(Cite as: 57 FR 20464) NOTICES DEPARTMENT OF COMMERCE (C-122-819) Preliminary Affirmative Countervailing Duty Determination; Portable Seismographs From Canada Wednesday, May 13, 1992 AGENCY: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: May 13, 1992. FOR FURTHER INFORMATION: Gary Bettger or Susan M. Strumbel, Investigations, Import Administration, International Trade Administration, U.S. Department of (Cite as: 57 FR 20464) Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 377-2239 and 377-1442, respectively. Preliminary Determination: The Department preliminarily determines that benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers, or exporters in Canada of the subject merchandise. Case History Since the publication of the Notice of Initiation in the Federal Register (57 FR 8305, March 9, 1992), the following events have occurred. On March 11, 1992, we presented a questionnaire to the Government of Canada (GOC) in Washington, DC, concerning the allegations of GeoSonics Inc., petitioner in this investigation. On March 24, 1992, we presented a supplemental questionnaire to the GOC based on additional subsidy allegations made by petitioner. On March 30, 1992, the United States International Trade Commission (ITC) issued its preliminary determination that exports of portable seismographs from Canada materially injure, or threaten material injury to a U.S. industry. Timely responses to our questionnaires were submitted by the GOC, the Provincial Government of Ontario, and Instantel Inc. (Instantel). We (Cite as: 57 FR 20464) did not receive a complete response from Nomis Computer Systems Corp. (Nomis). Scope of Investigation The products covered by this investigation are portable seismographs from Canada. Portable seismographs are *20465 (Cite as: 57 FR 20464, *20465) used by the mining, construction, and blasting industries to measure the ground and air vibrations produced by man-made blasting in compliance with seismograph standards established by the U.S. Bureau of Mines. The basic components and ranges of measurement are: Ground peak particle velocity (.02 to 10 inches per second); ground motion frequency (2 to 200 Hz); direction of motion (3 orthogonal axis (L,T,V)); airblast level (100 to 140 DBL); airblast overpressure (1/10,000 to 1/100 psi); and airblast frequency (2 to 200 Hz). Earthquake, nuclear, and reflection/refraction seismographs are not included in the scope of this investigation. Portable seismographs are currently provided for in subheading 9015.80.6000 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 is dispositive. Analysis of Programs (Cite as: 57 FR 20464, *20465) Consistent with our practice in preliminary determinations, when a response to an allegation denies the existence of a program, receipt of benefits under a program, or eligibility of a company or industry under a program, and the Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All such responses, however, are subject to verification. If the response cannot be supported at verification, and a program is otherwise countervailable, the program will be considered a subsidy in the final determination. For purposes of this preliminary determination, the period for which we are measuring subsidies (the period of investigation--"POI") is calendar year 1991, which corresponds to the fiscal year of Instantel. A. Best Information Available We have used, in accordance with section 776(c) of the Act, best information available (BIA) for Nomis because it did not respond to our questionnaires. The Department has determined that since no applicable BIA information has been submitted by petitioner, it is appropriate to use the highest subsidy rate for each program found countervailable in previous Canadian investigations. Additionally, we have calculated a rate specific to Nomis for a clean received under the Program for Export Market Development during the POI, based on (Cite as: 57 FR 20464, *20465) information provided by the GOC. Consequently, we have calculated a total net subsidy amount of 32.40 percent for Nomis. B. Programs Preliminary Determined To Be Countervailable We preliminarily determine that subsidies are being provided to manufacturers, producers or exporters in Canada of portable seismographs under the following programs: 1. Program for Export Market Development (PEMD) and Promotional Projects Program (PPP) The PEMD was consolidated and restructured in 1987 and now includes the former PPP. PEMD is a trade promotion program of the Department of External Affairs. The program's objective is to increase export sales of Canadian goods/services by sharing with Canadian businesses the costs of undertaking or participating in various types of marketing activities. Support provided under the new program is either industry-initiated (former PEMD) or government-initiated (former PPP). Under the industry-initiated component, interest-free loans are provided to industries requesting assistance in export market development. Under the government-initiated component, the GOC underwrites some of the cost (Cite as: 57 FR 20464, *20465) of participating in international trade fairs and missions. The interest-free PEMD loans are repaid over several years from sales revenues earned from the export market that was the object of the promotional activities sponsored by PEMD. If no sales or insufficient sales are made to the export market in question within a given number of years, the outstanding loan is forgiven. Since PEMD loans are provided for export activities with no interest being charged, we determine that assistance provided under the program confers export subsidies. Because the repayments terms on PEMD loans are indefinite, we are treating the PEMD loan made for Instantel's portable seismograph product-line