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NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
(C-122-816)
Preliminary Affirmative Countervailing Duty Determination: Certain Softwood
Lumber Products From Canada
Thursday, March 12, 1992
AGENCY: Import Administration, International Trade Administration, Department of Commerce.
EFFECTIVE DATE: March 12, 1992.
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SUMMARY: We preliminarily determine that benefits which constitute subsidies within the meaning of the countervailing
duty law are being provided to manufacturers, producers or exporters in Canada of certain softwood lumber products, as
described in the "Scope of Investigation" section of this notice. The estimated net subsidy is 14.48 percent ad valorem.
FOR FURTHER INFORMATION CONTACT:Bernard Carreau or Kelly Parkhill, Office of Countervailing Compliance, Import
Administration, U.S. Department of Commerce, room B099, 14th Street and Constitution Avenue, NW., Washington, DC 20230;
telephone (202) 377-2786.
Preliminary Determination
Case History
Since the publication of the Self-Initiation of Countervailing Duty Investigation: Certain Softwood Lumber Products From
Canada (Notice of Self- Initiation) 56 FR 56055 (October 31, 1991), and Notice of Amendment to Self- Initiation of
Countervailing Duty Investigation 56 FR 56058 (October 31, 1991), in the Federal Register the following events have
occurred. On November 8, 1991, we issued a questionnaire to the Government of Canada (GOC) in
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Washington, DC concerning Canadian stumpage programs. At the GOC's request, we extended the due date for the questionnaire
responses until December 13, 1991.
On December 27, 1991, the International Trade Commission (ITC) announced its preliminary determination that imports of
certain softwood lumber products from Canada materially injure a U.S. industry. Softwood Lumber from Canada (56 FR
67099).
On December 13, 1991, we received responses from the GOC on behalf of the Northwest Territories and Yukon Territory (the
Territories) and the provincial Governments of Alberta, British Columbia (BC), Manitoba, Ontario, Quebec, and Saskatchewan. On
December 20, 1991, we presented the GOC with supplemental/deficiency questionnaires concerning federal and provincial
responses. At the GOC's request, we extended the due date for the supplemental/deficiency questionnaire responses until January
9, 1992.
On December 3 and 13, 1991, the Coalition for Fair Lumber Imports (the Coalition), an interested party representing the U.S.
industry, alleged that log export restrictions in BC, and Alberta, Ontario, and Quebec, respectively, constitute subsidies within the
meaning of the countervailing duty law. On December 23, 1991, we found that these allegations contained sufficient
information for the Department to investigate whether such export restrictions constitute subsidies. On December 24, 1991, we
issued a questionnaire to the GOC concerning the log export restrictions in these provinces. At the request
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of the GOC, we extended the due date for these responses until January 21, 1992. On January 27, 1992, we issued a
supplemental/deficiency questionnaire concerning log export restrictions and an additional supplemental/deficiency
questionnaire concerning provincial stumpage programs to the GOC. At the request of the GOC, we extended the due date for this
response until February 10, 1992.
Pursuant to 19 CFR 355.15(b), we postponed the preliminary determination for 30 days, until February 24, 1992, because we
found this investigation to be extraordinarily complicated, 57 FR 397 (January 6, 1992). On February 4, 1992, we determined
that additional time was necessary to make our preliminary determination and postponed the preliminary determination an
additional 10 days until March 5, 1992, 57 FR 4989 (February 11, 1992).
Company Exclusion Requests
On December 9, 1991, 334 companies, claiming not to have benefitted from any net subsidy, requested exclusion from any
possible countervailing duty order in this case. Under 19 CFR 355.14(c), the Department is required to investigate requests
for exclusion to the extent practicable.
We found that investigating 334 company exclusion requests was impracticable. However, we determined that one category of
companies seeking exclusion would
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not pose an extraordinary administrative burden: Companies that produce lumber solely from U.S.-origin logs. We identified 11
companies that properly certified that they produce lumber solely from U.S.-origin logs. (See Decision Memorandum, Company
Exclusions, January 17, 1992, in the public file, room B099, of the Department of Commerce.) On January 17, 1992, we presented
the GOC with questionnaires concerning the volume and value of U.S.-origin logs purchased by these 11 companies.
On January 31, 1992, we received the 11 requested exclusion questionnaire responses from the GOC. The GOC also submitted 13
unsolicited exclusion responses. These additional responses were among those originally certified by the GOC and included
companies that, because they purchased insignificant amounts of non-U.S.-origin logs, may have received no net subsidy during
the period of investigation (POI).
We reviewed the responses (both the 11 requested and the 13 unrequested) and calculated a subsidy rate for the companies by
applying an estimated country- wide rate (7.30 percent), based on the individual provincial rates in our Notice of Self-Initiation,
to the percentage of a company's purchases of private logs, Crown logs, and Crown lumber. If a company had a de minimis rate
(i.e., below 0.5 percent), we concluded that it was eligible for further consideration. (See Decision Memorandum, Company
Exclusion Requests, February 24, 1992, in the public file, room B099, the Department of Commerce.)
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On February 25, 1992, we presented a supplemental exclusion questionnaire to the GOC requesting additional information from
14 of the 24 companies. Based on our analysis, the other 10 companies no longer warranted consideration. We received responses
to this questionnaire on March 2, 1992.
Based on our review of the responses and certifications received, we have preliminarily excluded six companies from this
investigation. In determining which companies to preliminarily exclude, we first identified those companies which used only
U.S.-origin logs in their lumber production during the POI. There were four such companies. However, one of these companies did
not export the subject merchandise to the United States during the POI. Therefore, three companies which used U.S.-origin logs
only have been preliminarily excluded. Next, we identified those companies which purchased both U.S.-origin logs as well as
non-U.S.-origin logs and lumber. For these companies we calculated a weighted-average subsidy rate. This rate was calculated by
applying the subsidy rate as calculated for this preliminary determination to the value of each company's purchases of private
logs, Crown logs, and Crown lumber, and a *8801
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zero rate to the value of each company's purchases of U.S.-origin logs. If, after summing these two rates, a company had an overall
de minimis subsidy rate, it was preliminarily excluded. All other respondents requesting exclusions (i.e., those companies with
rates above de minimis) were not excluded.
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The names of the companies preliminarily excluded are listed in the "Suspension of Liquidation" section of this notice. The final
decision on exclusion of these companies will depend on verification of the submitted information and the final subsidy rate
determined.
We have adjusted our country-wide rate and the appropriate provincial rate calculations to remove the effect of the companies we
have preliminarily excluded.
Scope of Investigation
The products covered by this investigation are: (1) Coniferous wood, sawn or chipped lengthwise, sliced or peeled, whether or not
planed, sanded or finger- jointed, of a thickness exceeding six millimeters; (2) coniferous wood siding (including strips and friezes
for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbitted, chamfered, V-jointed, beaded, molded,
rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed; (3) other coniferous wood
(including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbitted, chamfered,
V-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger- jointed;
(4) coniferous wood flooring (including strips and friezes for parquet
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flooring, not assembled) continuously shaped (tongued, grooved, rabbitted, chamfered, V-jointed, beaded, molded, rounded or
the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed. Such products are currently provided for
under subheadings 4407.1000, 4409.1010, 4409.1090, 4409.1020, respectively, of the Harmonized Tariff Schedule (HTS).
Although the HTS subheadings are provided for convenience and customs purposes, our written description of the scope of this
proceeding remains dispositive.
We received a number of letters from U.S. importers of lumber products made from various specialized grades or certain species
requesting that imports of these specialized grades and species be excluded from the scope of this investigation. Since the scope of
our investigation includes those products covered by the U.S.-Canada Memorandum of Understanding on Softwood Lumber
(MOU), which includes not only dimension lumber but a wide variety of other lumber products, all of these products are
considered to fall within the scope of this investigation.
Analysis of Programs
We have relied on aggregate information (i.e., data for the manufacturers, producers and exporters in all provinces and territories
subject to investigation) provided by the GOC and the provincial governments for this
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preliminary determination because of the large number of producers of softwood lumber products covered by this investigation.
Although we received a number of requests for company-specific rates, we determined not to issue any company- specific rates in
this investigation.
Unless otherwise specified, all values referred to are denominated in Canadian dollars.
For purposes of this preliminary determination, the period for which we are measuring subsidies (the POI) is the GOC's fiscal year,
April 1, 1990, through March 31, 1991. Based upon our analysis of the responses to our questionnaires, we preliminarily
determine the following:
Programs Preliminarily Determined to be Countervailable
We preliminarily determine that subsidies are being provided to manufacturers, producers, or exporters in Canada of the
subject merchandise under the following programs:
A. Stumpage Programs
On October 31, 1991, we self-initiated an investigation of the provincial stumpage programs of Alberta, BC, Manitoba, Ontario,
Quebec, and Saskatchewan
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and the stumpage programs in the Territories. Stumpage program in the Territories are administered by the federal government.
The vast majority of forest land in the provinces is owned by the provincial governments, while the vast majority of forest land in
the Territories is owned by the federal government.
For purposes of our analysis we are using the term "stumpage" to refer to standing softwood timber. Softwood timber is the good
which is the primary input into the production of softwood lumber. Stumpage on provincial and federal lands is provided to
companies by the provincial and federal governments under various tenure arrangements. These arrangements are described in
detail in the public responses on file in room B099, Department of Commerce.
Specificity
In order to determine whether a government program provides a domestic subsidy that is actionable under U.S.
countervailing duty law, the Department must perform a dual analysis. The first part of that analysis is codified in section
771(5)(A)(ii) and section 771(5)(B) of the Tariff Act of 1930, as amended (the Act). Section 771(5)(A)(ii) states that:
The term 'subsidy' includes, but is not limited to * * * domestic subsidies,
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if provided or required by government action to a specific enterprise or industry, or group of enterprises or industries, whether
publicly or privately owned and whether paid or bestowed directly or indirectly on the manufacture, production, or export of any
class or kind of merchandise * * *"
Section 771(5)(B) was added in 1988 as a clarification to subparagraph A (supra) and directs the Department to determine:
whether the bounty, grant, or subsidy in law or in fact is provided to a specific enterprise or industry, or group of enterprises or
industries. Nominal general availability, under the terms of the law, regulation, program, or rule establishing a bounty, grant, or
subsidy, of the benefits thereunder is not a basis for determining that the bounty, grant, or subsidy is not, or has not been, in fact
provided to a specific enterprise or industry, or group thereof.
If the Department determines that, in accordance with sections 771(5) (A) and (B), a domestic subsidy is provided to a specific
enterprise or industry, or group of enterprises or industries, it then proceeds to the second part of the dual analysis. In the case of
a government-provided good or service, the Department must determine whether the good or service is provided at preferential
rates in accordance with section 771(5)(A)(ii)(II) of the Act (see Preferentiality section below). Determinations that a program is
both specific and preferential are necessary in order for the Department to conclude that a
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program is countervailable. An affirmative determination with respect to only one of the requisite factors, i.e., specifically or
preferentiality, would compel the Department to find the program not countervailable.
In this section, we will address the first aspect of our domestic subsidy analysis: Specificity. An evaluation of the provision of
stumpage by both the Canadian federal (with regard to the Territories) and the provincial governments identified in our Notice of
Self-Initiation has led the Department to *8802
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determine preliminarily that stumpage programs are in fact limited to a group of industries, the primary timber processing
industries, and, therefore, are specifically provided within the meaning of the Act.
This is not the first time the Department has confronted the issue of the specificity of Canadian stumpage programs. In 1983, the
Department determined in its Final Negative Countervailing Duty Determination: Certain Softwood Products from
Canada, 48 FR 24159 (May 31, 1983) (Lumber I) that stumpage programs were not specific because: (1) Any limitation on use
was not a result of government action, but rather was due to the inherent nature of the products under investigation, and (2)
stumpage was used by several specifically-named groups of industries (the lumber and wood products industries, the pulp and
paper industries, and the furniture industries). Although the Department found that nonstumpage benefits provided to the "forests
products industries" were specific, in the case of stumpage, the Department reasoned that a finding of no
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specificity was warranted because the universe of users of stumpage was limited by the inherent characteristics and uses of raw
timber.
In 1986, the Department preliminarily determined in the Preliminary Affirmative Countervailing Duty Determination:
Certain Softwood Lumber Products from Canada, 51 FR 37435 (October 22, 1986) (Lumber II) that stumpage programs were
specific based on the use of "best information available." Using petitioner's information, we found that various actions of the
provincial governments, such as not granting stumpage rights on a first-come, first-served basis, and requiring the construction
of sawmills, constituted the exercise of discretion and skewed the allocation of stumpage rights toward lumber producers.
Furthermore, in Lumber II, we stated that we had improperly found there to be three separate groups of industries in Lumber I.
