nov., 1980), the government of Quebec operates the TAP. This program is available to those manufacturing businesses not engaged in initial processing operations in a resource-based

(Cite as: 51 FR 1010, *1020)

industry and those not located in metropolitan Montreal. It provides certificates allowing a firm to deduct from taxes payable 25 percent of the value of allowable capital investments, or a maximum of 50 percent of the year's income taxes due, up to a limit of $500,000. This program was terminated in 1981. However, firms participating in the program while it was in effect had the option to claim their earned tax credits during the 5 years following the issuance of the certificates. Because tax credits under this program appear to be: (a) Available only to certain manufacturing industries and, (b) not available to industries located in metropolitan Montreal, we preliminarily determine this program to be limited to a specific enterprise or industry, or group of enterprises or industries, and a regional subsidy, and hence countervailable. The response indicates that no tax credits were granted to the fishing industry during the review period. However, tax credits granted to *1021

(Cite as: 51 FR 1010, *1021)

the fishing industry in 1980, 1981, and 1982 could have been claimed during the review period. Since there is no information indicating when, in fact, the credits were used, we are assuming that all available credits were used during the review period. Dividing the value of the available credits by the value of all landings in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.007 percent ad valorem.

(Cite as: 51 FR 1010, *1021)

II. Programs Preliminary Determined Not To Confer Subsidies

A. Federal Programs

1. Atlantic Fisheries Management Program. The Atlantic Fisheries Management Program is a federal program for the conservation and restoration of the fisheries' resources. The program's functions include: setting total allowable catches, licensing fisheries and vessels, administering biological conservation measures, managing fleet quotas, performing research and surveillance and monitoring domestic and foreign fleets. The program does not provide any financial assistance to the groundfish industry. Research under the program falls into three general categories: resource assessment, aquaculture and resource development, and habitat assessment. The results of the research are published in technical and scientific journals and are all publicly available.

Because no financial assistance is provided under the program and because the research results under the program are publicly available, we preliminarily determine that the program is not countervailable.

2. Department of Fisheries and Oceans (DFO) Marketing Intelligence and Industry Service Branch. As previously discussed in section I.A.3 the Marketing Intelligence and Industry Services Branch (MIIS) is part of DFO's Marketing

(Cite as: 51 FR 1010, *1021)

Directorate. MIIS provides market analysis, market research, market forecasts and policy advice to DFO management. Its reports are used by the DFO, government agencies, industry, universities, international organizations, bankers, and the general public. Because MIIS provides no financial assistance to the groundfish industry and because its market reports are publicly available, we preliminarily determine that no countervailable benefits are provided under MIIS.

3. Enterprise Development Program (EDP). EDP was established in 1977 and ended in 1983. It was administered by the Federal Department of Industry, Trade and Commerce. The purpose of EDP was to increase productivity in the manufacturing and processing sectors through the encouragement of innovations in the production process. EDP provided loans and grants to manufacturers (individuals, firms or corporations engaged in a manufacturing or processing activity) and term loan insurance to banks lending to manufacturers or processors.

According to the response, the groundfish industry received both grants and term loan insurance, but no loans. However, in Certain Softwood Products from Canada (48 FR 24159) we determined that term loan insurance and grants provided under EDP were not limited to a specific enterprise or industry, or group of enterprises or industries. Therefore, we preliminarily determine that assistance given to the groundfish industry under this program is not

(Cite as: 51 FR 1010, *1021)

countervailable.

4. Import Duty Remission for Machinery Program. Petitioner alleges that fishermen and processors have import duties remitted on machinery not available from Canadian manufacturers, and that this program may be administered in such a manner as to de facto limit the program to a specific industry or group of industries. The response from the government of Canada states that this program is governed by the Financial Administration Act and was established in 1968. The Machinery Program covers machines such as metal working machinery, construction equipment, and general purpose machinery such as hydraulic pumps and pulp, paper and plastics machinery. The remission of duty is authorized by the Governor-in-Council on the recommendation of the Minister of Regional Industrial Expansion. The Machinery and Equipment Advisory Board (CMEAB) advises the Minister on the eligibility of imported machines for remission of duty. To qualify for approval, the remission of duty must be in the public interest and reasonably equivalent machinery must not be available in Canada. The government of Canada states that only applications for machinery that was available for production in Canada were rejected. Since all applications covering machinery not available in Canada were approved, we can find no evidence of governmental discretion in the administration of this program and, therefore, no de facto limitation on use of the program. Since the types of machinery eligible for remission of import duties are available for use to a

(Cite as: 51 FR 1010, *1021)

wide range of industries, we preliminarily determine that this program is not countervailable because it is not limited to a specific enterprise or industry, or groups of enterprises or industries within Canada.

