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 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 countervailable benefit. 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
(Cite as: 51 FR 10041, *10047)
submitted by the government of Canada, and (c) the terms of the restructuring.
With respect to FPIL, we determine that it was unequityworthy at the time of its organization. Although one 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 change for recouping the money it had already loaned to FPIL was to help it reorganize.
Our determination rests primarily on the poor financial conditions of the companies merged into FPIL during 1981 through 1983 and on our analysis of the projected future profitability of the company. The predecessor companies, viewed generally, had low profits or lost money on their operations during the period from 1981 through 1983 (even prior to the payment of interest expenses). The primary source of projected future operations presented by respondents consists of a study performed by an independent consulting firm. The projected financial performance of FPIL according to this study, and our own analysis of the general perception of the industrial environment at the time of restructuring, lead us to believe that a reasonable investor acting in a manner consistent with commercial considerations would not have invested in FPIL at the same time that the government of Canada and the province of Newfoundland invested. The projected increase in retained earnings over five
(Cite as: 51 FR 10041, *10047)
years is not large and is accompanied by a deterioration in the financial structure and working capital position of the company. The government estimates of future catches on which these projections were based are subject to great uncertainty. Government action on enterprise allocations and the effect of such a program were both uncertain. By respondents' own admission, although private investors had been sought, none were willing to invest in the restructured company under the conditions in the Atlantic fishing industry at that time. Therefore, based upon our analysis, we determine that equity infusions in 1983 by the government of Canada and the province of Newfoundland into FPIL were made on terms inconsistent with commercial considerations.
We also 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 into 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 determination, we find that it is not possible to determine the actual value placed on each portion of this transaction by the
(Cite as: 51 FR 10041, *10047)
private investor. Our determination is not based on whether NSP is equityworthy in general. Rather, analysis of these preferred shares purchased by the government indicates that the expected *10048
(Cite as: 51 FR 10041, *10048)
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 determine that these infusions confer benefits which constitute a subsidy. To calculate the benefit of the equity infusion into FPIL, we followed our normal rate of return shortfall methodology. The benchmark rate of return was the national average rate of return on equity. For NSP, we compared the benchmark rate of return to the rate of return on the government shares. The benchmark rate of return was arrived at by using the actual return for another class of preferred stock ("term difficulty preferred shares") purchased at the same time by a private investor. We made an adjustment on the rate of return of the term difficulty preferred shares to account for their tax-free status by taking the difference between the return on tax-free bonds and long-term commercial bonds, and adding that difference to the return on the private investor's term difficulty preferred shares. Adding the benefits from the two equity infusions, 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 1.876 percent ad valorem.
(Cite as: 51 FR 10041, *10048)
B. Joint Federal-Provincial Programs
1. Agricultural and Rural Development Agreements (ARDA)
The Agricultural and Rural Development Act allowed the federal government to enter into agreements with the provincial governments to promote economic development and to alleviate conditions of social and economic disadvantage in certain rural areas. The focus of these agreements was alternative land use, soil and water conservation, and economic development in rural development regions. Funding for projects in these areas was evenly split between the federal and provincial government. These agreements were negotiated with all provinces in Canada, except Prince Edward Island, which in 1969 signed its own Comprehensive Development Plan with the federal government. Of the ARDAs signed with the Atlantic provinces, the Newfoundland and Nova Scotia ARDAs provided specific benefits to the fishing industry located in rural development regions.
The Newfoundland ARDA provided funds for a water supply project to furnish water to fresh fish and herring plants. Although this project was not completed under ARDA, it was later funded and completed under a General Development Agreement subsidiary agreement. Using the design report for the project as best information available, we estimate that 21 percent of the funds
(Cite as: 51 FR 10041, *10048)
under this project benefitted the fresh fish plants. As best information available, we are using the project proposal as our source for the total amount of assistance provided under the project. We are also assuming the financial assistance provided under the project occurred in 1978. The Nova Scotia ARDA provided grants for bait freezing units in certain rural development regions. The grants for these units were disbursed in 1975. Respondents were unable to segregate the benefits provided solely to groundfish production under both the Newfoundland and Nova Scotia ARDAs.
Since the benefits under the Newfoundland and Nova Scotia ARDAs were limited to companies located in specific regions, we determine that the grants provided under the ARDAs is countervailable. We recognize that this program terminated in 1975, with funding continuing until 1978. However, using our grant methodology, grants bestowed in fiscal years 1975 through 1978 continue to confer a benefit during the review period. To calculate the benefit from these programs, we allocated the grants over 12 years.
