(Cite as: 57 FR 22570, *22621)
routinely and quickly. We found no evidence of a meaningful "surplus to domestic needs" test in Ontario, Quebec, or Alberta.
The few U.S. mills that expressed interest in buying logs from these provinces can hardly be said to constitute huge pent-up
export demand. In the case of Alberta, transportation costs alone preclude most of the timber harvested there from being sold in
the United States.
Finally, export restrictions, according to the Coalition's own argument, depress domestic prices relative to the export market. The
Coalition fails to provide a credible reason why mills in Quebec and Ontario, which supposedly benefit from significantly
underpriced domestic logs, would bother to buy such a significant volume of expensive U.S. logs.
In spite of these observations, we agree with the Coalition that there are some procedural impediments to the exportation of logs
from Alberta, Ontario, and Quebec. For example, only one request to export logs from Alberta was received during the POI. The
intended destination was Japan. The request for export was eventually withdrawn; because, according to the applicant, the
government took too long to make a decision. In Quebec, the only request to export logs during the POI took six months to be
approved. In Ontario, written requests to export under the quota were processed quickly. However, at verification we learned
that there were many more telephone inquiries about export procedures than actual written requests and that after speaking with
(Cite as: 57 FR 22570, *22621)
Ontario officials, few of the callers bothered to submit a formal request to export.
Although these procedural impediments may have a minor effect on log exports, we determine that log export restrictions in
Alberta, Ontario, and Quebec do not have any significant impact in those provinces. As discussed in the Preliminary
Determination, in contrast to BC, where the preponderance of evidence points towards a virtual de facto ban on the export of logs,
and where we can show that this de facto ban has a significant downward effect on the price of BC domestic logs, the
preponderance of evidence in the other three provinces does not point to any such de facto ban. Therefore, we determine that the
log export restrictions in Alberta, Ontario, and Quebec are not countervailable.
Revisions To Factual Information From Preliminary Determination
In the Preliminary Determination, we described the log export restriction laws, regulations, and policies of the Federal
government, BC, Alberta, Ontario, and Quebec. Our description was accurate except for the following:
Federal Government Log Export Controls
(Cite as: 57 FR 22570, *22621)
In the Preliminary Determination, we implied that the "Notice to Exporters" issued by the Federal Government applies only to BC,
when in fact it is intended to describe generally how the export permit system under the Federal EIPA works and to bring to the
attention of exporters the requirements for obtaining an export permit. These notices have a special section with respect to BC
describing the procedure for exporters wishing to obtain a Federal export permit for logs harvested on lands in BC under Federal
jurisdiction. We also implied in the Preliminary Determination that this "Notice to Exporters" amounts to a Federal regulation
when, in fact, it does not. However, even though these notices have no regulatory effect, the Federal Government does not issue
an export permit for any logs harvested in BC unless the exporter has first obtained a BC export permit (see Federal Government
Verification Report).
British Columbia Log Export Controls
We learned at verification that there are two possible ways of obtaining an exemption to the provincial log export restrictions
according to section 136 of the Forest Act: An OIC granted by the Lieutenant Governor in Council, and a Ministerial order granted
by the MOF. A ministerial exemption is basically an administrative procedure, requiring approval only at the MOF. By contrast an
OIC requires approval by the entire cabinet, as represented by the Lieutenant
(Cite as: 57 FR 22570, *22621)
Governor in Council. One or the other of these exemptions is necessary before logs can be exported.
The Lieutenant Governor in Council or Minister must be satisfied that the timber or wood residue is surplus to the needs of the
domestic industry, cannot be processed economically in the vicinity from which it is cut, or that an exemption would prevent the
waste, or improve the utilization, of the timber cut from Crown lands. The procedure for evaluating economic or utilization
reasons are similar, involving a cost analysis and export valuation. In the case of a ministerial order, the timber must be
harvested, and the volume cannot exceed 15,000 cubic meters for each export application. All standing timber applications must
be approved by an OIC.