5. Special Recovery Capital Projects Program. The Special Recovery Capital Projects Program (SRCPP) was established on April 19, 1983 and terminated on April 10, 1985. SRCPP was an anti-recession public works program with a budget of 2.4 billion dollars. Funds from this program were used to initiate or accelerate construction of capital projects of federal departments and agencies and Crown Corporations of Canada. The program was implemented by Treasury Board circulars and the Minister of State for Economic and Regional Development and had overall responsibility for SRCPP. The Minister chaired the Cabinet Committee on Economic and Regional Development. The Cabinet was advised by the Special Recovery Capital Projects Board on which projects to approve. The Board was composed of the deputy heads of the major participating federal departments. The government of Canada stated that there were two established criteria for SRCPP which guided the selection of which projects to fund: SRCPP should contribute to balanced growth with projects planned for all parts of the country, and SRCPP approved projects should expand and improve upon essential infrastructure facilities. Also, all selected projects were expected to be started by October 31, 1983. SRCPP funds were provided to projects within six broad groupings:

(Cite as: 51 FR 1010, *1021)

transportation facilities, shipbuilding for Coast Guard vessels, research and training facilities, advanced technology procurement, land and tourism development, and resource development. Projects which received SRCPP funds included airport terminal buildings, runways, highways, railroad stations, subways, deep water ports, small craft harbors, sewage treatment facilities, water bombing aircraft, historical building restoration, and clothing for the armed forces. Fish unloading systems and ice making facilities, bait storage depots, and marine service centers also received financing within the grouping of resource development. Projects also classified as resource development included livestock facilities and irrigation works. Resource development projects were designed to alleviate constraints on the development of resources in the forestry, fishing and agricultural sectors of Canada.

The types of facilities which received SRCPP funds are wide-ranging. There is also a wide array of industries which benefit from such projects. A review of *1022

(Cite as: 51 FR 1010, *1022)

the capital projects receiving SRCPP funding and the Treasury Board circulars provides no evidence of targeting to selected industries or regions. The response also states that the projects receiving SRCPP financing were planned in all parts of the country. During verification we will more closely examine the criteria used in project selection to ensure that location is not a criterion. Since the program is not limited to a specific enterprise or industry or a group of enterprises or industries, we preliminarily determine

(Cite as: 51 FR 1010, *1022)

that SRCPP is not countervailable.

6. Small Craft Harbor Program. In 1973, the management of Canada's commercial fishing and recreational harbors was consolidated within the DFO by the Fishing and Recreational Harbours Act. Under this program, the Small Craft Harbours Directorate within the DFO has the responsibility for operating and maintaining over two thousand small craft harbors which range from modern active facilities to minor installations serving isolated communities. The program provides for harbor maintenance projects such as breakwater protection, dredging, wharves, launching facilities and other related services. The program also provides harbor services such as lighting of harbor approaches and the provision of fire-fighting equipment.

We regard the development and maintenance of a country's road, rail, air and water transportation networks as a legitimate public function of government. The provision and maintenance of such a system, when made available on equal terms to any potential user, is not limited to a specific industry or group of industries. Canada's maintenance of its harbors not only benefits commercial fishermen, but also recreational boaters and any industry in the country which exports or imports goods and materials by sea; therefore, we preliminarily determine this program not to be countervailable.