Applying the grant methodology and dividing by the f.o.b. value of production in Atlantic Canada of fish during the review period for the Newfoundland ARDA grant, and fish and shellfish during the review period for the Nova Scotia ARDA grants, we calculated an estimated net subsidy of 0.005 percent ad valorem.
2. P.E.I. Comprehensive Development Plan
(Cite as: 51 FR 10041, *10048)
The P.E.I. Comprehensive Development Plan (the Plan) was agreed to in 1969 by the federal and provincial governments. The Plan operated until 1984. The federal statutory authority for the Plan was the Fund for Rural Economic Development. The Plan provided for joint federal-provincial government cooperation on devising and implementing economic development programs. The programs instituted by the Plan focused on fisheries, agriculture, tourism, forestry, industrial development, land use, educational facilities and transportation. The federal government was responsible for 75 to 90 percent of funding under the Plan. The response claimed that none of the programs under the plan benefitted the harvesters or processors of groundfish. However, during verification, it could not be established that the fishery projects did not benefit the harvesters or processors of groundfish. Furthermore, respondents were unable to segregate the benefits going solely to groundfish production. The following projects provided financial assistance to the fishing industry in P.E.I. under the fishery program of the Plan: (1) Landing and handling, (2) resource harvesting, (3) product handling, (4) processing and quality control, (5) silage, (6) cold storage, (7) fishermen's incentives, (8) plant quality, and (9) ice-making facilities. As best information available, we are using information provided by the P.E.I. regional office of the federal Department of
(Cite as: 51 FR 10041, *10048)
Fisheries and Oceans to establish the funding levels of these programs.
Because the federal share of grant money under the Plan was limited to companies within a specific region (i.e., the province of P.E.I.), we determine the federal share to be countervailable. However, since the provincial funds were not limited to a specific enterprise or industry, or group of enterprises or industries, we determine that they are not countervailable. To calculate the benefit from this program, we allocated the federal share of grants received in fiscal years 1973 through 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 0.039 percent ad valorem.
3. General Development Agreements (GDA)
GDAs provide the legal basis for departments of the federal and provincial governments to cooperate in the establishment of economic development programs. The GDAs were umbrella agreements which stated general economic development goals. Ten-year GDAs were signed with all the provinces in 1974, except P.E.I., which had signed the Comprehensive Development Plan in 1969. Five-year GDAs were signed with the Yukon in 1977 and with the Northwest Territories in 1979. Pursuant to GDAs, subsidiary agreements were signed. The subsidiary agreements were generally between particular federal and provincial govenment
(Cite as: 51 FR 10041, *10048)
departments (e.g., the Department of Fisheries). These agreements established various individual programs. delineated administrative procedures and set out the relative funding commitments of the federal and provincial governments. Subsidiary agreements were typically directed at establishing traditional government program (i.e., extension *10049
(Cite as: 51 FR 10041, *10049)
services), developing infrastructure, providing for economic development assistance for certain regions within the province, and creating programs for specific industries. We verified that subsidiary agreements in Newfoundland, New Brunswick and Nova Scotia provided financial assistance to the fishing industry. Under the Newfoundland and New Brunswick subsidiary agreements, funds were provided for the construction of marine service centers. We determine the building of government-owned and operated marine service centers not to be countervailable. We are unable to determine if the services offered through these facilities are provided on preferential terms. This issue will be closely examined in any section 751 review that may be requested, if this investigation results in a countervailing duty order.
In Newfoundland, two subsidiary agreements provided funding to the fishing industry for inshore fisheries development and special fish plant water systems. We determine these two subsidiary agreements to be countervailable because they provided direct financial assistance that was limited to a specific enterprise or industry, or group of enterprises or industries. We
(Cite as: 51 FR 10041, *10049)
verified the federal amount of funds disbursed under the two subsidiary agreements. To establish the total level of funding, we are using, at best information available, a federal government publication on GDAs which states that federal expenditures under the Newfoundland subsidiary agreements represents 90 percent of total expenditures.
