NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-122-507]
Final Affirmative Countervailing Duty Determination; Certain Fresh Atlantic Groundfish From Canada
Monday, March 24, 1986
*10041 (Cite as: 51 FR 10041, *10041)
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
(Cite as: 51 FR 10041, *10041)
SUMMARY: We determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided 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 5.82 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to continue to suspend liquidation of all entries of certain fresh Atlantic groundfish from Canada that are entered, or withdrawn from warehouse, for consumption, and to require a cash deposit or bond on *10042
(Cite as: 51 FR 10041, *10042)
entries of these products in the amount equal to the estimated net subsidy as described in the "Suspension of Liquidation" section of this notice.
EFFECTIVE DATE: March 24, 1986.
FOR FURTHER INFORMATION CONTACT:Gary Taverman, 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.
(Cite as: 51 FR 10041, *10042)
SUPPLEMENTARY INFORMATION:
Final Determination
Based upon our investigation, we determine 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 following programs are found to confer subsidies:
A. Federal Programs
1. Fishing Vessel Assistance Program;
2. Department of Fisheries and Oceans (DFO) Promotions Branch;
3. Assistance for the Construction of Ice-making and Fish Chilling Facilities;
4. Certain Types of Investment Tax Credits;
5. Program for Export Market Development;
6. Regional Development Incentive Program;
7. Industrial and Regional Development Program;
8. Fisheries Improvement Loan Program;
9. DFO Grants to Fishermen and Fish Processors from SRCPP Funds;
(Cite as: 51 FR 10041, *10042)
10. Preferential User Fees to Fishermen under the Small Craft Harbour Program; and
11. Government Equity Infusions into National Sea Products Limited and Fishery Products International Limited.
B. Joint Federal-Provincial Programs
1. Agricultural and Rural Development Agreements;
2. Prince Edward Island (P.E.I.) Comprehensive Development Plan;
3. General Development Agreements;
4. Transitional Programs;
5. Economic and Regional Development Agreements; and
6. Interest-Free Loans to National Sea Products Limited.
C. Provincial Programs
1. New Brunswick: Loans from the Fisheries Development Board;
2. New Brunswick: Fish Unloading Systems and Ice-making Programs;
3. New Brunswick: Insurance Premium Prepayment Program;
4. New Brunswick: Interest Rate Rebates;
5. New Brunswick: Technical Services;
(Cite as: 51 FR 10041, *10042)
6. Newfoundland: Grants for Purchasing and Constructing Boats;
7. Newfoundland: Grants for Rebuilding and Repair of Fishing and Coastal Vessels;
8. Newfoundland: Grants to Cover Operating Expenses;
9. Newfoundland: Loans from the Fisheries Loan Board;
10. Newfoundland: Loan Guarantees from the Fisheries Loan Board;
11. Newfoundland: Operation of Fisheries Facilities and Services;
12. Newfoundland: Construction and Repair of Fisheries Facilities;
13. Newfoundland: Enhancement of Fishing Operations;
14. Newfoundland: Marketing Assistance;
15. Nova Scotia: Fishing Vessel Construction Program;
16. Nova Scotia: Loans from the Fisheries Loan Board;
17. Nova Scotia: Industrial Development Division Grants;
18. Nova Scotia: Market Development Assistance;
19. P.E.I.: Fishing Vessel Subsidy Program;
20. P.E.I.: Near and Offshore Vessel; Assistance Program;
21. P.E.I.: Engine Conversion Program;
22. P.E.I.: Commercial Fishermen's Investment Incentive Program;
23. P.E.I.: Assistance for the Construction of Ice-making and Fish Chilling Facilities;
24. P.E.I.: Fish Box Pool Program;
(Cite as: 51 FR 10041, *10042)