B. Provincial Programs

(Cite as: 51 FR 1010, *1022)

1. New Brunswick: Marketing and Promotion Activities. Petitioner alleges that the New Brunswick Department of Commerce and Development offers four separate programs to fish processors to assist in the development, marketing and export activities of the Province. According to the response, New Brunswick administers only three programs relating to promotion and marketing. These are trade services, marketing services and production services. Technical/Marketing Assistance was eliminated at the end of 1983 and its functions have been absorbed by the production services section. There are no provincial rules or regulations that specifically provide for the various marketing and export programs; all are activities performed by the Department of Commerce and Technology under the direction of its Minister and the Deputy Administrator of the Department. Funding for the programs is authorized by the Financial Administration Act of October, 1984. Participation in these programs is voluntary and open to all manufacturers or processors established or willing to establish in New Brunswick. None of the three programs is designed to deal exclusively with export promotion, and, according to the response, of the three programs available, the only one utilized by producers of groundfish was trade services.

Under the trade services program, the personnel of the Department of Commerce and Development research and investigate possible trade shows and missions

(Cite as: 51 FR 1010, *1022)

which might be of use to manufactures and processors of any product in the province. These activities are available for both export and domestic marketing. The Department agrees to share some of the costs (usually 50 percent) involved in taking part in the trade shows if the manufacturer can show that he is financially solvent, has the production capability to supply a product, and will follow-up on any trade leads uncovered. The manufacturer must be a resident of the province of New Brunswick.

According to the response, in fiscal 1984-85, less than 4 percent of the total monies allocated was expended on the promotion of the subject merchandise; the balance was expended on the promotion of trade services for all other sectors in New Brunswick. Therefore, based on the response, we preliminarily determine that benefits provided under this program are not limited to a specific enterprise or industry, or group of enterprises or industries, and are not countervailable.

2. Newfoundland: Exemptions from Sales and Gasoline Taxes. Under the direction of the Tax Administration Branch of the Ministry of Finance, the government of Newfoundland offers exemptions from the application of the Retail Seles Tax Act and the Gas Tax Act, both enacted in 1978. The sales tax applies a flat rate of 12 percent on the consumption of tangible personal property. Its purpose is to tax only the final consumer of retail products. Pursuant to this purpose, the regulations enumerate specific exemptions in all areas of

(Cite as: 51 FR 1010, *1022)

commercial production, including production of primary products: agriculture, fish, forestry, and minerals; and manufacturing and processing. Vessels or boats purchased by commerical fishermen, farm equipment and supplies, all productive capital equipment purchased for use in manufacturing and all tangible personal property to be processed, fabricated, or manufactured for purpose of resale, are exempt.

The gas tax is an ad valorem tax based on 22 percent of the average retail price for fuel and is used to provide funds for highway repair. Exemptions apply to all uses of gas that are not related to the use of a motor vehicle on a public roadway including motorized farm equipment used for agricultural purposes, tractors and power saws used in commercial cutting and harvesting of logs, boats used in fishing, and equipment used in manufacturing plants. Therefore, based on the response, we preliminarily determine that benefits provided under these programs are not limited to a specific enterprise or industry, or group of enterprises or industries, and are not countervailable. At verification, we will carefully examine the de facto distribution of benefits under this program.

3. Newfoundland: Newfoundland and Labrador Development Corporation (NLDC). Under the direction of the Ministry of Finance, the government of Newfoundland operates the NLDC. This program was established in 1974 to promote small- and medium-sized businesses, and provides loans and equity investments to all

(Cite as: 51 FR 1010, *1022)

commercial sectors. Besides fishing, the NLDC has assisted enterprises in manufacuring, mining, forestry, services, agriculture, and tourism. Loans are made at the provincial lending rate. The maximum repayment period is 15 years. Repayment is determined according to the useful economic life of the asset. The NLDC also offers business and technical information on an informal basis in response to anyone's inquiries. Until March 1984, the program received partial federal contribution. Since then it has been solely under provincial responsibility.

Based on the response, we preliminarily determine that benefits provided under this program are not limited to an enterprise or industry, or group of enterprises or industries, and are not countervailable. At verification, we will carefully examine the de facto distribution of benefits under this program.