In the course of verification, it was discovered that New Brunswick grants were provided to the fishing industry under two subsidiary agreements directed at specific regions within the province. These were the Northeast New Brunswick and Developing Regions subsidiary agreements. Under these two subsidiary agreements, grants were disbursed for bait sheds, salt sheds, quality control, computer installation, fish handling machinery, ice machines, processing up-grading and ice-making storage facilities. Respondents were unable to segregate the grants under the two subsidiary agreements which went solely to groundfish production. Because the provincial and federal funds provided under the subsidiary agreements in New Brunswick were limited to companies within a specific region, we determine funds provided under these agreements to be countervailable. Because there was no information in the questionnaire response on the amount of funding provided under this program, we are using, as best information available, the amounts indicated in the annual reports of the Community Improvement Corporation (the administering authority) to determine the total level of funding for the Northeast New Brunswick
(Cite as: 51 FR 10041, *10049)
subsidiary agreement. For the Developing Regions subsidiary agreement, we are using as best information available, a listing of federal expenditures provided by the provincial office of DRIE. We are using, as best information available, a federal publication on GDAs which states that federal expenditures uder the New Brunswick subsidairy agreements represent 80 percent of total expenditures.
In Nova Scotia, the Strait of Canso subsidiary agreement provided for a water supply project designed to improve the fresh water supply to a fish processor. Because there was no information in the questionnaire response on the amount of funding provided under this program, we are using, as best information available, the total estimated project cost as shown by "Schedule A" of the agreement. Because the provincial and federal funds provided under this subsidiary agreement were limited to a company within a certain region, we determine the grants to be countervailable.
To calculate the benefits under the fishery subsidiary agreements described above, we allocated the grants received in fiscal years 1973 through 1984 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 0.181 percent ad valorem.
(Cite as: 51 FR 10041, *10049)
Between the termination of the GDAs and the beginning of Economic and Regional Development Agreements, three programs were founded solely by the federal government. They were the Southeast New Brunswick Development Initiative, the Quebec Development Plan, and the Fisheries Development Program for Coastal Labrador (which is discussed in section IV.B.1. below).
The Southeast New Brunswick Development Initiative began in 1981 and will end in 1986. The federal Department of Fisheries and Oceans administers the Initiative. Under the Initiative, grants are provided to fish processors for the upgrading of fish processing and transportation equipment. Respondents were unable to segregate the benefits going solely to groundfish production. Because the grants under the Initiative are limited to companies within certain regions, we determine them to be countervailable.
The Quebec Development Plan began in 1983 and is expected to last until 1998. Under the Plan, grants have been provided for expansion of the commercial fishing fleet and improvement of commercial fishing vessels. The Plan is administered by the federal Department of Fisheries and Oceans. Because the grants under the Plan are limited to companies within certain regions, we determine them to be countervailable.
To calculate the benefit under these transitional programs, we allocated all the grants received over 12 or 18 years, as appropriate. Applying the grant methodology and dividing by the f.o.b. value of production in Atlantic Canada
(Cite as: 51 FR 10041, *10049)
of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.060 percent ad valorem.
5. Economic and Regional Development Agreements (ERDA)
ERDAs are essentially a continuation of the GDAs. ERDAs were signed with every province and territory in the early 1980's. Similar to GDA subsidiary agreements, ERDA subsidiary agreements establish programs, delineate administrative procedures and set up the relative funding commitments of the federal and provincial governments. We verified that three subsidiary agreements relating to development of the fisheries industry were signed with P.E.I., New Brunswick and Nova Scotia. Under the P.E.I. subsidiary agreement, four programs were founded by the federal government: resource development, harvesting, infrastructure and pilot projects. In addition, three programs were funded by the provincial government: quality enhancement, quality improvement and product utilization. At verification, conflicting documentation was provided regarding the total monies disbursed under the subsidiary agreement. We are using, as best information available, the 1984-1985 ERDA Review Report to establish the aggregate amount of funding. Because these programs provided funds to a specific enterprise or industry, or group of enterprises or industries, we find
(Cite as: 51 FR 10041, *10049)
the grants to be countervailable.
We verified that funds under the New Brunswick fishery subsidiary agreement expended for administrative costs and programs were not related to the production of groundfish. Therefore, we determine the funds provided under these programs were not used. We verified that no funds were disbursed *10050
(Cite as: 51 FR 10041, *10050)
under the Nova Scotia subsidiary agreement as of March 31, 1985.
To calculate the benefit under the P.E.I. fishery subsidiary agreement, we allocated the total value of all federal and provincial funds received in fiscal year 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 0.007 percent ad valorem.