25. P.E.I.: Technical Upgrading Program;
26. P.E.I.: Fresh Fish Marketing Program;
27. Fishing Industry Technology Program;
28. P.E.I.: Technology Improvements Program;
29. P.E.I.: Onboard Fishing Handling Systems Program;
30. Quebec: Vessel Construction Assistance Program;
31. Quebec: Gear Subsidy Program:
32. Quebec: Insurance Premium Subsidy Program;
33. Quebec: Large Vessel Construction Program;
34. Quebec: Loans from the Ministry of Agriculture, Fisheries and Food;
35. Quebec: Grants for Engine Purchases;
36. Quebec: Grants for Fish Transport and Seafood Processing Tanks;
37. Quebec: Grants to Processing Enterprises for Capital Equipment; and
38. Quebec: Ice-making and Fish Chilling Assistance.
We determine the estimated net subsidy to be 5.82 percent ad valorem.
Case History
On August 5, 1985, we received a petition in proper form from the North Atlantic Fisheries Task Force on behalf of the United States groundfish industry which harvest and produces for sale Atlantic groundfish in fresh
(Cite as: 51 FR 10041, *10042)
form. The North Atlantic Fisheries Task Force is an unincorporated association representing fisherman, 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.
We found that the petition contained sufficient grounds upon which to initiate a countervailing duty investigation, and on August 26, 1985, we initiated this investigation (50 FR 35281). We stated that we expected to issue a preliminary determination by October 29, 1985. 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 contained in the petition to the government of Canada in Washington, DC, on September 9, 1985.
(Cite as: 51 FR 10041, *10042)
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 and Labrador, Nova Scotia, Prince Edward Island, and Quebec, and three Canadian firms (Fishery Products International Limited, National Sea Products Limited, and United Maritime Fisherman (Co-op). We received supplementary information throughout November and December 1985. *10043
(Cite as: 51 FR 10041, *10043)
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 for the preliminary determination to no later than January 2, 1986 (50 Fed. Reg. 41921). On the basis of information contained in the response, we made a preliminary determination on January 2, 1986 (51 Fed. Reg. 1010).
From January 13 to February 10, 1986, we verified the information submitted in response to our questionnaire. At the request of petitioner, we held a hearing on February 18, 1986. We received pre-hearing briefs on February 12, 1986, and post-hearing briefs on February 26, 1986. Written comments on the verification reports were submitted by petitioner on March 7, 1986.
In accordance with § 355.38 of the Commerce Regulations, several Canadian firms claiming not to have benefitted from subsidies applied for exclusion from any possible countervailing duty order. On October 8, 1985, we informed representatives of the Canadian government of the applications, and requested
(Cite as: 51 FR 10041, *10043)
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 the firms in question. Both the questionnaire responses and government certifications were due no later than November 8, 1985. We received responses to the questionnaire 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 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 we did not receive the certifications by that date, we would not consider the exclusion
(Cite as: 51 FR 10041, *10043)
requests. On December 4, 1985, the Canadian government notified the Department that it would be unable to provide the certifications. Therefore, we denied the requests for exclusion.
Standing Issue
Section 702(b)(1) of the Act requires that a petition be filed "on behalf of" a U.S. industry. 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.
In the course of this investigation, we heard from a number of members of the domestic industry producing fresh groundfish fillets who unconditionally oppose the petition. These firms primarily opposed the case on whole, fresh groundfish, which they do not, by and large, produce. This opposition did not reach such a level as would lead us to believe that a majority of either industry opposes the petition on the like product each produces. We also received a submission from the Task Force for the Survival of American Fishermen, Processing Plants and Jobs, a group claiming to account for a major proportion of groundfish fillet production in the United States, and a
(Cite as: 51 FR 10041, *10043)
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 for which it accounts, nor has it provided sufficient evidence that it accounts for a major proportion of the domestic whole groundfish industry. Accordingly, we believe that the opponents of the petition have not demonstrated affirmatively that the petition was not filed on behalf of the domestic industry. This conclusion is not based upon any exclusion from consideration, as part of the domestic industries, of those firms which may also import from Canada the like product which they allegedly produce.