as a short-term loan rolled over each year, with zero interest. To calculate the benefit, we multiplied the amount of principal outstanding at the beginning of the POI by our short-term interest benchmark, the rate used to meet the short- and medium-term financing needs of the private sector as found in the 1991 International Financial Statistics. We then divided the benefit by the f.o.b. value of all exports of portable seismographs by Instantel during the POI. Using this methodology, we calculated an estimated net subsidy of 0.020 percent ad valorem. Using the same methodology as outline above, we calculated an estimated net subsidy of 0.058 percent ad valorem for Nomis. Because Nomis did not respond to our questionnaires, we did not have its value of exports of portable (Cite as: 57 FR 20464, *20465) seismographs during the POI. Therefore, as BIA, we have used the value of exports made by Instantel during the POI in this calculation. 2. Industrial and Regional Development Program (IRDP) The IRDP was established in 1983, replacing the Regional Development Incentive Program (RDIP). The program was designed to promote industrial development in all regions of Canada through financial support in the form of grants, loans and loan guarantees. To accomplish this goal, assistance was provided for four major purposes. (1) To encourage the development of new products and new processes through support of research and development projects that show promise of economic success; (2) To assist in the establishment of new production facilities; (3) To increase industrial productivity through the improvement, modernization and expansion of existing manufacturing and processing operations; and (4) To facilitate the identification, development and exploitation of new domestic and international market opportunities. The level of benefit received under the IRDP depended upon the census district in which a project was located. Census districts were classified into one of four tiers based on economic development. The main factors considered in measuring economic (Cite as: 57 FR 20464, *20465) development were employment, per capita income and tax revenue receipts. The most economically deprived districts received the greatest IRDP assistance. The IRDP program was terminated on June 30, 1988. Instantel reported that it did not receive benefits under this program during the POI. With regard to Nomis, because it did not respond to our questionnaire, as BIA we have presumed benefits were received by Nomis under this program during the POI. This program has been found to be countervailable in previous Canadian investigations. Therefore, we have assigned Nomis an estimated net subsidy rate of 0.001 percent ad valoren, the highest subsidy rate from a previous Canadian investigation. 3. Economic and Regional Development Agreements (ERDA) ERDAs are essentially a continuation of the General Development Agreements *20466 (Cite as: 57 FR 20464, *20466) (GDAs) (discussed below) and are the principal instruments for implementing the federal government's commitment to economic development on a nationwide basis. ERDAs were signed with every province and territory in the early 1980s. Similar to GDA subsidiary agreements, ERDA subsidiary agreements establish programs, delineate administrative procedures and set up the relative funding commitments of the federal and provincial governments. Assistance is aimed at projects designed to upgrade infrastructure, such as transportation (Cite as: 57 FR 20464, *20466) and convention centers, and to enhance productivity, particularly for small businesses. Instantel reported that it did not receive benefits under this program during the POI. With regard to Nomis, because it did not respond to our questionnaire, as BIA we have presumed benefits were received by Nomis under this program during the POI. This program has been found to be countervailable in previous Canadian investigations. Therefore, we have assigned Nomis an estimated net subsidy rate of 6.700 percent ad valorem, the highest subsidy rate from a previous Canadian investigation. 4. Investment Tax Credits There are several categories of Investment Tax Credits (ITCs) in Canada. The only category of ITC used and found to be countervailable in a previous Canadian investigation was for investment in qualified property such as new plant and equipment used for manufacturing or processing. The basic ITC for investment in qualified property is seven percent. An additional three or 13 percent is available for qualified property used in certain regions. As discussed below, Instantel reported only using one of these categories. With regard to Nomis, because it did not respond to our questionnaire, as BIA we have presumed benefits were received by Nomis under the qualified property (Cite as: 57 FR 20464, *20466) category of this program during the POI. Therefore, we have assigned Nomis an estimated net subsidy rate of 0.162 percent ad valorem, the highest subsidy rate from a previous Canadian investigation. 