We found that one of the three groups, the furniture industries, did not own significant stumpage rights, if at all, and that certain
facts called into question the earlier conclusion that stumpage rights were not, in fact, limited to one group of industries. Lumber
II was terminated as a result of the MOU between the United States and Canada and petitioner's subsequent withdrawal of its
petition. (See Termination of Countervailing Duty Investigation; Certain Softwood Lumber Products from Canada, 52
FR 315 (January 5, 1987)).
Notwithstanding this history, in analyzing the issue of specificity for
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purposes of this proceeding, we have given limited weight to these prior determinations. First, as a general matter, there is no
principle of administrative stare decisis. Administrative agencies are free to overturn prior precedent, provided they have a
reasonable basis for doing so. In addition, insofar as Lumber II is concerned, the Department normally accords little, if any,
precedential value to preliminary determinations. [FN1]
FN1 In this regard, we note that, at least for certain purposes, respondents have argued that in an amendment to its termination
notice in Lumber II the Department stated that the preliminary determination in that case was "without legal force and effect." 52
FR 2751 (1987). This statement was made pursuant to an express provision of the Lumber MOU. In light of Canada's
unilateral termination of the MOU, the Department no longer is bound by this, and the preliminary determination in Lumber II
has the same precedential value as any other Department preliminary determination.
More important, however, is that in the interim between Lumber II and the current investigation, Congress amended the relevant
statutory provisions. Section 1312 of the Omnibus Trade and Competitiveness Act of 1988, Public Law 100-418 (Aug. 23, 1988),
102 Stat. 1184 (1988 Act), added a new provision on specificity to the Act, codified at 19 U.S.C. 1677(5)(B). Although the text of
this provision is not markedly different from pre-1988 Commerce administrative
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practice with respect to specificity, the legislative history of section 1312 does reveal a congressional intent to clarify the
application of "the specificity test" to programs like stumpage programs. Specifically, in the Department's opinion, Congress
indicated that the Department should not rely on the "inherent characteristics" rationale as a basis for finding subsidy programs
nonspecific. In order to understand the basis for this conclusion, it is necessary to examine the legislative history of section 1312.
Lumber I was one of a series of Department determinations involving so-called "natural resource subsidies"; i.e., subsidies
involving the government provision of a natural resource. Other determinations involved Mexico's dual- pricing system for oil,
natural gas, and derivative products. In those determinations, the Department, following the "inherent characteristics" rationale
first articulated in Lumber I, declined to find such subsidies to be specific. In particular, in its Final Affirmative
Countervailing Duty Determination: Carbon Black from Mexico, 48 FR 29564 (June 27, 1983) (Carbon Black from Mexico),
the Department ruled that the provision by the Mexican Government of natural gas and carbon black feedstock (CBFS) was
nonspecific, notwithstanding the fact that there were only two users of CBFS.
In connection with the passage of the Trade and Tariff Act of 1984, there was an effort by certain members of Congress to alter the
results of these determinations through legislation (see e.g., H.R. Rep. No. 725, 98th Cong., 2d
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Sess. (1984)). Although these efforts were not successful, and, in any event, did not focus on the specificity test, the fact that the
bills were proposed indicates that Congress was concerned with the Department's approach. In 1985, however, as a result of the
decision by the U.S. Court of International Trade (CIT) in Cabot Corp. v. United States, 620 F. Supp. 722 (1985), appeal dis., 788
F.2d. 1539 (Fed. Cir. 1986), vacated as moot, Order dated Nov. 20, 1986 (Cabot), the natural resource subsidy issue was
resurrected, and this time the issue was focused on the specificity test.
Cabot involved a challenge to the Department's final determination in Carbon Black from Mexico, supra. In the decision, the CIT
ruled that the Department had applied an incorrect test in finding the provision of natural gas and CBFS nonspecific. The Court
remanded the case to the Department for reconsideration.
Cabot spawned multiple interpretations of what the CIT actually had decided. Although there are many aspects of the Cabot
decision with which we took issue, we agreed with the Court that the Department should apply a de facto test for specificity.
However, some parties argued that Cabot required the Department to adopt a radically new approach prusuant to which the
Department would assess the "effects" of a benefit on individual recipients, i.e., whether some firms received a "competitive
advantage" vis-a-vis other firms receiving the benefit. See, e.g., W. Hunter and S. Kuhbach, "Subsidies and Countervailing
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Duties: Highlights Since 1984," Commerce Department Speaks 491, 506-543 (Practising Law Institute 1987). These parties,
using this interpretation, pushed for an amendment to the statutory provision on specificity. This radical interpretation would
have had the potential effect of greatly expanding the types of programs that we might find to be specifically provided. The
Department has never espoused this radical interpretation. [FN2]
FN2 In an appeal of the Carbon Black review, the CIT appeared to retreat from this radical interpretation, i.e., the need to measure
"competitive advantage" (Cabot Corp. v. U.S., 694 F. Supp. 949 (Ct. Int'l. Trade 1988)) (Cabot II). Although this decision postdated
the Congressional debates leading up to the 1988 Act, and, therefore, was not considered by Congress, the CIT in Cabot II, by
explicitly moving away from the radical interpretation and relying more heavily on the traditional de facto analysis for
specificity, implicitly supported the Department's interpretation of the earlier Cabot decision.
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In the meantime, the Department completed its Final Results of Countervailing Duty Administrative Review; Carbon
Black from Mexico, 51 FR 30385 (August 26, 1986) (Carbon Black). In that review, the Department reversed its decision in the
original final determination, finding that the provision of CBFS by the Mexican Government was specific. Essentially, the
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Department stated that in the original final determination it had placed excessive emphasis on the inherent characteristics
rationale, and that, even though CBFS was available to anyone in Mexico who wished to purchase it, there simply were too few
users of CBFS to justify a finding of nonspecificity. With respect to the provision of natural gas, the Department continued to find
that the users in Mexico were too numerous, and the diversity of industries too broad, to warrant a finding of specificity.
Following the Department's decision in Carbon Black, Congress took up consideration of the specificity test as part of what became
the 1988 Act. Both the House and the Senate passed versions of a new specificity test, and although the texts of the two versions
were similar, the legislative histories were quite different. The House version clearly was intended to codify the radical
"competitive advantage" interpretation of Cabot referred to above. H.R. Rep. No. 40, 100th Cong., 1st Sess., part I, 123 (1987).
The Senate version, on the other hand, generally is regarded as intended to codify the more traditional de facto analysis, as
articulated in Cabot. S. Rep. No. 71, 100th Cong., 1st Sess. 123 (1987) (Senate Report). The Conference Committee adopted the
Senate version of the specificity test, but the Committee report obscured the differences in the House and Senate versions. H.R.
Rep. No. 576, 100th Cong., 2d Sess. 587 (1988). It required a floor statement from Senator Lloyd Bentsen, Chairman of the Senate
Finance Committee, to clarify that the
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Conference did adopt the Senate version and that there were significant differences between the two versions. Cong. Rec. S4903
(daily ed. April 27, 1988).
Of greatest significance, for our purposes, is what the Senate had to say about the administrative review in Carbon Black. In
the Senate Report, the Finance Committee stated that the purpose of the specificity provision was to correct past Department
practice, and the Committee then described how the Department had erred. The Committee then stated:
In a subsequent review of the determination under review in the Cabot case, the Commerce Department recognized that it had
applied this test in an overly restrictive manner and determined that there were too few users of carbon black feedstock in Mexico
to find that the benefit *
Although the Finance Committee did not expressly use the word "approval" in describing the Department's action, it is clear that
the Committee understood what the Department had decided in the Carbon Black review, and that it regarded the Department's
decision as the correct approach to specificity.
The Finance Committee's statements concerning Carbon Black are relevant to this investigation because respondents have argued
that some form of "purposeful government action" to limit the availability or use of a benefit is a prerequisite to a finding of
specificity. This position is inconsistent with Carbon Black, however, because the Department did not base its finding of
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specificity in that case on any such government action. As noted above, the Department based its finding solely on the fact that,
regardless of the reasons, there were too few users of CBFS to justify a finding of nonspecificity. In this regard, respondents in this
investigation also have suggested that there was "purposeful government action" in Carbon Black in that the Mexican Government
had a choice as to whether to turn "catcracker bottoms" into CBFS or some alternative product. Again, this was not something
which the Department took into account in making its specificity finding in Carbon Black, nor is it something which the Finance
Committee considered in endorsing the Department's decision in that case. Thus, the fact that the Canadian provincial
governments may not have acted to limit the availability of stumpage, if true, does not preclude a finding of specificity in light of
the 1988 Act.
It also must be emphasized that neither in the Trade Agreements Act of 1979 nor in the 1988 Act did Congress attempt to define
precisely the key phrase "specific enterprise or industry, or group of enterprises or industries." Instead, Congress has delegated to
the administering authority, currently the Department, the authority to establish the parameters of the phrase. In this regard, the
Department, in 1989, promulgated proposed regulations concerning the specificity test (Countervailing Duties; Notice of
Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May 31, 1989) (the Proposed Rules)). Section 355.43(b)(2)
of the Proposed Rules states that:
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In determining whether benefits are specific (to an enterprise or industry, or group of enterprises or industries), the Secretary will
consider, among other things, the following factors:
(i) The extent to which a government acts to limit the availability of a program;
(ii) The number of enterprises, industries, or groups thereof that actually use a program;
(iii) Whether there are dominant users of a program, or whether certain enterprises, industries, or groups thereof receive
disproportionately large benefits under a program; and
(iv) The extent to which a government exercises discretion in conferring benefits under a program.
As previously stated, we have preliminarily determined that stumpage programs are in fact limited to a group of industries, the
primary timber processing industries. According to various industry sources and government forestry agencies in both the
United States and Canada, the primary timber processing group is comprised of two basic manufacturing industries: solid
wood products and pulp and paper products. For example, this definition is used in Wood Use: U.S. Competitiveness and
Technology, Congress of the United States, Office of Technology Assessment, p. 7. In addition, The State of Forestry in
Canada: 1990 Report to Parliament, Forestry Canada, 1991, p. 47, states:
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From its start in eastern Canada in the early 1800's, Canada's forest industry has diversified into a variety of products
and services. Of these, the solid wood products and pulp and paper sectors provide the backbone of the industry.
The Forest Resources Commission: The Future of Our Forests--April 1991, Province of British Columbia, p. 91, states:
In the context of studies for this report (the forest sector) consists of the following industries: extractive logging and forestry,
wood mills (e.g., lumber, plywood, shakes and shingles), and pulp, paper and allied.
In a report prepared for a review of Canada's trade policies under the General Agreement on Tariffs and Trade's Trade Policy
Review Mechanism (Trade Policy Review: Canada 1990 (Part B: Report by the Government of Canada, p. 89 (1991), at
paragraph 353)), the GOC states:
Canada's forest products sector is comprised of three major sub-sectors: the logging industries, the wood industries, and
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the pulp and allied industries. The three groups may be characterized as falling into primary producers (logs, pulpwood),
secondary producers (lumber, plywood and other wood-based panels, market pulp, newsprint, and shingles and shakes), and
producers of converted wood and paper products (paper products, packaging material, doors and windows, kitchen cabinets,
furniture parts and manufactured housing, etc.).
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We note that, in this instance, the primary timber processing industries group represents the first stage of industrial
manufacturing, and is equivalent to the "secondary producers" group cited above. Furthermore, in The Canada-U.S. Free
Trade Agreement and the Forest Products Sector: An Assessment (Industry, Trade and Technology Branch, Canadian Forestry
Service, 1988, p. 1), the Canadian Forestry Service observes:
In assessing the impact of the Canada-U.S. Free Trade Agreement, it is useful to distinguish the three major components or
categories of subsectors making up Canada's forest industry. The first group includes the primary producers (lumber, pulp,
newsprint, and shingles and shakes) * * *. The second group includes producers of higher value-added or intermediate forest
products such as paper, and paperboard, waferboard, particleboard * * *.
The solid wood products and pulp and paper products industries use the same input, timber, and have in common the first stage of
processing. Products made from timber must first be processed through a primary mill. Whether that mill is classified as a lumber
mill, plywood, panel or veneer mill, pulp and paper mill, or pole and post mill, the common denominator is the milling operation.
In fact, the GOC and the Government of Ontario state in their submissions regarding the Appendix to Joint Memorandum
Concerning Specificity: "The raw material for all forest products industries must be processed initially in some type of mill * * *."
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While the questionnaire responses in this investigation provide lists of numerous end-products ranging from tissue paper to
coffins, these are all final stage products that must first pass through the primary timber processing stage, and as such are not
products of the primary timber processing industries themselves. A U.S. Forest Service publication notes that:
The primary timber processing industries are the point at which consumer demand for wood products and available timber
supplies first meet. These industries provide the initial conversion of the timber resource into the wood products demanded by
consumers. The secondary wood processing industries are dependent upon the products of the primary timber processing
industries for their raw materials to further process wood products for final consumption.