In the Preliminary Determination we implied that the harvested surplus logs constituted the majority of exported logs during the
POI. This is not the case. At verification we learned that only about 35 percent of total logs exported were "surplus to domestic
needs," about 48 percent originated in Kalum/Cassiar under a blanket OIC, and the remainder was from areas covered by
miscellaneous blanket OICs or from stands exempted for economic or utilization reasons (see BC Verification Report).
Programs Determined Not To Be Used
(Cite as: 57 FR 22570, *22621)
During the course of the investigation, two private silviculture reimbursement programs were discovered. After further
examination and verification of these programs, we determine that subsidies are not being provided on the manufacture,
production, or exportation of the subject merchandise under either of these programs:
*22622
(Cite as: 57 FR 22570, *22622)
Private Forest Development Programs in Quebec and Ontario
In our Preliminary Determination, we determined that the reimbursement of silviculture expenses under the Private Forest
Development Program (PFDP) in Quebec provided a countervailable benefit to softwood lumber. We discovered the existence of
this program through Quebec's initial questionnaire response.
Quebec's PFDP, which has been in existence since the early 1970s, is a program established by Quebec to help private woodlot
owners improve their woodlots. Under the program, "woodlot owners who have been recognized as forest producers" are eligible
to receive reimbursement amounts for silviculture that are calculated to cover 90 percent of the estimated costs for certain
silviculture treatments. According to the PFDP, to be recognized as a forest producer, a private woodlot owner must own at least
four hectares of woodland forming a single block, and earn income from this land primarily through the production of wood,
maple sugar, or Christmas trees. Private land owners who
(Cite as: 57 FR 22570, *22622)
do not qualify for recognition as forest producers may receive seedlings for the reforestation of their land under the PFDP but are
not eligible for other PFDP reimbursements.
At verification, however, the Department found no information showing that producers of the merchandise subject to this
investigation receive payments or reimbursements under the PFDP. Therefore, we determine that this program does not confer a
subsidy to producers of the subject merchandise. Respondents have made a number of comments on the Department's
Preliminary Determination with respect to these programs focusing on specificity, the time period for receipt of benefits, and the
noncountervailability of the program. Since the Department has determined that this program was not used by producers of the
subject merchandise, these comments need not be addressed.
During the verification of the Ontario responses, we found that the Government of Ontario pays for silviculture on private land.
Most of the expenditures incurred relate to silviculture activities undertaken on poor agricultural lands. The provincial
government will pay for site preparation, scaling, uneven-aged management, and other silviculture activities. The program is
designed to develop forest land on depleted farmland (Christmas tree production is not covered). High value trees, such as white
pine, are often planted. (See Ontario Verification Report p. 12.)
As with the PFDP in Quebec, the Department found no information
(Cite as: 57 FR 22570, *22622)
showing that producers of the merchandise subject to this investigation receive payments or reimbursements under Ontario's
silviculture expenditures for private lands. Therefore, we determine that this program was not used by producers of the subject
merchandise.
Comments
All issues and comments not discussed in the above sections are addressed in this section.
Comment 1: In the joint case brief the GOC requested that all of the provinces subject to this investigation be excluded from the
investigation based on their claim that the investigated programs are nonspecific and nonpreferential.
DOC Position: We disagree. Our determination with respect to these claims is found in the "Stumpage" and "Log Export
Restrictions" sections of this notice.
Comment 2: Quebec asserts that it should be exempt from this investigation because (1) it was essentially exempt from the export
tax under the MOU due to its replacement measures, and (2) its parity technique for setting provincial stumpage rates mirrors
that of the excluded Maritime Provinces, in particular New Brunswick's system.
The Coalition disputes the basis for Quebec's request for exemption, in particular Quebec's assertion that its system for setting
public stumpage
(Cite as: 57 FR 22570, *22622)
prices is "indisputably identical" to New Brunswick's.