4. Newfoundland: Rural Development Loan Program (RDLP). Under the direction of the Rural Development Authority and pursuant to the Newfoundland Department of Rural *1023

(Cite as: 51 FR 1010, *1023)

Development Act of 1973, the government of Newfoundland operates the RDLP. The Rural Development Authority is comprised of three ministers: The Minister of Rural Development, the Minister of Forestry and Agriculture and the Minister of Fisheries, and three to five other appointed members. The RDLP promotes the development of small industries and rural enterprises by providing loans to both emerging and existing businesses. "

(Cite as: 51 FR 1010, *1023)

Rural" is interpreted to embrace all of Newfoundland including St. Johns, the capital of Newfoundland. Loans are at fixed interest rates for a maximum of $250,000. Maximum repayment periods are five years for new equipment and three years for used equipment, and security is required. The regulations authorize loans for many purposes including the purchase and repair of equipment; the purchase, construction and renovation of buildings; land purchases; and working capital needs. The only producers specifically excluded from the program are fish harvesters who already receive loans from the FLB. Otherwise, loans are provided in primary resource production, manufacturing, processing, services and tourism. Any Newfoundland business is eligible if the applicant demonstrates equity of at least 10 percent of the value of its existing fixed assets and is able to provide a cash input of at least 10 percent of the submitted capital costs. Therefore, based on the response, we preliminarily determine that benefits provided under this program are not limited to a specific enterprise or industry, or group of enterprises or industries, and are not countervailable. At verification, we will carefully examine the de facto use of this program.

5. Newfoundland: Loan Deficiency Guarantee Program. The government of Newfoundland's Ministry of Finance, pursuant to the Crown Guarantee and Loan Act of 1973, has guaranteed short-term working capital loans to eligible fishing companies since 1977. The response indicates that, since 1981,

(Cite as: 51 FR 1010, *1023)

guarantees have been provided to a variety of industries including fishing, mining, agricultural, pulpwood harvesting and saw milling. All loans that are guaranteed must be secured, and a guarantee fee of between 0.5 and 1.0 percent is charged. Because the guarantees provided under this program appear not to be limited to a specific enterprise or industry, or group of enterprises or industries, we preliminarily determine that they are not countervailable. At verification, we will carefully examine the de facto distribution of benefits under this program.

6. Newfoundland: Market Development Information Service. This service, offered by the support services branch of the Newfoundland Department of Fisheries, provides information on all aspects of the fishing industry to anyone who inquires. The response indicates that the information is used not only by the Canadian fishing industry, but by U.S. buyers and processors as well. As such, we preliminarily determine that the services provided under this program are not limited to a specific enterprise or industry, or group of enterprises or industries, and are not countervailable.

7. Nova Scotia: Market Development Assistance. Under the Marketing Development Division of the Department of Fisheries, the Market Development Service (MDS) operates to increase consumer awareness (both domestically and worldwide) of seafood products through the use of mall displays, cooking demonstrations and seminars, and distribution of recipe pamphlets and other

(Cite as: 51 FR 1010, *1023)

promotional material. According to the response, any individual or corperation, domestic or foreign, can receive information from the MDS. As such, we preliminarily determine that the services provided under this program are not limited to a specific enterprise or industry, or group of enterprises or industries, and are not countervailable.

III. Programs Preliminarily Determined Not To Be Used

A. Federal Programs

1. Community-Based Industrial Adjustment Program (CIAP). CIAP was started in 1981 and ended in 1984. The program was one part of the Industrial and Labor Adjustment Program which was administered by the Department of Industry, Trade and Commerce. The objective of CIAP was to encourage businesses to undertake capital projects in certain designated communities affected by serious industrial dislocations. CIAP financial assistance took the form of grants of up to 75 percent of the consulting costs associated with CIAP projects or loans to cover capital costs and preproduction expenses. According to the response, no groundfish harvesters or fresh fish processors benefitted from CIAP assistance. Therefore, we preliminarily determine that this program was not used.

(Cite as: 51 FR 1010, *1023)

B. Provincial Programs

1. New Brunswick: Winterization of Fish Plants Program. Petitioner alleged that this program provides financial assistance to winterize fish plants. According to the response there are no laws or regulations relating to this program. In 1979, the then existing Fish Inspection Branch of the Department of Fisheries conducted such a program but only one plant was involved and it did not process groundfish. Therefore, for purposes of this preliminary determination, we find this program not to be used.