An Analysis of the Timber Situation in the United States 1989-2040, United States Department of Agriculture; Forest Service;
General Technical Report RM- 199, p. 59.
Although not essential to our determination that the solid wood products industry and the pulp and paper products industry
constitute a group of industries within the meaning of the Act, we note that the solid wood products and pulp and paper industries
have become increasingly interdependent. According to the questionnaire responses, in BC, the largest softwood lumber-
producing province in Canada, pulp and paper mills are required to obtain their needed inputs (i.e., chips) from solid wood
products mills (i.e., sawmills,
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plywood mills, panel and veneer mills) before acquiring their own rights to harvest.
Also not essential, but equally relevant, to our determination that the solid wood products industry and the pulp and paper
products industry constitute a specific group of industries within the meaning of the Act is that in many cases the solid wood
products industry and the pulp and paper products industry are integrated. For example, according to BC's response, 86 percent
of BC's noncompetitive annual allowable cut is harvested by integrated companies. In Ontario, where 61 percent of the harvest
rights are held by companies associated with pulp and paper mills, the questionnaire responses indicate that the provincial
government encourages integration of these mills by offering a lower stumpage price to companies that own sawmills as well. The
increasing interdependence and integration of the solid wood products and pulp and paper industries serve to underscore the
interrelationship between the two industries and support our conclusion that the two do, in fact, constitute a single group of
industries.
We note that although we used the Standard Industrial Classification (SIC) system in Lumber I as support for the conclusion that
there were three separate groups of industries for purposes of our analysis of stumpage programs, such use overemphasizes the
SIC's use of the word "group". The SIC uses the word "group" at both the two-digit and three-digit level of classification. Any
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similar term, such as sector, class, or category could have been used by the SIC in its classification system. As such, the SIC's use
of the word "group" for its purposes does not interfere with the meaning of a "group of industries" as intended under the Act.
Moreover, there is no evidence that Congress intended the term "group", as used in section 771(5)(B), to equate to SIC
terminology.
With respect to the first factor in the Proposed Rules, government limitation, the extent to which the government acts to limit the
availability of a program is not instructive in this case because a government need not take any further action, through special
rules, regulations or eligibility criteria, to limit the availability or use of a program that is already in fact limited by the nature of
the input provided.
With respect to the second factor, the number of enterprises, industries, or groups thereof that actually use a program, we have
already noted that there is only one group of industries that uses stumpage: the primary timber processing industries, which is
comprised of two major industries, the solid wood products industry and the pulp and paper products industry. While this may be
due to the inherent characteristics of raw timber, as we have discussed, the fact that the inherent characteristics of stumpage limit
the number of users is not an indication of nonspecificity.
The third factor, the extent to which dominant users or disproportionately
(Cite as: 57 FR 8800, *8804)
large beneficiaries of a program exist, is not particularly helpful in this case. When the potential recipients of the benefit of a
program span many industries, the breadth of the potential universe can make the examination of dominant use or
disproportionately large benefits a useful tool in an analysis of specificity. However, when, as in this case, the universe of
recipients is limited by the nature of the benefit, the factors of dominant use or disproportionality provide little, if any, guidance.
The last factor, government discretion, is also not instructive in this case because the inherent characteristics of the input limit its
use to the primary timber processing industries. Although in our Notice of Self-Initiation we cited examples of government
discretion as part of the evidence indicating that stumpage was specifically provided, we preliminarily determine that we do not
need to reach the issue of whether the government exercises discretion in this case, because irrespective of whether discretion
was exercised, it would not alter our conclusion.
In this investigation, we have considered both legislative history and case precedent in preliminarily determining that stumpage
is provided to a specific group of industries. The guidance provided by Congress and the courts directs the Department to *8805
(Cite as: 57 FR 8800, *8805)
consider specificity on both a de jure and a de facto basis. A de facto analysis of provincial stumpage programs indicates that the
programs are used by only one group of industries, the primary timber
(Cite as: 57 FR 8800, *8805)
processing industries. While we recognize that the inherent characteristics of stumpage are, in and of themselves, limiting, we do
not believe that it was Congress' intent to render such programs beyond the purview of the countervailing duty statutes
because of this fact.
Having preliminarily determined that the stumpage programs administered by Alberta, BC, Manitoba, Ontario, Quebec,
Saskatchewan, and the Territories are provided to the primary timber processing industries group, the next section addresses
whether stumpage is provided at preferential rates.
Preferentiality
We must examine whether stumpage is provided at preferential rates pursuant to section 771(5)(A)(ii)(II) of the Act. Under this
statutory standard, the Department examines whether government provision of a good is preferential by comparing the price
charged by the government with a nonpreferential benchmark price.
To determine the appropriate benchmark, we have referred to the Preferentiality Appendix attached to Carbon Black (the
preliminary results of review), which is included in the Proposed Rules, and our application of the principles of the Preferentiality
Appendix and our consideration of the Proposed Rules in past cases. As discussed in the Proposed Rules, the
(Cite as: 57 FR 8800, *8805)
Department's preferred test for determining whether a good or service is provided at a preferential rate is to examine whether the
government provides the same good or service at a price that is lower than the price the government charges to the same or other
users of that product within the same political jurisdiction.
In the review of Carbon Black, we determined that it would not be appropriate to make use of this preferred test because, in that
case, the government was providing the good to all users of the input at the same price, and the number of users was too small to
constitute more than a specific enterprise or industry, or group or enterprises or industries. Because we were not able to use the
traditional price discrimination test to determine preference, we turned to the alternatives outlined in the Preferentiality
Appendix and Proposed Rules. These alternatives are, by order of preference: (1) The price charged by the government for a
similar or related good, (2) the price charged within the same jurisdiction by private sellers for an identical good or service, (3)
the government's cost of producing the good or service, and (4) the price paid for the identical good or service outside of the
political jurisdiction in question.
As noted above, the Proposed Rules state that the benchmark the Department uses to measure preference will normally be a
"nonspecific" price, i.e., a price that is provided to more than a specific enterprise or industry, or group
(Cite as: 57 FR 8800, *8805)
of enterprises or industries. However, where we have been able to determine that a price--although specific to an enterprise or
industry, or group of enterprises or industries--does not convey a preference toward those who pay it, we have used that "specific"
price as the benchmark. See, e.g., Final Affirmative Countervailing Duty Determination: Aluminum Sulfate from Venezuela,
54 FR 43440 (October 25, 1989). In that case, we were satisfied that one government price charged to a producer was
"nonpreferential" and could therefore be used as a measure of preference vis-a-vis the price the government charged another
producer. Consistent with this approach, where a government provides a good at more than a single administratively-set price to
a specific group of enterprises or industries (i.e., goods at all prices are specifically provided), but where we determine that one
(or more) of the prices for a good or service is provided on a nonpreferential basis, we may use that administratively-set price as
the basis for measuring the degree of preference conferred via the other administratively-set price.
For purposes of this preliminary determination, in BC, Ontario, and Alberta, we have relied on the traditional measure of
preference, price discrimination. In those situations where we have used a "specific" benchmark, we have done so because we find
the "specific" price to be nonpreferential. For Quebec, we have relied on prices charged within the jurisdiction by private sellers
for an identical good or service, the second alternative in the
(Cite as: 57 FR 8800, *8805)
Proposed Rules, as a measure of preferentiality because we have no information on either price discrimination by the
Government of Quebec or on the first preferentiality alternative, prices charges by the government for a similar or related good.
The following is a detailed discussion of the methodology used in each province to determine whether stumpage is provided at
preferential rates.
British Columbia
Although there are varying types of provincial tenures under which companies harvest timber in BC, the timber-pricing systems
for all tenures can generally be separated into two distinct types--administratively-set stumpage and competitively-bid stumpage.
According to the questionnaire responses, most administratively-set stumpage is determined using the Comparative Value
Pricing system, whereas competitively-bid timber sales are awarded based solely on the highest bid. Since the government
provides stumpage to some companies at an administratively-set price that, even after accounting for differences in forest
management and harvesting obligations (as described below), is generally lower than the competitively-bid price that the
government obtains from other companies, we preliminarily determine that the BC provincial government is providing stumpage
at a preferential rate.
(Cite as: 57 FR 8800, *8805)
Competitively-bid stumpage is sold only through section 16 of the Small Business Forest Enterprise Program (SBFEP), which was
created to stimulate new opportunities for forest products industries and the production of specialty products. SBFEP section 16
tenures are generally short in duration (typically one to three years) and provide smaller volumes of timber than
administratively-set stumpage tenures. During the POI these tenures accounted for nine to ten percent of the provincial softwood
sawlog harvest. The BC Ministry of Forests (MOF) sets a minimum bid for competitively-bid sales but does not set an upper limit to
the bid. Because the prices for SBFEP section 16 sales are determined solely by market forces, we preliminarily determine that
these competitively-bid prices are nonpreferential. Other sections of the SBFEP, accounting for approximately 13 percent of the
SBFEP harvest during the POI, include a partially competitive section (section 16.1) and a wholly uncompetitive section (section
18). For purposes of our analysis, we do not consider these sales to be completely market-driven and, therefore, did not include
them in our calculations of the competitive benchmark rate.
All other stumpage prices are administratively set. Tenures associated with administratively-set stumpage are usually long-term
(up to 25 years, with some opportunities for tenure renewals). These tenures also provide larger volumes of timber, and include
greater *8806
(Cite as: 57 FR 8800, *8806)
forest management and timber-harvesting obligations. During the POI, stumpage sold at administratively-set price
(Cite as: 57 FR 8800, *8806)
accounted for approximately 90 percent of the softwood sawlog harvest. (For the remainder of this discussion, harvesters of
competitively-bid stumpage (i.e., SBFEP section 16 sales) will be referred to as "SBFEP tenure holders", while harvesters of
administratively-set stumpage, including the 13 percent of total SBFEP sales provided under sections 16.1 and 18, will be referred
to as "major tenure holders.")
Although the price-determining factors are clearly different between competitively-bid and administratively-set stumpage sales,
an examination of stumpage prices alone is not sufficient to determine whether timber is provided at a preferential rate because
major tenure holders are required to fulfill certain forest management and timber-harvesting obligations that are not required of
SBFEP tenure holders. Therefore, in order to determine whether stumpage is provided at a preferential rate, we have compared
the total, per unit (on a per cubic meter harvested basis) expenses, both monetary and in- kind, incurred by major tenure holders
with those incurred by SBFEP tenure holders.
We determined the competitive stumpage rate by calculating the average, per unit stumpage rate for provincial SBFEP section 16
softwood sawlog timber sales. We calculated this rate, and all expenses in this calculation, for two distinct regions in BC: The Coast
and the Interior. This avoided any distortions being introduced into the calculation by reason of differing
(Cite as: 57 FR 8800, *8806)
relative harvesting levels in each region. We added payments for reserving the right to cut, which are referred to as ground rent,
to the stumpage rates to obtain the competitively-bid benchmarks.
We determined the noncompetitive stumpage rates by calculating the average stumpage rate for all provincial softwood sawlog
sales in each region that were not purely competitive. We made the following adjustments to the noncompetitive rate in order to
obtain an appropriate comparison with the competitive benchmark rate:
- Annual ground rents were included in the noncompetitive rate because, even though both types of tenure holders pay ground
rent, the major tenure holders pay significantly more than SBFEP tenure holders.
- Using BC MOF appraisal data for timber sold at both administratively-set and competitively-bid prices, we adjusted for quality
differences (i.e., species, grade, accessibility, etc.) between the timber harvested by major tenure holders and the timber
harvested by SBFEP tenure holders.
- Major tenure holders are required to perform certain activities pertaining to the reforestation of their timber stands. These
activities, referred to as silviculture, are broken down into two types--basic and incremental. Major tenure holders must perform
the former, while SBFEP tenure holders are not required to perform either. As a result, we added basic silviculture costs incurred
by major tenure holders to the noncompetitive rate. We made no
(Cite as: 57 FR 8800, *8806)
adjustment for incremental silviculture costs because neither major tenure holders nor SBFEP tenure holders are required to
perform these activities.
- Major tenure holders are also required to perform fire and pest suppression activities, which SBFEP tenure holders are not
required to do. Therefore, these additional costs were added to the noncompetitive rates.
- We included three components of road costs in the adjustments: costs for road building, road maintenance, and an allocation of
general and administrative expenses for these two activities. Because, as described below, SBFEP tenure holders appear to bear
some of these costs as well, a downward adjustment to the costs reported for major tenure holders is necessary.
There are two general classifications of roads specifically associated with logging in BC. "Cutblock" (or "on block") roads provide a
single tenure holder access to a particular timber stand. These are temporary roads (typically used for a single season) that
require little, if any, maintenance. Both major tenure holders and SBFEP tenure holders are responsible for building (or
contracting out) all of their own cutblock roads. Therefore, no adjustment was made for these expenses. However, according to a
supplemental response, some portion of these expenses may have been included in the road building costs reported for major
tenure holders. This is one reason for reducing the reported road building adjustment.