Scope of Investigation
The products covered by this investigation are certain fresh Atlantic groundfish, which cover fresh whole and fresh fillets of Atlantic groundfish, including cod, haddock, pollock, hake, and flatfish (including fllunder 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
(Cite as: 51 FR 10041, *10043)
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
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). For purposes of this final determination, the period for which we are measuring subsidization ("the review period") is the government of Canada's 1985 fiscal eyar (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
(Cite as: 51 FR 10041, *10043)
and slipways over 16 years (the average useful life of ship and boat building dry docks and land improvements), for fish boxes over four years (the average useful life of specialized materials handling devices), and for all other assets over 12 years (the average useful life of assets used in the manufacture of food and other sundry products). Because we used aggregate data for subsidy programs in this case, we used as the discount rate the long-term corporate bond rate in Canada, as published by the Bank of Canada.
With respect to the benchmark interest rates used to calculate benfits from loan programs, for long-term fixed-rate loans, we used the long-term corporate bond rate in Canada. For long-*10044
(Cite as: 51 FR 10041, *10044)
term variable-rate loans, because we had no variable-rate long-term loans to use as a benchmark, we relied on a short-term interest rate which in this case is the 90-day prime corporate paper rate as reported by the Bank of Canada. And for short-term loans, we also used the 90-day prime corporate paper rate. For those programs in which respondents were unable to segregate benefits to the producers of the subject merchandise from benefits to the producers of other fresh fish and shellfish, we allocated benefits to all producers of fish and shellfish over the f.o.b. value of production in Atlantic Canada of fish and shellfish. All dollar amounts referred to represent Canadian dollars.
Based on our analysis of the petition, the responses to our questionnaire, our verification, and comments filed by petitioner and respondents, we determine
(Cite as: 51 FR 10041, *10044)
the following:
I. Programs Determined to Confer Subsidies
We determine that subsidies are being provided to producers or exporters in Canada of certain fresh Atlantic groundfish under the following programs:
1. Fishing Vessels Assistance Program (FVAP)
Under the administration of the Economic Programs Branch of the DFO, the government of Canada operates the FVAP. Although the program was terminated on December 20, 1985, its operation remains in effect through March 31, 1986. This program provided grants to any provincial agency, Canadian corporation or resident citizen to construct, modify, or convert and re-equip fishing vessels. All construction, modification, or conversion was 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 maximum of $750,000. The funding limit for modification or conversion of a vessel was $400,000. However, during
(Cite as: 51 FR 10041, *10044)
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 commercial fishermen, we determine that they were limited to a specific enterprise or industry, or group of enterprises or industries, within the meaning of section 771(5)(B) of the Act, and are countervailable.
To calculate the benefit from this program, we allocated the grants received in Atlantic Canada in fiscal years 1968 through 1985 over 18 years. Applying our grant methodology and dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.715 percent ad valorem.
2. DFO Promotions Branch
The marketing of the DFO are the responsibility of the Marketing Directorate. The Directorate has two branches: the Market Intelligence and Industry Service Branch, and the Promotions Branch. The Market Intelligence and Industry Services Branch is discussed in section III. A.2 of this notice. The function of the Promotions Branch is to promote fish products generically.
(Cite as: 51 FR 10041, *10044)
Specifically, 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 promotion displays at fairs and exhibitions, including "Boston Seafood '85," and the "Dallas Solo Fish Show." The majority of the Promotions Branch's activities are directed at the Canadian domestic market. However, funding of promotional displays at the Boston Fair and Dallas Show provided a benefit to exporters of fish to the United States during the review period. Because promotional activities at these shows benefited only exports to the United States, we determine that the expenses incurred for participation are countervailable export subsidies.
To calculate the benefit from this program, we divided the amount expended on promotional displays by the f.o.b. value of exports of fish and shellfish from Canada to the United States during the review period. This resulted in an estimated net subsidy of 0.001 percent ad valorem.