2. Newfoundland: Secondary Processing Interest Subsidy Program (SPISP). Under the direction of the Ministry of Fisheries, the government of Newfoundland operates the SPISP. This program was initiated in 1978 to provide interest subsidies to secondary processors of fish for the purchase of machinery and equipment. The program is designed to encourage increased production of fish products processed beyond the whole and filleting stage of processing. According to the response, benefits are not available to producers and exporters of whole and filleted fresh groundfish. Therefore, for purposes of this preliminarily determination, we find this program not to be used.

3. Quebec: Technological Assistance Service for Business Program (TASBP). Under the direction of MAFF, the government of Quebec operates the TASBP. This

(Cite as: 51 FR 1010, *1023)

service, which the response indicates is available to all companies or individuals in industries related to the processing, distribution, and research and development of food products, provides financial assistance, up to 50 percent of total costs, for the development of new products and methods. This service also provides technological counselling to the firms in all sections of the food industry. According to the response, none of the merchandise subject to this investigation benefitted from financial assistance under this program. Therefore, for purposes of this preliminarly determination, we find this program not to be used.

4. Quebec: Aide a la Promotion des Exportations (APEX). Under the direction of the Ministry of Foreign Trade, the government of Quebec operates the APEX. Established in 1972 by the Ministry of Industry, Commerce and Tourism, this program provides grants to cover partial expenses for new export market development programs and attendance at trade fairs. According to the response, benefits under this program have not been provided to any *1024

(Cite as: 51 FR 1010, *1024)

exporters to the United States of the subject merchandise during the review period. Therefore, we preliminarily determine that this program was not used.

IV. Programs for which additional Information Is Needed

A. Federal Programs

(Cite as: 51 FR 1010, *1024)

1. Federal Assistance for Bait Services Program. The Bait Services Program was begun by the Dominion of Newfoundland before it joined Canada as a province in 1949. The federal government agreed to take over this program as a condition of Newfoundland becoming part of Canada. The program is presently being administered by the federal DFO. The bait service program provides fishermen with a source of bait independent of the local processors. The price charged to fishermen represents the cost of purchasing, processing and storing the bait. According to the response, the prices charged by the Bait Service are exactly the same as those charged by the two largest processors: Fisheries Products International and National Sea Products.

2. Unemployment Benefits for Fishermen under the Unemployment Insurance Act of 1971. Petitioner alleges that, in addition to the federal unemployment insurance available to Canadian workers, the federal Department of Employment and Immigration administers a subprogram which provides benefits specifically to and exclusively for fishermen, and that the bulk of the benefits under this program go toward providing seasonal benefits to fishermen. According to the response, this program is administered by the Canada Employment and Immigration Commission under the Unemployment Insurance Act of 1971. Under section 146 of the Unemployment Insurance Act, the Commission has the authority to establish and operate a scheme of unemployment insurance for

(Cite as: 51 FR 1010, *1024)

self-employed persons engaged in fishing. Fishermen who are employed under a contract of service fall within the general provisions of the Unemployment Insurance Act. A fisherman who is eligible for benefits under section 146 is not eligible for any other unemployment benefits. Altantic fishermen are eligible for unemployment benefits from November 1 to May 15 because, due to inclement weather, they are unable to fish during that period.

The government of Canada states that benefits available to fishermen under section 146 and benefits available to general claimants under the Unemployment Insurance Act are similar. Employer contributors are fixed at the same rate, which is presently 3.29 percent of insurable earnings with maximum weekly insurable earning of $460. All employees, including fishermen, pay the same percentage of their insurable earning which is 2.35 percent. The rate of weekly benefit payable to all claimants is an amount equal to 60 percent of their average weekly insurable earnings in qualifying weeks, except that if 15 or more weeks in the qualifying period are devoted to fishing, the claimant may base his average weekly insurable earnings on the 10 insured fishing weeks with the highest insurable earnings. Of November 7, 1985, petitioners presented new information which provides details of additional government funds to the unemployment insurance program for fishermen in Atlantic Canada. We need more information on the unemployment insurance program in Canada and on these additional funds being provided to the fishermen before we can make a

(Cite as: 51 FR 1010, *1024)

determination of whether this program is counteravailable. Therefore, we will be seeking additional information during our verification.