The second category of roads, main roads, are more permanent and may serve
(Cite as: 57 FR 8800, *8806)
numerous stands over a number of seasons. The questionnaire response states that most main roads are built by the major tenure
holders, including those used by SBFEP tenure holders. The response also indicates that the BC MOF may build roads for SBFEP
tenure holders depending on the technical and financial capability of the SBFEP tenure holder, the number of timber sales served
by the road in question, and the budgetary limitations of the BC MOF. Since the questionnaire response did not provide data
concerning the SBFEP tenure holders' expenses for building main roads, we asked in a supplemental questionnaire for information
regarding SBFEP tenure holders' road building expenses. In its response, BC stated that: "From a licensee's perspective, the
difference between the two programs is the cost of main road development. Major licensees incur all of that cost; SBFEP licensees
rarely incur any cost."
Based on the above information, it appears that there are some overlapping road building obligations, which points out the need
to reduce the adjustment for road building costs reported for major tenure holders. However, since respondents provided neither
the costs borne by SBFEP tenure holders nor an estimate of an appropriate reduction in the costs borne by major tenure holders,
we used the only information on the record, an adjustment figure of 25 percent submitted by the Coalition, as the best information
available.
- Data provided in the questionnaire responses for road maintenance costs are also imprecise. The responses provide information
on road maintenance costs
(Cite as: 57 FR 8800, *8806)
for major tenure holders. However, the responses also indicate that "(s)urface maintenance of all forest roads is the responsibility
of the industrial user, whether SBFEP or other tenure holder." In a supplemental questionnaire, we requested data on the expenses
borne by SBFEP tenure holders for surface maintenance, or an estimate of an appropriate downard adjustment, but we received
no information concerning the road surface maintenance responsibilities of SBFEP tenure holders. Since respondents did not
provide the value of these obligations for SBFEP tenure holders, and did not estimate them, we reduced the reported road
maintenance costs borne by major tenure holders by the ratio of surface maintenance costs to total road maintenance costs
incurred by the BC MOF in fiscal year 1989-90, as reported in the BC MOF's Annual Report, the most recent year for which such
information is available in published form.
- We reduced the reported allocation of general and administrative expenses (associated with road building and maintenance
costs) borne by major tenure holders by the same percentage that we reduced the reported road building and road maintenance
costs.
- The BC questionnaire responses list eight categories of miscellaneous expenses that are borne by major tenure holders, as well as
an allowance for general and administrative expenses *8807
(Cite as: 57 FR 8800, *8807)
attributable to those activities. The eight miscellaneous expenses include resource management, engineering and
(Cite as: 57 FR 8800, *8807)
layout, scaling, scaling fees, cruising, residue and waste, head office forestry and engineering, and regional office forestry and
engineering. The responses give conflicting information as to whether SBFEP tenure holders incur some of these expenses.
Moreover, we received no information regarding miscellaneous expenses borne by SBFEP tenure holders that are not borne by
major tenure holders, such as bid preparation. Therefore, we had to determine which of these expenses are incurred by SBFEP
tenure holders in order to know which ones to allow as an adjustment.
Based on our analysis of standard harvesting practices, as well as discussions with a U.S. Department of Agriculture forestry
expert, we preliminarily determine that only resource management and residue and waste expenses should be included in our
adjustment. All remaining activities appear to be ones incorporated in all harvesting operations and, therefore, would also be
borne by SBFEP tenure holders. For these reasons, we reduced the miscellaneous expenses adjustment amount by the value of the
remaining six categories. We also reduced the reported allocation for general and administrative expenses by the same
proportion by which we reduced the total miscellaneous expenses.
We added all adjustments to each regional (i.e., Coast and Interior) noncompetitive stumpage rate to obtain the total, per unit
rates paid by major tenure holders. We then subtracted the regional noncompetitive per unit rate from the appropriate regional
competitive per unit benchmark rate. We
(Cite as: 57 FR 8800, *8807)
multiplied the regional differentials by the regional softwood sawlog harvests to obtain the aggregate benefit for each region. We
used the softwood sawlog harvest in order to calculate the benefit to producers of softwood lumber products. We then combined
the aggregate benefits for each region to obtain the total provincial benefit. This figure serves as the numerator in the subsidy
calculation.
We divided the total provincial benefit by the value of BC softwood lumber shipments, plus the value of shipments of another
product produced in sawmills from softwood sawlogs (i.e., railway ties), plus the value of shipments of products produced during
the lumber-manufacturing process (i.e., chips and sawdust). On this basis, we calculated a rate of 6.88 percent.
Quebec
According to the questionnaire responses, over 95 percent of the stumpage harvested on provincial lands in Quebec is harvested
under Timber Supply Forest Management Agreements (TSFMAs). For purposes of setting stumpage rates under TSFMAs, Quebec
is divided into 28 tariffing zones, the boundaries of which, according to Quebec, were set so as to ensure that for each zone the
factors that influence the market value of standing timber (average tree size, type of soil, topography, transportation distances,
etc.) were as homogeneous as
(Cite as: 57 FR 8800, *8807)
possible. A different stumpage rate is set for each tariffing zone and that rate applies uniformly throughout the zone. The stumpage
rate for each tariffing zone is set based on a "parity technique", which uses information on stumpage rates from private forest to
calculate the market value of standing timber (MVST) of the provincial forest land in each tariffing zone. The stumpage rate
charged in a tariffing zone is equivalent to the MVST for that zone. In order to obtain private stumpage rates, the government
conducts a "full census" of the private market once every three years and a survey in the intervening years. The first and only "full
census" was conducted in 1988, and was used to set stumpage rates during the POI without any adjustments.
In setting the stumpage rates, the Government of Quebec makes no distinction between sawlogs and pulplogs. Because all
stumpage users pay the same prices, we have no basis for determining whether a benefit exists by reason of government price
discrimination under the preferred methodology. Therefore, we must turn to the hierarchy of benchmarks outlined in the
Proposed Rules. Since we do not consider that there are goods similar to stumpage for which appropriate price adjustments could
be made, we preliminarily determine that the first alternative test for preferentiality is not applicable. We do, however, consider
that we can use the second alternative for measuring preferentiality, the prices charged by other sellers for an identical good.
Because the prices for private stumpage are set solely by market forces, we
(Cite as: 57 FR 8800, *8807)
preliminarily determine that the private prices provide a reliable benchmark for comparison purposes. In addition, the private
data is a reliable preferentiality benchmark because a significant amount of provincial harvest is done on private lands and the
systematic and extensive private data collection by the government (in connection with the parity technique) is sufficient to
capture the prevailing average private stumpage rate.
In order to make an equitable comparison, we have had to account for the fact that TSFMA holders are required to fulfill certain
forest management and timber-harvesting obligations that may not be required of those harvesting from private lands. Therefore,
to determine whether provincial stumpage is provided at a preferential rate, we have attempted to adjust for all of the expenses,
on a per cubic meter basis, that are incurred by TSFMA holders that are not borne by those harvesting privately-owned timber.
We calculated the private stumpage benchmark by weight-averaging the private stumpage rates collected in the provincial
government private market surveys in the calendar years 1990 and 1991, to reflect Quebec's fiscal year. No adjustments were
made to this figure as it was unclear from the questionnaire responses what expenses were incurred, both monetary and in-kind
(other than stumpage fees) by those harvesting on private lands.
We determined the noncompetitive stumpage rate by dividing the actual total stumpage fees paid by sawmills and lath producers
during the POI (most laths
(Cite as: 57 FR 8800, *8807)
are within the scope of this investigation) by the actual amount of stumpage used by sawmills/lath producers during the POI
reported in the questionnaire responses. To this were made the following adjustments (on a per cubic meter basis) for obligations
which our analysis indicated were not incurred by private stumpage harvesters:
- Under the TSFMA tenure arrangements, companies must perform all silviculture treatments in order to achieve sustained yield.
Most of the cost of this silviculture is credited toward a company's stumpage fees, but some costs, such as planning and
transportation of seedlings are not credited. The responses report the total noncredited silviculture expenses under all TSFMAs.
In order to obtain Quebec's private silviculture reimbursement under the Private Forest Development Program, private woodlot
owners must also incur some silviculture costs for which they receive no reimbursement. According to the responses, the
reimbursement "was calculated to cover 90 (percent) of the estimated cost of the treatments." At a minimum, therefore, private
woodlot owners incur 10 percent of the total silviculture costs of treatments eligible for reimbursement. Any other silviculture
costs would be borne entirely by the private woodlot *8808
(Cite as: 57 FR 8800, *8808)
owner. However, we have no information on the record regarding what the additional costs of these activities, if they were
performed, would be. Therefore, we have used the 10 percent figure as best information available to calculate the noncredited
silviculture costs of
(Cite as: 57 FR 8800, *8808)
private woodlot owners. In order to calculate the proper adjustment for noncredited silviculture costs accounted for by softwood
sawlog producers under TSFMAs, we calculated the differential between the per unit, noncredited silviculture costs of TSFMA
tenure holders and private woodlot owners.
- The Government of Quebec's responses refer to "control of utilization" costs, which are new costs borne by companies harvesting
under TSFMAs since the new forest system came into effect in 1987. These costs are mainly attributable to the preparation of the
general forest management plan, the five year forest management plan, the annual plan of action, and the cost of negotiations
when several TSMFAs cover the same forest area. In order to calculate the per unit adjustment, we divided the cost for "control of
utilization" incurred by TSFMA holders by total harvest under TSFMA.
- According to Quebec's Forest Act, TSFMA holders are required to prevent and extinguish forest fires within timber limits. In
order to fulfill this requirement, each TSFMA holder must belong to a forest protection agency. The government assumes 50
percent of the cost of fire protection and extinction while the forest protection agency assumes the other 50 percent. Because we
have no information indicating that private stumpage holders are also required to belong to a forest protection agency, we
divided the total amount of the cost of the fire protection and extinction incurred by TSFMA holders through the forest protection
agency by total harvest under TSFMAs.
(Cite as: 57 FR 8800, *8808)
- TSFMA holders are also required to belong to an organization for the protection of the forest against insects and diseases. As
with fire protection, the government assumes 50 percent of the cost and we have no information indicating that private stumpage
holders are also required to belong to a forest protection agency. We made the adjustment for insect and disease protection in a
similar manner to the adjustment for fire protection.
The questionnaire responses also listed road building and maintenance, and environmental standards as costs incurred by TSFMA
holders but not credited toward stumpage fees. We have not included these costs in our adjustment. Regarding road building and
maintenance, we asked the Government of Quebec to explain the obligations associated with road building on private lands during
the POI. However, the responses provided an unclear picture as to the actual amount of these expenses, as well as which party
bears the responsibility for them. Although an aggregate average cost of private forest harvest was provided, road building costs
were not broken out. Since the information on the record indicates that private stumpage harvesters incur road building
expenses, we have not made an adjustment to the administratively-set TSFMA price for road building costs.
The responses also list costs incurred by TSFMA holders for meeting environmental standards as an expense not credited toward
stumpage fees. However, the responses indicate that these costs are incurred for meeting the
(Cite as: 57 FR 8800, *8808)
environmental standards for the logging industry as a whole. We have assumed that these environmental standards apply to the
entire logging industry, including those companies harvesting timber on private lands, and have not made an adjustment to the
administratively-set price.
We added the adjustments described above to the administratively-set stumpage rate to obtain the total, per unit rate paid by
TSFMA holders harvesting softwood sawlogs. Comparing this rate to the private rate, we preliminarily determine that the
Government of Quebec is providing stumpage to lumber producers at preferential rates. To calculate the benefit, we subtracted
the administratively-set per unit rate from the private per unit benchmark rate. We multiplied the differential between the
benchmark rate and the administratively-set rate by the total softwood sawlog harvest during the POI to obtain the aggregate
benefit from the administratively-set stumpage program.
In the questionnaire responses, the Government of Quebec indicates that private woodlot owners were reimbursed by the
government under Quebec's Private Forest Development Program to cover the cost of silviculture treatments. We preliminarily
determine that such reimbursement is limited to a specific group of enterprises or industries (i.e., private stumpage holders) and
that the reimbursement provides a countervailable benefit. We multiplied the total amount of this silviculture reimbursement by
the percentage of total private
(Cite as: 57 FR 8800, *8808)
timber harvest accounted for by sawmills and lath producers to obtain the total benefit to lumber producers in Quebec.
We divided the total benefit by the value of Quebec softwood lumber shipments, plus the value of shipments of products produced
during the lumber- manufacturing process (i.e., chips, sawdust, and shavings). On this basis, we calculated a rate of 3.78 percent.