6. Interest-Free Loans to National Sea Products
We found during verification that National Sea Products had three interest- free loans from government sources. The sources of these loans were the federal Department of Industry, Trade & Commerce, the Newfoundland Industrial Development Corporation, and the Nova Scotia Resources Development Board. Since we are unable to determine the extent to which interest-free loans may be
(Cite as: 51 FR 10041, *10050)
provided by each of these sources to other industries, we find these loans to be limited to a specific enterprise or industry, or group of enterprises or industries, and hence countervailable since they are on terms inconsistent with commercial considerations. For two of the loans, we are using our long-term methodology because the interest rate is fixed for the life of the loans. For the third loan, we are using our short-term loan methodology since the interest rate is scheduled to change during the term of the loan. We divided the benefit from these loans by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period to calculate an estimated net subsidy of 0.018 percent ad valorem.
1. New Brunswick: Loans from the Fisheries Development Board (NBFDB)
The predecessor to the Fisheries Development Board was the Fisheries Loan Development Board (FLDB), originally established in 1946 by the Fisherman's Loan Act (FLA). The purpose of the FLDB under the FLA was to improve and develop the fishing industry in the province. The FLA allowed the FLDB to make loans for the building or purchase of boats, the purchase of new engines and fishing gear, or any other expenditure which the Board deemed proper. Interest
(Cite as: 51 FR 10041, *10050)
rates charged for loans under the FLA were not to exceed five percent and were fixed for the term of the loan. The term was not to exceed 15 years and for each approved pplication to buy a boat or engine, a deposit of 30 percent of the estimated cost was required.]
Effective March 1, 1978, the FLA was replaced by the Fisheries Development Act (FDA). The latter replaced the FLDB with the NBFDB. Under the FDA, the Minister of Fisheries, upon recommendation from the NBFDB, could provide financial assistance in the form of direct loans to a person or company in the fishing industry. The term for all loans under the current FDA regulations is set at a maximum of 25 years with a minimum downpayment of five percent of the value of the loan. 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 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
(Cite as: 51 FR 10041, *10050)
contrast, loans under the NBFDB are limited to one specific industry, the fishing industry. Comparing the appropriate long- and short-term benchmark interest rates described above to the various fixed and variable interest rates charged under this program, we also determine that these loans were made on terms inconsistent with commercial considerations.
We were unable to verify much of the information provided in the questionnaire response relating to the actual terms and conditions of these loans. We therefore are using, as best information available, information contained in the relevant regulations and annual reports of the Department of Fisheries. To determine the term for loans provided under the program, we used, as best information availabe, the regulations under the FLA, which state that the maximum allowable term of a loan was 15 years. Our calculations are therefore based on loans provided from 1970-1985. We treated loans given from 1970-1980 and 1983-1985 as fixed rate loans, and applied our long-term loan methodology outlined in the Subsidies Appendix. Loans given in 1981 and 1982 were variable-rate long-term loans. To calculate the benefits from the variable rate loans, we took the difference between the benchmark interest rate 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. Adding the benefits and dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an
(Cite as: 51 FR 10041, *10050)
estimated net subsidy of 0.259 percent ad valorem.
2. New Brunswick: Fish Unloading Systems and Icemaking Program (FUSIP)
The New Brunswick Department of Fisheries, through the NBFDB, administers a 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. During verification, we confirmed that 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- making facility or equipment to a maximum of $15,000 per application.
Because benefits under this program are available exclusively to the fishing industry, we determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is counteravailable. To calculate the benefit from this program, we allocated all grants received in fiscal years 1981 through 1985 over 12 years. Applying our grant methodology
(Cite as: 51 FR 10041, *10050)
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 0.010 percent ad valorem.
3. New Brunswick: Insurance Premium Prepayment Program
To provide vessel insurance for recipients of loans through the NBFDB, the Department of Fisheries purchases insurance on behalf of the recipient and includes the costs in the annual premium paid on the loan for the vessel. These insurance prepayment loans, which are provided in accordance with the Fisheries Development Act of 1977 *10051
(Cite as: 51 FR 10041, *10051)
and Regulation 84-166, are available at the same interest rates as those charged under the NBFDB. These loans, however, must be paid within one year. This program is available only for vessels financed through the NBFDB, discussed in section I.C.I. above, and is not available to fishermen financing boats through commercial lending institutions.