3. Assistance for the Construction of Ice-making 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 used by the fishing industry in amounts up to 50 percent of a project's cost, with a ceiling of $25,000. In 1977, the ceiling was raised to
(Cite as: 51 FR 10041, *10044)
$50,000. The program began in 1973, and terminated in 1980.
Because grants provided under this program were limited to a specific enterprise or industry, or group of enterprises or industries, we determine the program to be countervailable. We recognize that this program terminated in 1980. However, according to our grant methodology, grants bestowed between 1973 and 1980 confer benefits during the review period. To calculate the benefit from this program, we allocated the grants received in Atlantic Canada in fiscal years 1974 through 1980 over 12 years. Applying the grant methodology and dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.059 percent ad valorem.
4. 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 ITC 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 13 percent is
(Cite as: 51 FR 10041, *10044)
available for qualified property used in certain regions.
The second category of ITC 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 characterized by high levels of unemployment and low per capita income. The ITC rate for certified property is 50 percent. The third category of ITC 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 20 percent ITC rate is available for qualifying scientific research expenditures. For small Canadian-controlled private corporations, the rate is 35 percent. For all other corporations, the rate is 30 percent, if the expenditure is made in certain regions. The fourth category of ITC is for investment in "qualified transportation equipment."
We verified that the basic seven percent rate for "qualified property" is not limited to a specific industry or region. We, therefore, determine that it is not countervailable. However, because the additional rates of three and 13 percent for qualified property can only be claimed on assets used in *10045
(Cite as: 51 FR 10041, *10045)
certain regions, we determine that those additional benefits are countervailable. The 50 percent ITC rate for "certified property" can also only be claimed on assets used in specific regions. Thus, we determine that
(Cite as: 51 FR 10041, *10045)
the additional benefit above the basic rate of seven percent is countervailable.
We verified that the fishing industry did not benefit from scientific research ITCs. Therefore, we determine that these ITCs were not used. We verified that the ITC for transportation equipment is not available for investment in fishing vessels. Consequently, we determine that this type of ITC 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, information from tax returns filed in 1984 is not available. Thus, we are using, as best information available, those tax credits claimed in 1983. Dividing the amount of countervailable ITCs attributable to Atlantic Canada's fishing industry by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.162 percent ad valorem.
815. Program for Export Market development (PEMD)
PEND 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 providing assistance for project bidding, market identification, export consortia, sustained export market development, participation in trade fairs
(Cite as: 51 FR 10041, *10045)
abroad, and bringing in foreign buyers. PEMD assistance is in the form of interest-free loans with repayment terms dependent upon 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. We verified the amount of PEMD loans provided to the Atlantic fishing industry. However, respondents were unable to segregate the loans provided solely for the export promotion of groundfish.
Since PEMD loans are provided for export activities, we determine that assistance provided under the program confers benefits which constitute export subsidies. Because the repayment terms on PEMD loans are indefinite, we are considering all the loans attributable to the Atlantic Canada fishing industry outstanding in the beginning of the review period as short-term loans with zero interest, rolled over each year. To calculate the benefit, we multiplied the amount outstanding at the beginning of the review period by our short-term interest benchmark. We then divided the benefit by the f.o.b. value of exports to the United States of fish and shellfish during the review period. We calculated an estimated net subsidy of 0.001 percent ad valorem.
6. Regional Development Incentive Program (RDIP)
(Cite as: 51 FR 10041, *10045)
The RDIP, which was the predecessor of the Industrial and Regional Development Program (see section I.A.7. of this notice), was administered by the Department of Regional Economic Expansion (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. Because paid benefits were limited to companies located within specific regions in Canada, we determine that grants provided through the RDIP program of DREE 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 received in Atlantic Canada in fiscal years 1974 through 1985 over 12 years. Applying the grant methodogy, and dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.447 percent ad valorem.