DOC Position: We disagree with Respondents. The export tax rates under the MOU were negotiated rates not related to any final
determination of subsidization. They did not necessarily reflect the actual rate of subsidization in 1986, much less now. The offset
of these static rates through provincial replacement measures was also the result of negotiation and in no way addressed the issue
of current subsidization. Moreover, Quebec did not fully replace its export tax rate under the MOU. Quebec's rate at the time of
Canada's unilateral termination of the MOU was 6.2 percent and was scheduled to fall to 3.1 percent in November 1991.
The Maritime Provinces were exempt from this investigation solely because of the "special circumstances" requirement for
self-initiation under GATT. The special circumstance for self-initiation of this investigation was the GOC's unilateral termination of
the MOU. The Maritime Provinces were exempt from the MOU, therefore, the special circumstances necessary for self-initiation
did not exist for the Maritime Provinces, and the Department was precluded from self- initiating against these provinces. Quebec
was not exempt from the MOU. For Quebec, the prerequisite special circumstances existed. Moreover, the Department had
sufficient evidence concerning Quebec's stumpage programs to include them in the self-initiation of a countervailing duty
case covering softwood lumber imports from Canada.
(Cite as: 57 FR 22570, *22622)
Comment 3: BC states that it was the only province to adopt full replacement measures under the MOU and that the United States
accepted those measures and amended the MOU to exclude BC from the export tax. BC further argues that its situation is exactly
like that of the Maritime provinces which were exempt from this case because they were exempt from the export charge.
Therefore, BC contends that, like the Maritime Provinces, it should be exempt from this investigation because the Department
failed to meet the special circumstances or sufficient evidence requirement of Article 2.1 of the GATT Subsidies Code.
The Coalition states that public stumpage prices in BC are not set by the market since, and as this whole case has demonstrated, BC
administered stumpage has lagged well below the competitive SBFEP rate and "in no essential manner is market-based."
DOC Position: We disagree with Respondents. Although the export tax for BC under the MOU was reduced to zero, BC was not
exempt from the MOU. Despite the zero rate, BC's operation of replacement measures was still subject to consultations with the
United States and monitoring by both governments. Although BC's export tax rate was zero, a decrease in its replacement
measures would have resulted in the reimposition of some or all of the 15 percent export tax. This was not the case for the
Maritime Provinces. The Maritime Provinces were exempt from the export charge; no reimposition of the export charge was
possible during the lifetime of the MOU.
(Cite as: 57 FR 22570, *22622)
In addition, as discussed above in the response to Comment 2, the Maritime Provinces were exempt from investigation solely
because of the special circumstances requirement for self-initiation under GATT. The Maritime Provinces were exempt from the
MOU; BC was not. As in Quebec, and every other province and territory not exempt under the MOU, the prerequisite special
circumstances existed for BC, and as demonstrated in *22623
(Cite as: 57 FR 22570, *22623)
our notice of self initiation, the Department found sufficient evidence to self-initiate an investigation against BC.
Comment 4: Respondents argue that the Department must provide a mechanism to identify imports of products that cannot
benefit from the alleged subsidies under investigation. Furthermore, the Department must exclude lumber made from U.S.-origin
logs and logs from the Maritime Provinces.
DOC Position: The Department cannot exempt products that we have determined are within the scope of the investigation. (See
"Scope Exclusion Requests" section of the notice.) The appropriate avenue for exclusion is through the company exclusion
process and, in fact, we have excluded 15 companies that used solely or principally U.S.-origin logs. It is virtually impossible to
identify the origin of the timber used in the manufacture of any given shipment of softwood lumber when that shipment arrives at
the border. Furthermore, in contrast to the examples provided by Respondents, the large number of lumber shipments makes it
impracticable if not impossible to identify the origin of
(Cite as: 57 FR 22570, *22623)
timber used to manufacture lumber on an individual lumber shipment basis.
Comment 5: The Coalition contends that the Department excluded the federal administered stumpage programs from the
Preliminary Determination without comment. The Coalition notes that it submitted information on the record contending that
federal stumpage programs provide countervailable subsidies, and that the Department's failure to consider these programs in its
preliminary analysis is contrary to law.