5. General Development Agreements GDAs provided the legal basis for various departments of the federal and provincial governments to cooperate in the establishment of economic development programs. The GDAs were umbrella agreements which stated general economic development goals. Ten-year GDAs were signed with most provinces in 1974. All of the GDA agreements expired in 1984. Subsidiary agreements were signed pursuant to the GDAs, generally between particular federal and provincial government departments, to address economic development and infrastructure needs. These agreements established various individual types of economic development programs, delineated administrative procedures and set out the relative funding commitments of federal and provincial governments. Subsidiary agreements ere typically directed at establishing traditional government economic assistance programs, developing infrastructure, providing economic development assistance for certain regions within the province and providing financial assistance to specific regions, industries or enterprises. (Cite as: 57 FR 20464, *20466) Instantel reported that it did not receive benefits under this program during the POI. With regard to Nomis, because it did not respond to our questionnaire, as BIA we have presumed benefits were received by Nomis under this program during the POI. This program has been found to be countervailable in previous Canadian investigations. Therefore, we have assigned Nomis an estimated net subsidy rate of 25.48 percent ad valorem, the highest subsidy rate from a previous Canadian investigation. C. Programs Preliminarily Determined Not To Be Countervailable We preliminarily determine that subsidies are not being provided to manufacturers, producers or exporters in Canada of portable seismographs under the following programs: 1. Investment Tax Credits for Research and Development Instantel, as a small business, claimed ITCs during the POI for expenditures for scientific research performed in the development of portable seismographs. Eligible expenditures under this category include the cost of capital equipment used for scientific research and expenses attributable to scientific research. A basic 20 percent tax credit is available for qualifying scientific research (Cite as: 57 FR 20464, *20466) expenditures to all companies in Canada. For small Canadian-controlled private corporations (CCPC), the rate is 35 percent. For other corporations, the rate is 30 percent, if the expenditure is made in certain regions. In the Final Affirmative Countervailing Duty Determination: Oil Country Tubular Goods From Canada, 51 FR 15037 (April 22, 1986) we determined that the 20 and 35 percent scientific research tax credits, whether sold or used by the company performing the research, did not confer domestic subsidies because they are not limited to a specific enterprise or industry, or group of enterprises or industries or to companies in specific regions. 2. Research and Development Super Allowance (R&D Super Allowance) The R&D Super Allowance program was established in the 1988 Ontario budget. In addition to the regular federal deduction, the R&D Super Allowance program provides a 35 percent deduction for CCPC and a 25 percent deduction for other corporations for qualifying research and development expenditures net of federal ITCs. Both the 35 and 25 percent deductions are available to all industries in Ontario who have qualified expenditures. Since this program is not limited to a specific enterprise or industry or a group of enterprises or industries in Ontario, we preliminarily determine that this program is not countervailable. (Cite as: 57 FR 20464, *20466) 3. Ontario Current Cost Adjustment (OCCA) The Government of Ontario introduced the OCCA in the 1988 Ontario Budget. The OCCA provides an additional deduction from income otherwise subject to tax in Ontario for the cost (net of federal investment tax credits) of new manufacturing and processing machinery and equipment acquired for use in Ontario. The deduction is ten percent for acquisitions in 1989, 15 percent in 1990 and 30 percent in 1991 and subsequent years. New manufacturing and processing machinery and equipment qualifies for the deduction if it meets the following criteria: (1) It has not been used by any person for any purpose prior to acquisition by the taxpayer; (2) It is first used by the taxpayer in Ontario; and (3) It is used by the taxpayer for the purpose of earning income from business. The corporation can take the OCCA deduction from income in the taxation year when the assets become eligible assets. The OCCA was terminated on January 1, 1992. Since this program is available to all industries in Ontario, we preliminarily determine that this program is not countervailable. (Cite as: 57 FR 20464, *20466) D. Programs Preliminarily Determined Not To Be Used We preliminarily determine that producers or exporters in Canada of the subject merchandise did not use or *20467 (Cite as: 57 FR 20464, *20467) receive benefits under the following programs during the POI. 1. Export Credit Financing The Export Development Council (EDC) was created to facilitate and develop Canada's export trade within the framework of the Canadian Export Development act. The EDC, a self sustaining Crown Corporation, pursues its purpose by providing insurance guarantees and financing. EDC provides export financing to foreign buyers of Canadian goods and services. Funds are disbursed directly by EDC to Canadian exporters on behalf of the foreign buyer, in effect providing the exporter with a cash sale. Instantel reported that it did not receive benefits under this program during the POI. The only subsidy rate calculated under this program in a previous Canadian investigation was unique to the product involved in that investigation. Therefore, we were unable to use this rate as BIA for Nomis in this investigation. (Cite as: 57 FR 20464, *20467) 2. Canada Center for Mineral and Energy Technology (CANMET) CANMET is the main research and technology development arm of Energy, Mines and Resources Canada. CANMET, in partnership with its clients, performs and sponsors predominantly commercial and cost-shared research and development, and technology transfer to find safer, cleaner and more efficient methods to develop and use Canada's mineral and energy resources. Because any potential benefit received by Instantel was attributable to a product not covered by the scope of this investigation, we preliminarily determine that this