7. Industrial and Regional Development Program (IRDP)
(Cite as: 51 FR 10041, *10045)
Under the administration of the Department of Regional and Industrial Expansion (DRIE), IRDP was established in 1983 as the successor to RDIP. Its purpose is to increase industrial development and improve the overall economic climate in Canada. To accomplish this goal, grants are provided for four purposes: (1) to encourage the development of new products and new processes and to increase industrial productivity and industrial competitiveness; (2) to assist in the establishment of new production facilities in less developed areas; (3) to increase industrial productivity through the improvement, modernization and expansion of existing manufacturing and processing operations; and (4) for marketing purposes.
Each of Canada's 260 census districts is classified into one of four tiers on the basis of the 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 15 percent of the population (in terms of economic disparity) resides are classified as Tier III; the districts in which the next 30 percent of the population resides are classified as Tier II; and the districts in which the remaining 50 percent of the population resides are classified as Tier I. The Yukon and Northwest Territories are always classified in Tier III.
Those districts classified as Tier IV are authorized to receive the highest share of assistance under IRDP (as a percentage of assistance per approved
(Cite as: 51 FR 10041, *10045)
project); those in Tier I, the lowest. Also, grants for the establishment of new facilities, and for modernization and expansion are no longer provided to companies located in census districts classified as Tier I.
Despite the fact that the criteria for assignment to a tier may be neutral, the program nevertheless authorizes benefits to vary from tier to tier, and thus, from region to region. Therefore, we determine that this grant program provides regional subsidies and is countervailable.
IRDP grants were received by fresh fish producers only in the 1985 fiscal year. To determine the level of benefit under this program, we compared the level of assistance provided to companies involved in fresh fish production in Atlantic Canada to the average level of assistance provided to companies in Tier I. We took the difference and allocated it over 12 years. Applying the grant methodology and dividing the f.o.b. value of production in Atlantic Canada of the subject merchandise during the review period, we calculated an estimated net subsidy of 0.001 percent ad valorem.
8. Fisheries Improvement Loan Progam (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
(Cite as: 51 FR 10041, *10045)
Minister of Fisheries and Oceans guarantees loans made by chartered banks and other designated commercial lenders to commercial fishermen for fisheries improvement projects. These projects include the *10046
(Cite as: 51 FR 10041, *10046)
purchase, construction, and repair of alteration of fishing vessels, equipment, water supply systems, or other structures related to a primary fishing enterpirse. The maximum amount of guaranteed loans that a borrower may have outstanding is $150,000. The interest rates charged on loans guaranteed by the government are variable and are equal to the prime lending rate of the lending bank plus one percent. The maximum term of any loan is set at 15 years. There are 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 to be limited to a specific enterprise or industry, or group of enterprises or industries. 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 Fed. Reg. 25097) because they
(Cite as: 51 FR 10041, *10046)
were available on similar terms to all industries in the agricultural sector. In contrast, loans under the FILP are limited to one specific industry, the fishing industry. In addition to determining whether the FILP is limited to a specific enterprise or industry, or group of enterprises or industries, we must also determine whether the loans and loan guarantees given under the program are on terms inconsistent with commercial considerations.
With respect to the loan guarantees, there are no private commercial sources for loan guarantees in Canada. There are, however, fees charged for loan guarantees under other federal and provincial programs. Under the Federal 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. Under the Newfoundland Deficiency Guarantee Program, the government of Newfoundland's Department of Finance also charges a one percent fee per annum. Therefore, we are using, as best information available, the guarantee fee charged under those programs as our benchmark to determine whether loan guarantees provided under the FILP are on terms inconsistent with commercial considerations. As stated earlier, there are no fees charged on loan guarantees under the FILP. Therefore, we 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
(Cite as: 51 FR 10041, *10046)
considerations.
To calculate the 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 in Atlantic Canada during the review period. Dividing the result by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.043 percent ad valorem for loan guarantees provided under this program.