V. Programs Preliminarily Determined to be Terminated

A. P.E.I.: Fish Box Pool Program

To promote improved quality of fish and efficient fish handling in the inshore facility, the DFL implemented the Fish Box Pool Program on April 28, 1976, by providing loans to assist the fish buyer in purchasing plastic tote or fish boxes used in storing and transporting catches. According to the response, all loans under this program had been repaid prior to the review period.

B. Quebec: Societe de Developement Industriel (SDI) Expansion Program

Under this program, the government of Quebec provided grants and interest cost reimbursements to Quebec firms which increased direct exports by 25 percent over those of the previous year. The response indicates that grants were provided in 1980 and 1981 to one firm that exported fresh fish to the United States. Because these grants were for interest reimbursements, using our grant methodology, we allocate them to the year of receipt. Therefore,

(Cite as: 51 FR 1010, *1024)

becuase no benefits were provided during the review period, and because the program was cancelled in 1981, we preliminarily determine that this program has been terminated.

VI. Programs Preliminarily Determined Not To Exist

A. New Brunswick: Fish Chilling Assistance Program

This is a program of the federal government. See section I A. 4. of this notice.

B. Newfoundland: Bait Services Program

This is a program of the federal government. See section IV.A.1 of this notice.

C. Newfoundland: Production Machinery and Processing Technology Program

The response indicates that this program, alleged by petitioners to provide financial and technical assistance for the design of plant layouts and the development and acquisition of machinery, is the same as the Secondary

(Cite as: 51 FR 1010, *1024)

Processing Industry Subsidy Program. See section III.B.2 of this notice.

D. P.E.I. Fish Chilling Assistance Program

This is a program of the federal government. See section I A. 4. of this notice.

E. P.E.I. Fishermen's Holding Unit Program

This is a program of the federal government. See section I A. 4. of this notice.

F. Quebec: Joint Federal--Provincial Development Program

Petitioner alleged that, in 1983-84, the DFO established a five-year program to revitalize the fishing industry in Quebec. According to the response, no such project exists.

Verification

In accordance with section 776(a) of the Act, we will verify the information

(Cite as: 51 FR 1010, *1024)

used in making our final determination.

Suspension of Liquidation

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of certain fresh Atlantic groundfish from Canada which are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register and to require a cash deposit or bond for each such entry in the amount of 6.85 percent ad valorem. This suspension will remain in effect until further notice.

*1025

(Cite as: 51 FR 1010, *1025)

ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non- privileged and non-confidential information relating to this investigation. We will allow the ITC access to all privileged and confidential information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.

(Cite as: 51 FR 1010, *1025)

The ITC will determine whether these imports materially injure, or threaten material injury to, a U.S. industry within 120 days after the Department makes its preliminary affirmative determination or 45 days after its final affirmative determination, whichever is later.

Public comment

In accordance with § 355.35 of our regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination at 1:00 p.m. on February 18, 1986, at the U.S. Department of Commerce, Room 6802, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import Administration, Room B-099, at the above address with in 10 days of the publication of this notice.

Request for a hearing should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of the issues to be discussed. In addition, at least 10 copies of pre-hearing briefs must be submitted to the Deputy Assistant Secretary by February 10, 1986. Oral presentations will be limited to issues raised in the briefs.

(Cite as: 51 FR 1010, *1025)

In accordance with 19 CFR 355.33(d) and 19 CFR 355.34, written views will be considered if received not less than 30 days before the final determination or, if a hearing is held, within 7 days after the hearing transcript is available.

This notice is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).

Dated; January 2, 1986.

Gilbert B. Kaplan,

Deputy Assistant Secretary for Import Administration.

[FR Doc. 86-431 Filed 1-8-86; 8:45 am]

BILLING CODE 3510-DS-M