program was not used. Because this program has never been investigated, we do not have a rate to assign to Nomis as BIA. 3. Program for Industry/Laboratory Projects (PILP) PILP was established in 1978 to explore the use of government laboratory technology. The program was changed later to incorporate additionally the use of technology from other public sources, including university laboratories. This was accomplished through shared-cost government research and development contracts with companies based in Canada. The Government of Canada or the participating university owned the technology which was available for use under a non-exclusive license. The PILP program ceased to exist for funding of new (Cite as: 57 FR 20464, *20467) proposals in 1986. Because any potential benefit received by Instantel was attributable to a product not covered by the scope of this investigation, we preliminarily determine that this program was not used. Because this program has never been investigated, we do not have a rate to assign to Nomis as BIA. 4. Industrial Research Assistance Program (IRAP) IRAP was established in 1962 to assist firms with R&D projects that represented an increase in R&D performed and were longer range and technically more difficult than the firms would otherwise have carried out. Assistance by government scientists was recognized as desirable whenever it could be arranged. The program was carried out through shared-cost government R&D contracts with companies based in Canada. Instantel explained that they did benefit from this program during the POI, but since the benefit received was attributable to a product not covered by the scope of this investigation, we preliminary determine that this program was not used. Because this program has never been investigated, we do not have a rate to assign to Nomis as BIA. 5. Ontario Centre for Resource Machinery Technology (Cite as: 57 FR 20464, *20467) The Ontario Centre for Resource Machinery Technology was created under the Technology Centres Act, 1982 and ended operation in March 1991. It was designed to promote and to enhance the application of resource machinery technology in order to improve the productivity and competitiveness of Ontario industry and commerce. The Ontario Centre for Resource Machinery Technology provided venture capital and R&D funds to support projects which clearly contributed to resource machinery manufacturing in Ontario. Instantel reported that it did not receive benefits under this program during the POI. Because this program has never been investigated, we do not have a rate to assign to Nomis as BIA. 6. Ontario Development Corporation (ODC) Export Support Loans This program was established to assist in the development and diversification of industries in Ontario. Assistance is provided in the form of loans, loan guarantees and grants. Instantel reported that it did not receive benefits under this program during the POI. Because this program has never been investigated, we do not have a rate to assign to Nomis as BIA. Verification. In accordance with section 776(b) of the Act, we will verify (Cite as: 57 FR 20464, *20467) the information used in making our final determination. Suspension of liquidation. In accordance with 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of portable seismographs from Canada, except those from Instantel, Inc., which are entered or withdrawn from warehouse, for consumption on or after the date of the publication of this notice in the Federal Register and to require a cash deposit or bond for such entries of the merchandise in the amount of 32.40 percent ad valorem, the country-wide rate. Instantel is excluded from this preliminary determination because the estimated net subsidy for this company is 0.02 percent ad valorem, which is de minimis. Pursuant to 19 CFR 355.20(d), we have calculated a separate net subsidy for Instantel because its rate differs significantly from the country-wide rate. This suspension will remain in effect until further notice. 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 Deputy Assistant Secretary for Investigations, Import Administration. (Cite as: 57 FR 20464, *20467) If our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination. Public comment. In accordance with 19 CFR 355.38 of the Commerce Department's regulations, we will hold a public hearing, if requested, on July 7, 1992, at 10 a.m. in room 3708, to afford interested parties an opportunity to comment on this preliminary determination. Interested parties who wish to request or to participate in the hearings must submit 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 B-099, 14th Street and Constitution Avenue NW., Washington, DC 20230. Requests should contain: (1) The party's name, address, and telephone number; (2) The number of participants; (3) The reason for attending; and *20468 (Cite as: 57 FR 20464, *20468) (4) A list of the issues to be discussed. In accordance with 19 CFR 355.38(c) and (d), ten 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 June 26, 1992. Ten copies of the business proprietary version and five copies of the nonproprietary version of rebuttal briefs must be submitted to the Assistant Secretary no later than July (Cite as: 57 FR 20464, *20468) 2, 1992. An interest party may make an affirmative presentation only on arguments included in that party's case or rebuttal brief. Written argument should be submitted in accordance with § 355.38 of the Commerce Department's regulations and will be considered if received within the time limits specified in this notice. This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)). Dated: May 7, 1992. Alan M. Dunn, Assistant Secretary for Import Administration. (FR Doc. 92-11252 Filed 5-12-92; 8:45 am) BILLING CODE 3510-DS-M