With respect to loans under this program, in order for commercial banks to have their loans guaranteed by the federal government, they must charge an interest rate of prime plus one percent. To determine whether the interest rate mandated by the government provides an additional benefit to commercial fishermen, we compared the interest rate provided to fishermen under the FILP to the commercial interest rate which commercial fishermen would have had to pay absent this program. Comparing the appropriate benchmark described in the Analysis of Programs section of this notice to the interest rate charged under the program, we determine that the FILP loans are not made on terms inconsistent with commercial considerations. We therefore determine that loans made under this program are not countervailable.
9. DFO Grants to Fishermen and Fish Processors From SRCPP Funds
(Cite as: 51 FR 10041, *10046)
The DFO has provided grants to fishermen and fish processors. The funding source of these grants was the Special Recovery Capital Projects Program (SRCPP). SRCPP, which was announced in the 1983/84 budget of the government of Canada, was terminated on April 10, 1985. SRCPP was intended to be an anti- recessionary public works program with a budget of 2.4 billion dollars. SRCPP involved the injection of substantial amounts of new funds into the capital budgets of 13 federal departments and agencies in Canada which funded projects located throughout the country. These federal departments and agencies identified those projects under their program jurisdictions which could be implemented quickly with additional funds. Projects were then selected to receive SRCPP monies. To determine whether countervailable benefits were provided under SRCPP, we looked at the use of the funds and not their source. This is because SRCPP did not create new programs but only accelerated existing programs already administered by separate government agencies and departments.
The DFO received SRCPP funds which were used for a number of programs. Some SRCPP funds were used to improve small craft harbors (see section 1.A.10. of this notice.) DFO also used SRCPP funds to construct government-owned and operated marine service centers, bait storage depots, fish unloading systems, and ice-making facilities. These government-owned facilities are not yet
(Cite as: 51 FR 10041, *10046)
operational, and therefore, we are unable to determine if the goods and services offered through these facilities are provided on preferential terms. We will examine these programs in any section 751 review that may be requested, if this investigation results in a countervailing duty order.
In addition, DFO used SRCPP monies to provide individual grants to fish processors and commercial fishermen for ice-making and storage facilities and fish unloading systems in Nova Scotia and New Brunswick. We determine these grants to be countervailable because they are limited to a specific enterprise or industry, or group of enterprises or industries within Canada.
To calculate the benefit from these DFO grants, we allocated the grants received in Atlantic Canada in fiscal years 1984 and 1985 over 12 years. Applying the grant methodology and dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.079 percent ad valorem.
10. Preferential User Fees to Fishermen Under the Small Craft Harbour 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 of the DFO has the responsibility for operating and maintaining over 2,000 small craft
(Cite as: 51 FR 10041, *10046)
harbors, which range from modern active facilities to minor installations serving isolated communities. The program also received SRCPP funds to upgrade harbor installations.
The regulations of the program provide the berthage fees to be charged to users of the harbors. Under the *10047
(Cite as: 51 FR 10041, *10047)
regulations, the berthage fees charged to commercial fishermen are less than those charged to other commercial vessels and recreational boaters. Commercial fishing vessels are charged seven cents per meter of length of vessel per day; other commercial vessels are charged 49 cents per meter per day. We determine the program to be countervailable because the preferential user fees for harbor facilities are limited to commercial fishermen. To calculate the benefit under this program, we took the difference between the amount of berthage fees paid by commercial fishermen and the amount they would have had to pay if they were charged the same rate as all other commercial vessels. Dividing that difference by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.046 percent ad valorem.
11. Government Equity Infusions Into National Sea Products Limited and Fisheries Products International Limited
(Cite as: 51 FR 10041, *10047)
Petitioner alleges that the government of Canada made equity infusions into National Sea Products Limited, Fishery Products International Limited and United Maritime Fishermen Co-op, and that these equity infusions may have been on terms inconsistent with commercial considerations. We have verified that 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 have limited 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 Fishery Products Limited, 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 Limited. 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 item of