Loans under this program are available exclusively to commercial fishermen, and are therefore limited to a specific enterprise or industry, or group of enterprises or industries. Comparing the interest rates charged on these loans to the appropriate benchmark described in the "Analysis of Programs" section of this notice, we also determine that these loans are provided on terms
(Cite as: 51 FR 10041, *10051)
inconsistent with commercial considerations, and are therefore countervailable. To calculate the benefit from this program, we used our methodology for short-term loans. Because we were unable to verify the interest rate reported in the response, we used, as best information available, the lowest quarterly provincial lending rate for 1985, as supplied by the New Brunswick Department of Finance to represent the interest rate charged under this program. Dividing by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated subsidy of 0.004 percent ad valorem.
4. New Brunswick Interest Rate Rebates
Information contained in the New Brunswick Department of Fisheries 1984 Annual Report (Annual Report) indicates that the province provides interest rate rebates to commercial fishermen. Under this program, the government rebates either 25 or 50 percent of the interest charged on NBFDB loans that were provided from March 1, 1978, to December 6, 1979. Although this rebate program was repealed on December 6, 1979, loans provided during that period that are still outstanding are eligible for the rebate.
Because benefits under this program are available only to commercial fisherman, we determine that this program is limited to a specific enterprise
(Cite as: 51 FR 10041, *10051)
or industry, or group of enterprises or industries, and is contervailable since such rebates are inconsistent with commercial considerations. To calculate the benefit from this program, we divided the interest rebates provided during the review period by the f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period. On this basis, we calculated an estimated net subsidy of 0.018 percent ad valorem.
5. New Brunswick: Technical Services
Information contained in the Annual Report indicates that the Technical Services Branch of the New Brunswick Department of Fisheries provides assistance to the fishing industry under three programs. Under the Aquatic Resources Program, the Department funds aquacluture projects such as development of commercially viable aquaculture environments and testing the adaptability of certain species. Under the Fishing Vessel and Gear program, the Department will place various types of new equipment free-of-charge on board their fishing vessels for projects such as development of new types of fishing trawlers, long-lining systems and reinforcing equipment for rough weather fishing. Under the Infrastructure Program, research projects for aquaculture and hatchery facilities development, and improvement projects for construction of haul-out ramps and marine service center facilities are funded.
(Cite as: 51 FR 10041, *10051)
Because aquaculture projects pertain to species which are not the subject of this investigation, we determine that the Aquatic Resources Program does not confer benefits upon exports of the subject merchandise. Projects under the Infrastructure Program do not benefit the fishing industry specifically, but provide benefits to all users of marine facilities, including pleasure boats and marine transportation facilities. We therefore find that the Infrastructure Program is not countervailable because it is not limited to a specific enterprise or industry, or group of enterprises or industries. However, because benefits under the Fishing Vessel and Gear Program are limited to the fishing industry, we consider the program to be countervailable. We treated the value of the machinery provided as a grant. According to our grant methodology, we would normally take financial data for the last 12 years (the average useful life of equipment in the fishing industry) and allocate grants in each year over a 12-year period. However, because financial data were unavailable for years other than the 1983-84, we used, as best information available, the total grants disbursed as reported in the 1983-84 Annual Report as representing the amount disbursed during the review period, and have expensed the full amount in the year of receipt. 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 0.015 percent ad valorem.
(Cite as: 51 FR 10041, *10051)
6. 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 which 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 commercial fishermen for the construction and purchase of fishing vessels. There are stringent eligibility requirements, which include: a) that the 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 grant accrues upon completion of the ship and final survey. Those who receive grants must undertake to use the vessel primarily in fishing for a period of five years.
(Cite as: 51 FR 10041, *10051)
Because grants under these programs are available only for vessels used by commercial fishermen, we 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 f.o.b. value of production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.150 percent ad valorem.
7. Newfoundland: Grants for the Rebuilding and Repair of Fishing and Coastal 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. The vessels must be older than eight years and in excess of ten tons underdeck. Any work *10052
(Cite as: 51 FR 10041, *10052)
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 one year. As in the grant programs for the
(Cite as: 51 FR 10041, *10052)
construction of new ships, rebuilding and repair must meet the technical specifications laid down by the regulations. The FLB may provide grants for both fishing vessels and commercial vessels that are engaged in coastal trade. In actuality, however, grants are rarely disbursed for reconstructing coastal transport vessels and, in recent years, no money has been disbursed on these types of vessels.