Ontario
According to the questionnaire responses, the Government of Ontario charges two rates for equivalent stumpage harvested from
provincial lands: the integrated rate and the nonintegrated rate. Both of these rates are administratively set. Generally, the
integrated rate is paid by pulp producers, and the nonintegrated rate is paid by lumber producers. The integrated rate is charged
to integrated licensees which, under Regulation 234 of the Crown Timber Act, are defined as companies that own or operate a pulp
mill. (Pulp is manufactured either from whole logs or from the chips produced as a byproduct of lumber.)
However, if the stumpage harvested by an integrated licensee is destined for a sawmill, the nonintegrated rate is charged. The
nonintegrated rate is also charged to nonintegrated licensees (i.e., licensees which do not own or operate
(Cite as: 57 FR 8800, *8808)
a pulpmill). Over 99 percent of the softwood stumpage in Ontario is paid for on the basis of one or the other of these rates.
The nonintegrated rate is lower than the integrated rate. In setting these rates, however, the Government of Ontario has not made
a distinction in physical characteristics (e.g., grade, species, or size) between a sawlog and a pulplog. A pulplog is simply defined
as a log that enters a pulpmill, and a sawlog is defined as a log that enters a sawmill. Because of technological advances that enable
sawmills to obtain lumber from smaller diameter logs, which comprise the overwhelming majority of the Ontario harvest, there is
little difference in the timber consumed by pulpmills and sawmills. Thus, the sole factor affecting the price that a licensee will pay
is whether the log is processed in a pulpmill or in another type of mill (e.g., a sawmill). Since the government provides stumpage
to some companies (i.e., nonintegrated licensees) at a price that is lower than the price the government charges to other
companies (i.e., integrated licensees), we preliminarily determine that the Government of Ontario is providing stumpage at a
preferential rate.
Having preliminarily determined that stumpage is provided to a specific group of industries that includes the pulp and paper
industry, we must examine whether the higher integrated rate paid by pulp producers for stumpage is itself *8809
(Cite as: 57 FR 8800, *8809)
nonpreferential. The Government of Ontario provided survey information on private prices for stumpage in Ontario. Although the
survey
(Cite as: 57 FR 8800, *8809)
information is not comprehensive, and is not used by the Government of Ontario to establish stumpage rates, these private prices
do provide us with an indication of whether the rate paid by integrated licensees for pulp is nonpreferential. Comparing private
stumpage prices from the survey with the provincial integrated stumpage price shows that the integrated rate is higher.
Therefore, we preliminarily determine that the integrated rate is nonpreferential and have used it as the benchmark price.
It is not necessary to make any adjustments to the integrated and nonintegrated stumpage prices because licensees paying the
integrated rate and licensees paying the nonintegrated rate share the same obligations (such as road building and silviculture) on
their respective tenure arrangements.
To calculate the benefit, we have deducted the per cubic meter nonintegrated rate from the per cubic meter integrated rate and
multiplied the difference by the volume of stumpage sold at the nonintegrated rate. We divided the result by the value of Ontario
softwood lumber shipments, plus the value of shipments of another product produced in sawmills from softwood sawlogs (i.e.,
railway ties). plus the value of shipments of products produced during the lumber- manufacturing process (i.e., chips, sawdust,
fuel wood, and shavings). On this basis, we calculated a rate of 5.21 percent.
Alberta
(Cite as: 57 FR 8800, *8809)
The Alberta Forest Service provides stumpage under three types of tenure arrangements: (1) Forest Management Agreements
(FMAs), (2) Timber Quota Certificates (TQs), and (3) Commercial Timber Permits (CTPs). FMAs are provided to companies that
require the security of a long-term tenure. In addition to paying stumpage fees, or "Crown dues", FMA holders are responsible for
a number of in-kind services, including construction and maintenance of roads, reforestation of all areas harvested, and any other
obligations required by the Forest Service. The Crown dues paid by FMA holders are either administratively set by the Alberta
Forest Service in its schedule of General Rate of Crown Dues, or they are negotiated between the Forest Service and the FMA
holder.
TQs are also long-term tenure arrangements. TQ holders obtain the right to harvest a percentage of the annual allowable cut
established by the Forest Service. Unlike FMA holders, a timber license is required for a TQ holder to harvest the timber. TQ
holders are responsible for road construction and maintenance, reforestation of all areas harvested, and operational planning.
Together, FMA and TQ holders accounted for approximately 94 percent of the softwood sawlog harvest on provincial forest lands
in fiscal year 1990/91.
The third form of tenure arrangement, CTPs, provides timber harvesting rights on a shorter-term basis, (i.e., for two to three
years. The CTP holder
(Cite as: 57 FR 8800, *8809)
pays a reforestation levy to the Alberta Forest Service, which then carries out the majority of reforestation activities. The CTP
holder is responsible, however, for the construction and maintenance of certain roads.
For the reasons stated below, we preliminarily determine that stumpage is provided at preferential rates to softwood lumber
producers because the Government of Alberta provides stumpage to sawmills at a price that is lower than the nonpreferential
price the government charges to certain FMA holders.
According to the questionnaire responses, certain elements of the TQs and CTPs are competitively bid. The TQ holder pays a
one-time bonus bid at the time of acquiring its quota. This bonus bid is amortized over time. However, the actual stumpage rate
paid by TQ holders is not competitively bid, but rather is comprised of the Crown dues rate plus an appraisal factor.
In many circumstances where a government provides a good at both an administratively-set price and a competitively-bid price,
we would consider there to be price discrimination and would use the competitively-bid price as the nonpreferential benchmark.
However, in this case, we do not consider the stumpage fee paid by TQ holders to be a bona fide competitively-bid price.
The "bid" associated with the TQ pertains to the right to acquire the quota, not the price actually paid for the stumpage to be
harvested. There is no provision in the TQ that allows for adjustment to the stumpage price during the life of the quota. Although
the responses state that "quota stumpage fees are
(Cite as: 57 FR 8800, *8809)
not adjusted, because quotas are sold through a competitively-bid process which is designed to capture any revenues above the
normal stumpage fees and inkind costs that attach to the timber rights being sold", we do not consider this one-time bonus bid for
a twenty-year tenure to reflect a competitive price for stumpage actually harvested under that tenure in any given years because
the "bid" itself does not affect the stumpage price paid.
Accordingly, we preliminarily determine that the stumpage price paid under TQs is set administratively and cannot be used as, or
in the calculation of, a benchmark price.
Under CTPs, there are both administratively-set and competitively-bid stumpage prices. In the questionnaire responses, the
Government of Alberta reported a single weighted-average stumpage price for all CTPs. Because we cannot separate the
competitively-bid price from the administratively-set price, we are unable to consider whether the competitively-bid prices on
CTPs could serve as a benchmark.
Under the FMAs, prices charged for timber used in pulp production are different from the prices charged for timber used for other
types of production. However, as in the case of Ontario, the Government of Alberta has indicated that sawlogs and pulplogs are
indistinguishable prior to processing; the distinction in name relates exclusively to their ultimate mill destination.
(Cite as: 57 FR 8800, *8809)
In the FMAs for the pulplogs, the stumpage price for pulplogs is negotiated between the tenure holder and the Forest Service.
Under these same FMAs, there is a provision that the negotiated pulp price will be adjusted annually according to a price
published in the Pulp & Paper Week. For all other stumpage harvested by these FMA holders, other than that destined for
pulpmills, these FMAs state that the holder will pay the rate of Crown dues established in the schedule of General Rate of Crown
Dues. In FMAs for lumber producers, the price paid for all stumpage harvested is also the rate of Crown dues established in the
schedule of General Rate of Crown Dues. In this schedule, stumpage fees are established for all types of logs except pulplogs, which
the schedule indicates are sold at the negotiated "agreement rate."
Because the price paid by FMA holders for pulplogs is negotiated rather than set administratively, we preliminarily determine
that the pulplog price is nonpreferential and, therefore, can be used as our benchmark for sawlog prices. Because no distinction is
made between what constitutes pulplogs and what constitutes sawlogs, we do not need to make any adjustments for differences in
the grade, species, size, or quality of the timber. However, adjustments to both the nonpreferential pulplog price and the
administratively- set price paid by lumber producers must be made to reflect differences in fees *8810
(Cite as: 57 FR 8800, *8810)
and in-kind services required under each of the tenure arrangements.
These adjustments were made using information provided in the questionnaire
(Cite as: 57 FR 8800, *8810)
responses concerning stumpage fees, plus all additional fees charged by the government and all forest management obligations
incurred by tenure holders. The obligations reported by respondents include cash payments, such as holding and protection
charges, and in-kind services such as road building and maintenance, reforestation, and miscellaneous charges that include,
among other things, forest management and scaling. Because all tenure holders, including holders of pulplog FMAs, incur these
additional fees and in-kind services, adjustments had to be made to both the benchmark price and the administratively-set prices.
We accepted all adjustments reported in the questionnaire responses except for certain adjustments reported as being incurred
by CTP holders. In reporting CTP holders' in-kind services, the government used the TQ holders' in-kind costs as a surrogate.
Therefore, we have disallowed the claimed in-kind service costs for CTP holders.
Based on these adjustments, we calculated a weighted-average per unit price for sawlogs and compared it to the weighted-average
per unit price for pulplogs reported in the response for pulplog FMAs. This comparison shows that the stumpage price paid by
pulplog FMA holders for pulplogs is greater than the stumpage price paid for sawlogs by all tenure holders. Therefore, we
preliminarily determine that stumpage is being provided to lumber producers at preferential rates.
(Cite as: 57 FR 8800, *8810)
To calculate the benefit, we multiplied the difference between the weighted-average per cubic meter price for pulplogs and the
weighted-average per cubic meter price for sawlogs by the total softwood sawlog harvest. We divided this benefit by the value of
Alberta softwood lumber shipments, plus the value of shipments of products produced during the lumber-manufacturing process
(i.e., chips, sawdust, fuel wood, and shavings). On this basis, we calculated a subsidy rate of 4.16 percent.
Manitoba, Saskatchewan, the Northwest Territories, and the Yukon Territory
As discussed above, we have found the stumpage programs in the provinces and in the territories to be specifically provided to a
group of industries.
Although these programs are specifically provided, we do not need to reach the issue of preferentiality with respect to Manitoba,
Saskatchewan, and the Territories. The export volumes of the subject merchandise from these provinces and territories represent
approximately one percent of the total exports under investigation during the POI. Because the export volumes are so small, even
if we were to apply the highest rates on the record, which are the rates provided by the Coalition in their January 30, 1992
submission, the resulting benefits would have a de minimis effect on the country-wide rate that will be applied to all exports of
certain softwood lumber products to the
(Cite as: 57 FR 8800, *8810)
United States that are subject to this investigation. Therefore, for purposes of this preliminary determination, we have assigned
Manitoba, Saskatchewan, and the Territories the weighted-average country-wide rate.
Calculation of the Country-Wide Rate for Stumpage Programs
In order to calculate a country-wide program rate, we multiplied the rates calculated for BC, Quebec, Ontario, and Alberta by
their relative share (or weight) of total Canadian softwood lumber exports to the United States during the POI which are subject to
this investigation. This resulted in a weighted- average country-wide program rate of 6.25 percent.
B. Log Export Restrictions
The Coalition has alleged that the provinces of Alberta, BC, Ontario and Quebec restrict the export of logs. These restrictions
allegedly result in an artificial increase in the domestic supply of logs and a subsequent lowering of the price of logs--the major
input into lumber--thus providing an indirect benefit to lumber producers. As discussed below, we have evaluated all information
regarding these export restrictions submitted in the context of this investigation and preliminarily determine that only the log
export
(Cite as: 57 FR 8800, *8810)
restrictions in BC provide an indirect domestic subsidy to lumber producers within the meaning of section 771(5)(A) of the Act.
We also preliminarily determine that the log export restrictions in Alberta, Ontario and Quebec do not provide a subsidy to
lumber producers.
Canadian Federal Government Log Export Controls
The Canadian federal government is granted jurisdiction over trade and commerce under section 91(2) of the Constitution Act of
1867. This act also grants the Canadian provincial governments jurisdiction over, inter alia, the development, conservation,
taxation and exportation (from the province to another part of Canada) of nonrenewable natural resources and forestry
resources in the province. The Constitution Act of 1867 also grants the provincial governments jurisdiction over the management
and sale of public lands owned by the provinces and over the timber on those public lands.
The Canadian federal government controls the export of all logs from Canada primarily through the Export and Import
Permit Act (EIPA), which was first enacted in 1947. The EIPA allows the Canadian government, among other things, to place
certain goods on an Export Control List and require that anyone wishing to export these goods obtain an export permit from the
federal government. The Federal Export Permit Regulations contain a special provision
(Cite as: 57 FR 8800, *8810)
concerning the export of logs from BC.