Because grants under this program are, in fact, provided almost solely for vessels used by the commercial fishing industry, we 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 1968 through 1985 over 18 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 0.003 percent ad valorem.
8. Newfoundland: Grants to Cover Operating Expenses
The province of Newfoundland has provided grants to National Sea Products to cover current operating expenses of its Burgeo Plant. The funds were provided under an agreement which was signed in 1982, disbursed funds from 1982 through
(Cite as: 51 FR 10041, *10052)
1985, and expired in 1985.
Because this program was limited to a specific enterprise, we determine that it is countervailable. To calculate the benefit, since this program was a recurring grant program, we allocated the amount of funds received in our review period over the f.o.b. value of production in Atlantic Canada of fish. This resulted in an estimated net subsidy of 0.096 percent ad valorem.
9. 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. Commercial fishermen who are residents of Newfoundland and who 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
(Cite as: 51 FR 10041, *10052)
ten years for equipment to 12 years for wooden ships; downpayments of ten 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 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 Fisheries Loan Board program are limited to one specific industry, the fishing industry. Comparing the appropriate benchmark described in the "Analysis of Programs" section of this notice to the interest rate charged under this program, we also 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. We were unable to verify information in the response on the average number of years loans were outstanding. Therefore,
(Cite as: 51 FR 10041, *10052)
as best information available, we are assuming a 12-year loan term, which is the maximum authorized by the FLB for wooden ships. We used, as best information available, the amount of loans disbursed in each of the past 12 years, and applied our long-term loan methodology. We used the appropriate benchmark described in the "Analysis of Programs" section of this notice. We also treated loans written-off during the review period as grants expensed in that year. Dividing the benefit 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 0.245 percent ad valorem.
10. Newfoundland: Loan Guarantees from the FLB
The FLB will guarantee 20 percent of the aggregate amount of chartered banks' term loans to fishermen for the purchase or construction of fishing vessels. There is no charge for the guarantees. Because these loan guarantees are provided exclusively to the fishing industry and at no charge, we determine that they are limited to a specific enterprise or industry, or group of enterprises or industries, that they are provided on terms inconsistent with commercial considerations, and are therefore countervailable.
To calculate the benefit from this program, we used as a benchmark, the guarantee fee described above in section I.A.8. of this notice on the FILP.
(Cite as: 51 FR 10041, *10052)
Taking the balance of guaranteed loans outstanding during the review period, multiplying by the benchmark guarantee fee of one percent, 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 0.013 percent ad valorem.
11. Newfoundland: Operation of Fisheries Facilities and Services
Based on information contained in the Public Accounts for the Department of Fisheries, we have found that the government of Newfoundland provides grants to Newfoundland commercial fishermen under the Longline Program, a program designed to encourage them to use longlines in their operations. Because grants under this program are provided only to commercial fishermen, we determine that this program is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable.
Using our grant methodology, we would take financial data for the last 12 years, and allocate grants in each year over a 12 year period. Because financial data were unavailable for any years other than 1983-84, we used, as best information available, the total grants disbursed in 1983-84 as representing the amount disbursed during the review period, 1984-85, and expensed this amount in the year of receipt. Dividing by the f.o.b. value of
(Cite as: 51 FR 10041, *10052)
production in Atlantic Canada of fish and shellfish during the review period, we calculated an estimated net subsidy of 0.001 percent ad valorem.
*10053
(Cite as: 51 FR 10041, *10053) 12. Newfoundland: Construction and Repair of Fisheries Facilities
Based on information contained in the Public Accounts for the Department of Fisheries, the government of Newfoundland offers grants to local commercial fishermen committees to purchase materials necessary for building and repairing fisheries and marine facilities. A large percentage of expenditures go to infrastructure projects available to all boat users. However, some grants go strictly to fisheries facilities. Because these grants are provided only to commercial fishermen, we determine that assistance for fisheries facilities is limited to a specific enterprise or industry, or group of enterprises or industries, and is countervailable. Using our grant methodology, we would take financial data for the last 12 years, and allocate grants in each year over a 12 year period. Because financial data were unavailable for any years other than 1983-84, we used, as best information available, the total grants disbursed for fisheries facilities in 1983-84 as representing the amount disbursed during the review period, and expensed this amount to the year of receipt. Dividing by the f.o.b. value of