A "Notice to Exporters" from the federal government, dated January 1, 1986, states that those persons wishing to export logs
harvested from lands under federal jurisdiction (exports of logs from BC lands under federal jurisdiction constituted
approximately 13 percent of total exports during the POI) located in BC must first receive a BC provincial log export permit (the
federal regulations, by mandating BC export permits, effectively cover the remaining lands in BC, which are under provincial
jurisdiction). To obtain this permit, the exporter must first receive an exemption from the BC domestic-processing requirements
(as discussed below). According to the "Notice to Exporters," the exporter must apply to the BC MOF to acquire this exemption.
Upon receipt of the application, the MOF notifies potential domestic purchasers that the logs are available for domestic sale and
that they may place a bid on the logs within 14 days of notification. If no offers are received within 14 days, the logs are deemed
"surplus to domestic needs," and the exporter may then apply for a BC export permit. Upon receipt of the BC export permit, the
exporter is eligible to apply for a federal export permit. If an offer to purchase the logs is received from a potential domestic
purchaser, a Timber Export Advisory Committee (TEAC), made up of industry specialists, evaluates the offer. If the TEAC deems
the offer "reasonable," the exemption is denied and no export permit can be granted. However, there is
(Cite as: 57 FR 8800, *8810)
no requirement that a potential purchaser who makes a reasonable offer actually purchase the logs.
In its questionnaire response, the GOC states that it does not differentiate among applicants regarding log exports, and that all
federal applications *8811
(Cite as: 57 FR 8800, *8811)
regarding log exports are "routinely granted and granted quickly."
British Columbia Log Export Controls
In addition to the federal laws that restrict the export of logs from BC lands, the BC government has had its own restrictions on the
export of logs since 1906. Shipments of logs from lands under provincial jurisdiction constituted approximately 87 percent of
total exports during the POI. Currently, the exportation of logs from BC is controlled by the 1979 Forest Act. The provincial
Forest Act requires that all timber harvested in BC must be used or manufactured in the province, unless exempted. This
provision applies to all lands under provincial jurisdiction. The BC Lieutenant Governor in Council may grant an exemption from
the requirement to process logs in BC. The primary basis for receiving an exemption is whether the logs are deemed "surplus" to
provincial needs.
The procedures for determining if the logs are surplus to provincial needs are similar to those described in the federal "Notice to
Exporters,"
(Cite as: 57 FR 8800, *8811)
discussed above. After logs have passed the "surplus" test and an exemption for export has been granted, the exporter must apply
for a provincial export permit. A fee-in-lieu-of-manufacture (i.e., an export tax) amounting to 100 percent of the difference
between the export and domestic market values for the logs to be exported must be paid before the export permit is granted.
Exports from lands under federal jurisdiction are not subject to the fee-in-lieu-of- manufacture.
Tenure holders under the SBFEP, in contrast to other tenure holders, are precluded from applying for an exemption because,
according to the questionnaire responses of BC, "approval of an application for exemption from manufacture by a holder of such a
license would be contrary to the objective of these licenses." In addition, BC has a complete ban on the exportation of western red
cedar, yellow cedar, and cypress logs.
Alberta Log Export Controls
The Alberta Forests Act restricts the exportation of logs of any species from any provincial forest land (logs harvested on federal
and private lands can be freely exported). The Forests Act gives the Minister of Forestry, Lands and Wildlife broad authority to
grant an exemption from these restrictions for logs from any specified forest land for a one-year period. During the POI, Alberta
(Cite as: 57 FR 8800, *8811)
received only one request to export softwood logs, but the prospective buyer canceled the order while the request was pending.
Ontario Log Export Restrictions
Section 15 of the Crown Timber Act states that all timber harvested on Crown (provincial) lands in Ontario must be manufactured
in Canada unless certain conditions are met. The Crown Timber Act does not apply to privately held lands or federal lands.
The export restrictions embodied in the Crown Timber Act are subject to exemptions created in a 1968 Order in Council that set
annual export quotas, with an accompanying levy (which ranges from $0.04 to $0.42 per cubic meter). The export quotas are
100,000 cords of popular and white birch and 50,000 cords of spruce, balsam, fir, and jack pine. These quotas have never been
met. Any Crown licensee may apply for a portion of the annual export quota by submitting a request to the Ministry of Natural
Resources and providing certain information. The applicant may be asked to document that the logs to be exported have been
offered to local Canadian mills at a fair market price, that none was willing to purchase the logs, and that the logs are otherwise
domestically unmarketable.
(Cite as: 57 FR 8800, *8811)
Quebec Log Export Restrictions
Quebec's Forest Act states that all timber harvested on Crown (provincial) lands must be completely processed in Quebec. The
Quebec government may authorize shipment outside of the province of logs harvested from Crown lands if "it appears contrary to
the public interest to do otherwise." The provincial log export restrictions of the Forest Act do not apply to timber harvested from
private or federal lands.
Comparison of Log Export Restrictions in British Columbia and Other Provinces
There are important differences between the export restrictions in BC and the restrictions in Alberta, Ontario, and Quebec. These
differences can be seen not only in the structure of the laws, regulations and procedural requirements governing the various
programs, but in the effects of the programs as well. For purposes of our analysis, we have examined provincial differences in legal
and procedural requirements, as well as differences in such factors as the quantity of private and provincial timber exported, the
quantity of logs imported, the markets to which provincial logs are directed, and provincial transportation factors.
(Cite as: 57 FR 8800, *8811)
The restrictions on the export of logs in BC are explicitly mandated by both federal and provincial law. The federal regulations,
enacted in 1986, require that those seeking to export logs from BC obtain an exemption from BC domestic processing
requirements and receive a BC export permit in order to qualify for federal approval to export. However, the federal regulations
contains no such provisions with respect to the other provinces under investigation. The federal regulations regarding the export
of logs from these provinces merely place logs on an export control list and require an export permit, which is routinely granted,
but leave discretion to the provinces (i.e., it is the law of each province that is controlling).
BC's legal and regulatory procedures for export are considerably more restrictive than those in Alberta, Ontario, and Quebec. The
laws governing export restrictions in BC are complex, the regulations and procedures are highly formalized and, as noted above,
the entire BC legal framework is explicitly linked with the federal law. The federal and provincial laws affect all provincial, federal,
and private lands in the province. In BC, the procedures for exporting logs are more restrictive (involving a series of applications
at both the provincial and federal levels) than in the other three provinces. Only BC maintains such a prohibitive export tax; the
other three provinces require only minimal, if any, export charges.
In terms of the actual application of the export restrictions in Alberta,
(Cite as: 57 FR 8800, *8811)
Ontario and Quebec, none of the three provinces restricts log exports from either private or federal lands, and each province has
routinely granted requests for export from provincial lands. In Alberta, federal and private lands comprise 1.8 percent of the total
harvest. During the POI, Alberta received only one application to export logs, but the order was canceled while the application
was pending. Ontario exporters may be asked to document that the logs to be exported have been offered to local mills at a fair
market price. Historically, applications to export logs from Ontario have been routinely granted. Federal and private lands
comprised seven percent of the total harvest in Ontario during the POI. In Quebec, federal and private lands comprised 17.5
percent of the total softwood harvest during the POI.
Having examined the legal and regulatory requirements governing the export of logs from all four provinces, we then reviewed
the actual occurrence of log exports from each province. Despite having the most pervasive regulatory impediments to log
exports among the four provinces, BC exported about one percent of total softwood harvest during the POI. In absolute *8812
(Cite as: 57 FR 8800, *8812)
terms, BC exported 667,000 cubic meters of softwood logs compared with only 6,435 cubic meters for the other three provinces
combined. In other words, BC exported one hundred times the amount of logs exported by the other three provinces combined.
Consequently, while BC's legal and regulatory requirements have clearly had the effect of preserving nearly all
(Cite as: 57 FR 8800, *8812)
(99 percent) of the province's softwood harvest for domestic processing, BC logs have nonetheless captured the major proportion
of Canada's external trade in logs.
As discussed, unlike BC, the provinces of Alberta, Ontario and Quebec do not place restrictions on the export of logs from private
lands. Despite this, there are no significant exports of logs from private lands in these three provinces.
In Quebec, the private softwood harvest represents 17.3 percent of the total softwood harvest. The majority of private timber is
harvested in the south of the province, closest to U.S. markets and outlets to European markets. Despite this proximity, only 0.02
percent (972 cubic meters) of the total private softwood log harvest in Quebec was actually exported during 1990. Because the
majority of provincial land is located further north in the province, where transportation costs to available export markets would
be even higher, it is likely that an even lower percentage of logs would be exported from provincial lands if they were
unrestricted. Furthermore, while the softwood harvest represents 65 percent of the total private harvest in Quebec, softwood
exports represent only 15 percent (972 cubic meters) of total log exports from Quebec. This suggests that there is much greater
external demand for hardwood logs from Quebec than for softwood logs. In contrast, BC exports almost exclusively softwood logs
(99 percent).
(Cite as: 57 FR 8800, *8812)
Alberta and Ontario have only minimal exports of logs from unrestricted private lands. According to questionnaire responses
submitted to the Department, Alberta did not export any logs from private lands during the period of review. Even though official
federal government data indicate that there were exports from Alberta, the Government of Alberta claims that these were
transshipments from BC. In addition, in the case of Alberta, which has a small private logging sector, there have been very few
applications to export logs. According to the questionnaire responses submitted by Alberta, an evaluation of the cost to transport
generally poor quality logs from harvesting sites in Alberta to mills across the border in the United States indicates that
transportation costs alone would be prohibitive. The majority of the timber harvest in Alberta is located more than 150 miles
from the United States border. Moreover, affidavits submitted by the Coalition on behalf of U.S. importers along the Canadian
border indicate that lumber producers generally do not transport logs more than 150 miles by land. See February 21, 1992,
submission by counsel for the Coalition (Exhibit 11).
Ontario softwood log exports from private lands totaled 5,463 cubic meters during the POI. The total softwood harvest on private
land was 983,691 cubic meters, meaning that only 0.6 percent of the total Ontario private softwood harvest was exported during
the POI. In addition, Ontario has put into place an export quota system for logs exported from provincial lands. Despite
(Cite as: 57 FR 8800, *8812)
the fact that log export requests are virtually always granted, export quotas in Ontario have never been filled. Thus, the low level
of exports from Ontario would seem to be explained by factors other than the presence of export restrictions.
In sum, BC exporters, despite facing substantial impediments to export, still export about one percent (667,000 cubic meters) of
their total softwood harvest (67,318,692 cubic meters), whereas exporters in the other three provinces, despite less stringent
impediments, export 0.1 percent (6,435 cubic meters) of the total unrestricted private and federal softwood harvest (5,421,218
cubic meters). This suggests that if BC's restrictions were lifted, an even greater quantity of logs would be exported, whereas if the
export restrictions were lifted in the other three provinces, there would be no noticeable effect.
Another factor we considered is the balance of trade in softwood logs, that is, log imports in relation to log exports. During fiscal
year 1990-1991, 664,000 cubic meters of logs were exported from BC, while only 281,513 cubic meters of logs were imported
(mostly from the United States).
The Province of Quebec, in contrast to BC, imports many more softwood logs than it exports. During 1990, 3,087,974 cubic
meters of logs were imported, as opposed to only 28,417 cubic meters exported. There are also some companies in Quebec that
use primarily U.S.-origin logs in their production process. These
(Cite as: 57 FR 8800, *8812)
patterns of trade seem to indicate that the demand in Quebec for U.S. logs is greater than external demand for Quebec logs. If the
price for logs of comparable species and quality in Quebec were artificially low as a result of the export restrictions, U.S. loggers
would be unable to compete in that market. Further, if logs commanded a higher price in the United States than in Quebec, it
would seem that, with no export limitations, more logs would be exported to the United States from private lands in Quebec. This
is not the case.
In Ontario, a similar pattern is evident. Ontario imports many more logs than it exports. During the POI, softwood log imports
totaled 250,153 cubic meters, while exports were only 5,463 cubic meters. All exports were from private lands.
Another meaningful factor affecting the conditions between the log export restrictions in BC and those in the other three
provinces is different foreign market demand. Because of BC's geographical location, its log exports are primarily destined for the
Pacific Rim market. In fact, during the POI, 99 percent of BC's log exports were to the Pacific Rim. In contrast, less than one
percent of the exports from the other three provinces went to that market.
BC is located in the Pacific Northwest, which has one of the most active log markets in the world. The Pacific Rim log market is
supplied with logs from the United States, BC, and Russia. In the past few years the supply
(Cite as: 57 FR 8800, *8812)
of logs to the Pacific Rim from the northwest United States has decreased dramatically as a result of restrictions on harvesting
timber from old growth forests, set-asides for the spotted owl, and other environmental considerations. At the same time,
Canada is the largest producer of certain species of timber, such as clear hardwood, cedar, and cypress, which are in high
demand in the Pacific Rim, but these and other species have been subject to increasing export restrictions in BC. This combination
of factors has limited the availability of logs in the Pacific Rim market. Therefore, it is likely that if BC's export restrictions were
lifted, more logs would be exported to satisfy the demand.
The provinces of Alberta, Quebec and Ontario do not have direct access to the Pacific Rim market. Transportation costs alone
would preclude any significant shipment of logs from Alberta, Quebec or Ontario to the Pacific Rim. Furthermore, the markets to
which these provinces do export (the north central and eastern United States and, to some extent, Europe) do not face the same
supply constraints (i.e., environmental limitations and rigorous export controls) found in the northwestern United States and BC.
According to Timber Trends and Prospects for North America, prepared *8813
(Cite as: 57 FR 8800, *8813)
by Forestry Canada and the USDA Forest Service; United Nations Economic Commission for Europe, Geneva; Food and
Agriculture Organization of the United Nations, Rome 1990, (p. 37):
(Cite as: 57 FR 8800, *8813)
(North America) is a net exporter of coniferous sawnwood, paper, paperboard, woodpulp, pulpwood and logs. Pulpwood and
coniferous (i.e. softwood) logs have the Pacific Rim as the major market. Sawnwood (lumber) and fiber based products have a
more diversified market which includes Europe.
The United Nations report continues:
One of the most visible market developments for the North American timber industry has been the sale of coniferous logs to the
Pacific Rim markets. From small volumes in the early 1960's, the market expanded to nearly 15 million cubic meters in 1985. The
origin of the logs has been primarily the states of Washington and Oregon and secondarily the Province of British Columbia and
the State of Alaska. Japan and, since 1980, the People's Republic of China are the primary destinations. (p. 38)
In conclusion, our analysis of both the legal and commercial factors affecting the export of softwood logs from Alberta, BC,
Ontario, and Quebec indicates that two separate phenomena appear to exist. First, notwithstanding the restrictiveness of BC's legal
impediments to export, which cover federal, provincial, and private lands, a considerable market for BC logs exists outside of the
province. In spite of these tight restrictions, BC still manages to export 100 times more than the three other provinces. This,
among the other factors we examined, shows that the restrictive net in BC acts to stifle what would otherwise be a significant flow
of log shipments abroad, resulting in a
(Cite as: 57 FR 8800, *8813)
domestic supply of logs in BC that is artificially high. In contrast, despite the lack of restrictions on private lands in Alberta,
Ontario and Quebec, as well as other factors we examined, private land exports from those three provinces are insignificant,
indicating that exports are not suppressed, resulting in no effect on the domestic supply of logs in those three provinces.
Effect of British Columbia Export Restrictions
As described above, the restrictions governing the export of logs from BC arise from a compilation of laws and regulations that,
taken together, result in a near total embargo on the export of logs from BC. The primary restraint is the requirement that all logs
harvested in BC must be processed in BC (see the Forest Act of BC). Only if logs are deemed "surplus" may the provincial
authorities (and, subsequently, the federal government) even consider allowing an exemption to the provincial processing
requirement. The fact that exempted surplus logs are subject to an additional 100 percent tax on the differential between the
domestic price and the export price is, in fact, only a secondary hurdle to the export of logs. While it is certain that the tax further
reduces any remaining incentive to export, the greatest effective impediment to export is the requirement that logs be proven to
be surplus.
The export tax requirement is, therefore, not our exclusive focus. Rather, it
(Cite as: 57 FR 8800, *8813)
is the cumulative impact of this web of regulatory and procedural impediments, which together amount virtually to a de facto
embargo on the export of logs, that the Department must evaluate in the context of the Act.
Following our analysis under the previous section, we preliminarily determine that these export restrictions, in toto, suppress
what would otherwise be a substantial flow of logs out of BC. This artificially imposed reduction in the quantity of logs exported
yields a corresponding increase in the quantity of logs available in the BC domestic market.
According to generally accepted principles of economics, when domestic supply is increased, as occurs in the case of BC logs,
there will be a concomitant decrease in the price or value of logs on the domestic market. This will occur regardless of whether
lumber producers purchase logs on the open market or harvest and mill logs themselves. In the first instance, the nonintegrated
lumber producer purchases a lower priced input (i.e., logs) in an arm's length transaction. In the second instance, the artifically
depressed price for the logs milled by the integrated producer discourages the sale of logs and encourages processing (i.e.,
milling) of the higher value product--lumber. If the export restrictions on logs were lifted and the domestic price or value of logs
rose, integrated producers would likely sell more logs in relations to lumber, either in the export or domestic market. This would
lead to a relative decrease in the BC domestic supply of logs and a corresponding increase in the
(Cite as: 57 FR 8800, *8813)
BC domestic price or value of logs--the major input into lumber.
Because the export restrictions on logs in BC affect all users of logs and are not contingent upon export performance, the
restrictions do not constitute an export subsidy. Rather, the export restrictions benefit the production of all lumber produced,
whether sold domestically or exported. For this reason, the export restrictions in BC confer a domestic subsidy. In accordance
with section 771(B), we preliminarily determine that these restrictions are provided to a specific enterprise or industry, or group
of enterprises or industries. The export restrictions benefit a specific group of industries, the primary timber processing
industries. (For a definition of the primary timber processing industries, see Specificity of Stumpage Programs above).
Section 771(5)(A) of the Act provides the following definition for the term "domestic subsidies":
(A) In General.--The term "subsidy" has the same meaning as the term "bounty or grant" as that term is used in section 303, and
includes, but is not limited to, the following:
* * * * *
(ii) The following domestic subsidies, if provided or required by government action to a specific enterprise or industry, or group
of enterprises or industry, whether publicly or privately owned and whether paid or bestowed directly or indirectly on the
manufacture, production or export of any class or
(Cite as: 57 FR 8800, *8813)
kind of merchandise:
(I) The provision of capital, loans or loan guarantees on terms inconsistent with commercial considerations.
(II) The provision of goods or services at preferential rates.
(III) The grant of funds or forgiveness of debt to cover operating losses sustained by a specific industry.
(IV) The assumption of any costs or expenses of manufacture, production or distribution.
(emphasis added).
In this provision, Congress offers general guidance for identifying a domestic subsidy. Section 771(5)(A) cites four examples that
may be considered to be domestic subsidies. However, as noted specifically in this provision, these examples are intended only to
be illustrative of some of the range of government practices which Congress envisaged would be encompassed by the term
"domestic subsidies" ("the term 'subsidy' * * * includes, but is not limited to, * * *") (emphasis added). Indeed, the report of the
Committee on Ways and Means, House of Representatives (H.R. No. 96-317, 96th Cong., 1st Sess. (1979)) states:
The Committee does not intend for this to be a comprehensive, exclusive enumeration of domestic practices which will be
considered subsidies. It is a minimum list, an identification, for purposes of clarification, of those
(Cite as: 57 FR 8800, *8813)
practices which are definitely subsidies. In deciding whether any other practice is a subsidy, the standard remains that presently
used with regard to a "bounty or grant" under section 303. However, to the extent the enumerations under this provision might
provide a basis for expanding the present standard consistent with the underlying principles implicit in these *8814
(Cite as: 57 FR 8800, *8814)
enumerations, then the standard shall be so altered.
(emphasis added).
Similar language appears in the Senate Report. See S. Rep. No. 96-249, 96th Cong., 1st Sess. (1979).
Therefore, the examples in the statute are illustrative only; the standard for determining whether a government program confers
a domestic subsidy is expected to be defined by "the underlying principles implicit in these enumerations," and not be limited by
those examples.
The Department has recognized, in numerous other cases, "that subsections (i)- (iv) do not constitute an all-inclusive list of
domestic subsidies," and the administrative practice of the Department has not restricted findings of countervailability
concerning domestic programs to only the four examples cited above. (See, e.g., Final Affirmative Countervailing Duty
Determination and Countervailing Duty Order; Carbon Black from Mexico, 48 FR 29564 (June 27, 1983); and Final
Negative Countervailing Duty Determination; Anhydrous and Aqua Ammonia from Mexico, 48 FR 28522 (June 22, 1983)).
(Cite as: 57 FR 8800, *8814)
Because the reduction in log prices does not result from direct government control of those prices, but comes about indirectly
from a government-induced increase in the domestic supply of logs, the Department considers that the export restrictions on logs
from BC, as described above, provide an indirect, rather than a direct, benefit to BC softwood lumber producers.
We have addressed the indirect provision of a subsidy in prior cases. For example, we stated:
Under the Act, the Department is required to determine whether respondents have received subsidies within the meaning of the
Act. To do so, the Department seeks to determine whether or not respondents have received directly or indirectly an economic
benefit. Whereas this is relatively easy in the case of a direct bestowal of a grant, it is quite difficult with regard to indirect
subsidies allegedly conferred through the subsidization of inputs used in a final product.
See Final Determination and Countervailing Duty Order; Certain Steel Products from the Federal Republic of Germany 47
FR 39353 (September 7, 1982).
In past proceedings, the Department has countervailed a variety of subsidies that indirectly benefitted producers or exporters of
the merchandise under investigation. For example, the preference for export loans over domestic loans, created by a preferential
rediscounting system of the Government of
(Cite as: 57 FR 8800, *8814)
Korea, encouraged commercial banks to provide export loans over domestic loans to large companies. Even though the interest
rates on both export and domestic loans were the same, the Department found that the government was providing an indirect
benefit to the manufacturer because a pool of loans was available to the manufacturer that would not have been available absent
government intervention in the commercial banking system. See Final Affirmative Countervailing Duty Determination; Oil
Country Tubular Goods from Korea, 49 FR 46776 (November 28, 1984).
In the Final Affirmative Countervailing Duty Determinations on Stainless Steel Sheet, Strip, and Plate from the United
Kingdom, 48 FR 19052 (April 27, 1983), we stated:
Subsidies used to close redundant facilities or to purchase idled assets clearly constitute countervailable benefits under the
statutory definition of "subsidy." Section 771(5)(B) of the Act defines "subsidy" to include various types of benefits "paid or
bestowed directly or indirectly on the manufacture, production, or export of any class or kind of merchandise." Clearly,
redundancy funds and plant closures make the recipient more efficient and relieve it of significant financial burdens. Thus, such
funds are unquestionably indirect, if not direct benefits to BSC's manufacture, production or export of steel and consequently are
countervailable.
Finally, we note that the notion of subsidies indirectly benefitting a good is
(Cite as: 57 FR 8800, *8814)
well grounded in the relevant provisions of the General Agreement on Tariffs and Trade (GATT). Both Article VI of the General
Agreement and Article 1 of the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the GATT (the
GATT Subsidies Code) explicitly provide for the term "countervailing duty" to mean "a special duty levied for the purpose
of off- setting any bounty or subsidy bestowed directly or indirectly upon the manufacture, production or export of any
merchandise * * *" (emphasis added). See Article 1 of the GATT Subsidies Code; Footnote 4.
We most recently considered the effect of export restrictions in Leather from Argentina; Final Affirmative Countervailing
Duty Determination and Countervailing Duty Order, 55 FR 40212 (October 2, 1990) (Leather). In Leather, we found that
an embargo on the export of hides served to decrease the domestic price for those hides, thereby providing a benefit to leather
producers by decreasing the price of the primary input. The export restrictions in BC are analogous to the embargo in Leather. In
Leather, we concluded that the low domestic hide prices were linked to the hide embargo. Further, we determined that this price
effect provided a countervailable benefit to leather producers.
In Leather, the standard we used for determining whether the embargo affected hide (the input product) prices was whether it had
a "direct and discernible effect" on those prices in Argentina (the standard we articulated was whether
(Cite as: 57 FR 8800, *8814)
there is a direct effect on the input product, even though we recognize that the effect on the processed product under
investigation is indirect). We measured the benefit by comparing Argentine hide prices over approximately a 30-year period in
relation to a benchmark based on U.S. prices over the same period. We determined that domestic prices for hides were directly
linked to the hide embargo by analyzing the hide prices during periods in which the embargo was in effect and periods in which the
embargo was not in effect.
To determine whether the impact of log export restrictions in BC has a direct and discernible effect on the price of logs, we have
reviewed studies on the record in this investigation. These studies indicate that the export restrictions on logs directly affect the
domestic price of logs in BC.
One study we evaluated was The Economic Impact of Removing Log Export Restrictions in British Columbia (Michael Margolick
and Russell Uhler Information Report 86-2; April 1986) (the Margolick Study). The Margolick study analyzes the effects on the BC
provincial economy of the complete removal of the restrictions on the quantity of logs exported. The study, completed in 1986,
and partially funded by the Canadian Forestry Service, attributes a 22 percent decrease in the BC export price for logs to the
removal of the log export restriction.
The study, based on 1983 data, held constant such factors as the policies of other major actors in the Pacific Rim market, including
the United States and
(Cite as: 57 FR 8800, *8814)
Japan. Since 1983, the export restrictions have only increased. The 22 percent decrease in export prices measured by Margolick
reflects only the effect of lifting BC's export restrictions.
In reviewing this study, we gave particular attention to whether the price reductions were actually the effect of the export
restrictions, or were attributable to other factors, such as species and grade differences and transportation costs. We have taken
into account the price differentials that occur as a direct result of the export restrictions (see Measurement of the Benefit section
below).
Another study we reviewed indicates that the de facto embargo on log exports *8815
(Cite as: 57 FR 8800, *8815)
causes the BC domestic price of logs to remain artificially low, while allowing the wood processing industry to increase production
because of lower "wood costs" (i.e., log prices). See Forest Management and Economic Growth in BC, M.B. Percy, Canadian
Government Publishing Center, 1986.
As distinct from Leather, the factual circumstances in this case are made more complicated by the fact that export restrictions in
BC have been in place since 1906. However, some conclusions may be drawn from minor changes in export restrictions that have
occurred. The only observable different in recent years stems from a change in the amount of the export tax rate. When the
export tax increased from 40 percent to 100 percent of the differential between export and domestic prices, exports decreased
by over 60 percent (from approximately three
(Cite as: 57 FR 8800, *8815)
percent of the total BC harvest to one percent). However, because the supply of logs on the domestic market increased by only a
small amount (since 97 percent of the domestic log harvest was not exported), there was apparently no change in the
considerable price differential that already existed between export and domestic prices as a result of the increase in the export
tax.
The change in the export tax also demonstrates that the factor most likely to affect the quantity of logs exported, and
consequently the domestic price of logs, is the domestic processing requirement. As discussed above, we have preliminarily
determined that it is the combination of the legal and regulatory requirements maintained in BC that is tantamount to an export
embargo. Further, as noted above, these requirements can be linked directly to the increase in supply and, as supported by the
findings of the Margolick study, the resulting artificially low price of logs in BC. Margolick states at p. 4:
The prices can only remain different as long as the two markets are effectively separated by export quantity or tax restrictions. * *
* If these restrictions are completely removed, then the markets will become a single integrated market with a single price given
at the point where the excess supply in British Columbia equals the excess demand in the Pacific Rim market.
Although Margolick refers to tax restrictions above in the generic sense, we have already established that it is the compilation of
laws and procedural requirements, together with the tax, that constitute a virtual embargo.
(Cite as: 57 FR 8800, *8815)
Measurement of the Benefit
As discussed above, log export restrictions in BC result in an increase in the domestic supply of logs and a decrease in the
domestic log price. Because logs are the primary input into lumber, the decrease in the domestic log price caused by export
restrictions artificially reduces the production costs of lumber producers. In order to measure the benefit to lumber procedures
during the POI, we examined the difference between the current domestic log price and the price that would exist if the
restrictions were not in place.
The export price that would prevail absent the export restrictions was derived using the following methodology. First, we
calculated the BC weighted- average unit value of softwood sawlog exports during the POI. Unit values were reported by species.
Actual export prices were requested from the BC government, but BC submitted only the aggregate volume and value data for
softwood log exports (i.e., sawlog, pulplog, and veneer log), as reported by Statistics Canada. The Coalition submitted more
detailed information from Statistics Canada that broke out sawlogs, by species, separately. Therefore, we used the sawlog unit
values, as reported by Statistics Canada, as a surrogate for the actual export prices.
BC also provided detailed data on export volume by species and grade for the
(Cite as: 57 FR 8800, *8815)
coastal region of BC. For the interior, the provincial government provided export volume by species only. During the POI, 52
percent of total exports were from the coast and 48 percent were from the interior. Thus, it is clear that the weighted-average unit
value from Statistics Canada represents a mix of coast and interior export prices. Furthermore, as indicated by these data, log
exports from both the coast and the interior fall primarily into two species categories: hembal (i.e., hemlock and balsam fir) and
spruce.
According to the Margolick Study, discussed above, if the log export restrictions were lifted, the supply of logs to the Pacific Rim
market (the market for 99 percent of BC exports) would increase and the price for logs would decrease by 22 percent. We have
applied Margolick's results in our calculation by decreasing the weighted-average price of logs exported from BC by 22 percent to
arrive at the BC export price that would result from lifting the restrictions. [FN3] Furthermore, although the Margolick study
concentrates on the effect of the restrictions on BC coastal log prices, it is reasonable to conclude that lifting the export
restrictions would affect the export price of the interior region approximately to the same degree as the coastal region because, as
noted above, approximately one-half of the exports of softwood sawlogs during the POI were from the interior of BC, and both
coastal and interior exports fall predominantly into two species categories, hembal and spruce.
(Cite as: 57 FR 8800, *8815)
FN3 We did not account for western red cedar in our adjustment of the export price, which Margolick estimates would yield a 25
percent decrease in the BC export price, because of the outright export ban on this species and the virtual absence of exports of
this species. Including red cedar in the adjustment would distort the calculation by accounting for a species that is not in the
current export mix.
We then deducted from this new price the additional costs involved in exporting logs. We accepted the following costs as reported
in the BC questionnaire response for purposes of this preliminary determination: Dry land sorting, volume lost, and export
transportation. BC indicated that exporters only incurred the reported per cubic meter export transportation cost on
approximately 25 percent of their exports. We therefore multiplied the reported cost by 25 percent to obtain the correct per
cubic meter deduction. The final price after these adjustments is the benchmark (i.e., the price absent the restrictions). BC claims
that export prices should be adjusted for "falldown sort costs." This claim is based on the fact that when log rafts are sorted into
export and domestic components, the domestic component is no longer a true domestic sort. Rather, it is a "domestic falldown"
sort, containing small and low grade logs which command a price considerably lower than a "true" domestic sort. We did not make
any adjustment for falldown sort costs because
(Cite as: 57 FR 8800, *8815)
any adjustment of this type would be duplicative of our species/grade adjustment (see below).
Because the original export unit value used to calculate the benchmark was based on weighted-average unit values from the coast
and interior, we calculated a similar weighted-average BC domestic log price. BC records domestic log prices from the Vancouver
log market in order to appraise timber stands in the coastal region. BC reported these price data on a weighted- average basis by
species and grade. The province stated that information on interior log prices is not available.
According to various industry and government forestry sources, it is commonly accepted in the industry that the price of a log is
equivalent to stumpage costs plus logging costs. Therefore, we constructed an interior log price based on the average interior
competitive SBFEP stumpage rate plus logging costs (road costs, tree-to-truck logging costs, post-logging costs, haul *8816
(Cite as: 57 FR 8800, *8816)
costs, general and administrative costs) and profit.
We used the competitive SBFEP stumpage rate in our calculation because it was the only market-based stumpage rate available.
We do not have stumpage prices for private timber in the interior, and we have preliminarily determined that administratively set
stumpage rates for major tenure holders confer a subsidy. To include the preferential rates in our constructed price would
underestimate the market price of an interior log and overestimate the benefit of the log
(Cite as: 57 FR 8800, *8816)
export restrictions by the amount of the stumpage benefit (the difference between the administratively set stumpage rates and the
competitive SBFEP stumpage rates). A constructed price using this competitive stumpage rate more accurately reflects the
market price for domestic logs because of the link between the competitive SBFEP rate and the domestic log price. The greater
flexibility of their tenures allows competitive SBFEP tenure holders to more readily use the domestic log market as an alternative
or a supplement to their own harvests. Clearly, tenure holders in the competitive SBFEP program will not rationally bid for
stumpage above a rate equivalent to the market price for domestic logs less logging costs. Absent actual prices, the competitive
SBFEP rate plus the above-noted logging costs provide the best estimate for the interior domestic log price.
Logging costs were taken from information submitted by BC in its responses. We applied the same per unit annual rent charges
used in the BC stumpage calculation for competitive SBFEP tenure holders in the interior. Road costs were broken down into two
components: Road building and road maintenance. We estimated that road building costs for competitive SBFEP tenure holders
were approximately 25 percent of the road building costs incurred by major tenure holders as described in the stumpage subsidy
calculation. We estimated that surface maintenance costs for competitive SBFEP tenure holders were approximately 41.5 percent
of the total road maintenance costs incurred by
(Cite as: 57 FR 8800, *8816)
major tenure holders. As we could not determine average tree-to-truck logging costs and post-logging costs from the Interior
Appraisal Manual, we estimated an interior average for these costs by applying the actual costs reported in the sample appraisal
submitted by BC. Average general and administrative costs were calculated from the regional interior averages listed in the
manual. We could not calculate average log haul costs directly from the manual. However, minimum highway and off-highway log
haul rates were listed. We, therefore, used a simple average of these two minimum rates as a surrogate for the average log haul
rate. Because profit figures for interior logging operations were unavailable, we applied the eight percent profit rate provided for
in the antidumping statute. (See, section 773(e)(B)(ii) of the Act.)
The constructed interior price and the actual coastal log price were then weight-averaged according to their respective share of
the total BC harvest in order to construct a BC domestic log price. Next, because the species and grade mix in the export and
domestic markets are different, we adjusted this weighted-average domestic log price for the different species/grade distributions
between the two markets. This was done so that the domestic price would mirror the benchmark price and a fair comparison could
be made.
After adjusting for differences in species, grades and certain additional costs associated with exporting, we calculated the
difference between the
(Cite as: 57 FR 8800, *8816)
benchmark price and our adjusted domestic price. This difference represents the per cubic meter benefit to lumber producers. We
multiplied this per cubic meter benefit by the total softwood sawlog harvest for BC (including private and federal lands from which
log exports are also restricted). We divided this benefit by the value of BC softwood lumber shipments, plus the value of shipments
of another product produced in sawmill from softwood sawlogs (i.e., railway ties), plus the value of shipments of products
produced during the lumber manufacturing process (i.e., chips and sawdust). On this basis, we calculated a subsidy rate for BC of
10.54 percent.
Calculation of The Country-Wide Program Rate for Log Export Restrictions
In order to calculate a country-wide program rate, we multiplied the rate calculated for BC by its relative share (or weight) of total
Canadian softwood lumber exports to the United States during the POI which are subject to this investigation. We assigned
Quebec, Ontario, Alberta, Manitoba, Saskatchewan, and the Territories zero rates for the reasons outlined above. This resulted in
a weighted-average country-wide program rate of 8.23 percent.
Verification
(Cite as: 57 FR 8800, *8816)
In accordance with section 776(b) of the Act, we will verify the information 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 the
subject merchandise from Canada, except for the provinces of Prince Edward Island, Nova Scotia, New Brunswick, and
Newfoundland (the Maritime Provinces), 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 all entries of this merchandise equal
to 14.48 percent ad valorem for each entry of this merchandise. Because exports to the United States of certain softwood lumber
products produced in the Maritime Provinces were exempt from payment of the export charge under the MOU, the Maritime
Provinces are exempt from this investigation.
The following companies are preliminarily excluded from the suspension of liquidation:
1. J.A. Fontaine et Fils, Inc.
2. J.D. Irving
3. Marcel Lauzon, Inc.
(Cite as: 57 FR 8800, *8816)
4. Les Produits Forestiers D&G, Limited
5. Francois Giguere, Inc.
6. Real Grondin, Inc.
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 nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all
privileged and business proprietary 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 Assistant Secretary for Import
Administration.
Our final determination is scheduled for May 19, 1992. If our final determination is affirmative, the ITC will make its final
determination within 45 days of the Department's final determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if requested,
(Cite as: 57 FR 8800, *8816)
to afford interested parties an opportunity to comment on this preliminary determination, on April 24, 1992, at 10 a.m. Please
contact the *8817
(Cite as: 57 FR 8800, *8817)
individuals listed in the "For Further Information Contact" section above for the hearing location. Individuals who wish to request
a hearing must submit such a request within ten days of the publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, room B099, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the
scheduled time.
Requests must 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, fifteen copies of the business proprietary version and five copies
of the nonproprietary version of the case briefs must be submitted to the Assistant Secretary no later than April 17, 1992. Fifteen
copies of the business proprietary version and five copies of the nonproprietary version of the rebuttal briefs must be submitted
to the Assistant Secretary no later than April 22, 1992. If the case brief and rebuttal brief contain only nonproprietary
information, then fifteen copies of each respective brief must be submitted to the Department. An interested party may make an
affirmative presentation only on arguments included in that party's case or rebuttal briefs. Written arguments should be
submitted in accordance
(Cite as: 57 FR 8800, *8817)
with 19 CFR 355.38 and will be considered if received within the time limits specified above.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)) and 19 CFR 355.15.
Dated: March 5, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.
(FR Doc. 92-5829 Filed 3-11-92; 8:45 am)
BILLING CODE 3510-DS-M