DOC Position: Underlying the Coalition's comment is the assumption that the Department self-initiated and pursued the
investigation of federal stumpage programs during the course of this investigation. Neither the Notice of Self- Initiation, nor the
questionnaire, directly refer to federal stumpage programs.
We note that our cover letter accompanying the questionnaire to the GOC requested that it collect data regarding the provision of
stumpage from "the provincial governments of Alberta, British Columbia, Manitoba, Ontario, Quebec, Saskatchewan, and the
federal government on behalf of the Northwest Territories and the Yukon Territory * * *" (See cover letter to countervailing
duty questionnaire, November 8, 1991, page 1, emphasis added.) In addition, section 2 of the questionnaire, labelled
"Questionnaire for the Government of Canada," does not include a request for information on federal stumpage programs. We
expressed no intention to examine federal programs in either our initiation memo, our initiation notice, or in our questionnaire.
We note that
(Cite as: 57 FR 22570, *22623)
federal stumpage represents a minuscule amount of total stumpage harvested from government-owned lands in Canada. Such
a small amount, even if investigated, would have virtually no impact on the country-wide subsidy rate.
The Coalition indicates in its comment that it identified the amount of potential subsidies arising from federal stumpage programs
in its January 30, 1992 preferentiality submission. Even if the Coalition were to have argued that its submission represented an
allegation that the provision of federal stumpage was a subsidy discovered during the course of an investigation within the
meaning of section 775 of the Act and § 355.39 of our regulations, which it did not do, the allegation would have been untimely
because it was submitted before the 40 days allowed for in § 355.31(c)(1)(i) of our regulations. It would have been questionable
even if it had been timely, once the exceedingly small amount of the possible additional subsidy and the complexity of performing
any analysis regarding these stumpage programs were considered. However, we note that the Coalition's allegation of the benefits
from federal stumpage program amounts has virtually no impact when taken over the total value of shipments the Department
used in its calculation of the country-wide subsidy rate. This insignificant effect is itself significant because only the preamble to
our regulations states that in "considering whether 'sufficient time remains' to investigate an additional subsidy practice, the
Department would take into account the potential significance of the additional subsidy to
(Cite as: 57 FR 22570, *22623)
the outcome of the investigation * * *" (See Countervailing Duties; Final Rule, 53 FR 52306, 52344.) For these reasons, we
did not investigate federal stumpage programs in our final determination.
Verification
In accordance with section 776(b) of the Act, unless otherwise noted, we verified the information used in making our final
determination. We followed standard verification procedures, including meeting with government and company officials,
inspecting internal documents and ledgers, tracing information in the responses to source documents, accounting ledgers and
financial statements, examination of original source documents, and collecting additional information that we deemed necessary
for making our final determination. Our verification results are outlined in the public versions of the verification reports.
Suspension of Liquidation
In accordance with section 705(c) of the Act, we are directing the U.S. Customs Service to continue 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),
(Cite as: 57 FR 22570, *22623)
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 6.51 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. This exemption does not apply to lumber manufactured in the Maritime Provinces from provincially-owned timber
harvested in other provinces.
The following companies are excluded from the suspension of liquidation and all cash deposit and/or bonding requirements:
1. J.A. Fontaine et Fils, Inc.
2. J.D. Irving, Ltd.
3. Marcel Lauzon, Inc.
4. Les Produits Forestiers D&G, Limited.
5. Francois Giguere, Inc.
6. Real Grondin, Inc.
7. Bois Daquaam.
8. Rene Bernard, Inc.
9. Wilfrid Paquet & Fils, Ltee.
10. Grondin Industries.
(Cite as: 57 FR 22570, *22623)
11. Carrier & Begin, Inc.
12. Clermond Hammel, Ltee.
13. Paul Vallee, Inc.
14. Scierie Tessier Lachance, Inc.
15. Scierie La Patrie, Inc.
As explained above (see "Shipment Values Used in Denominator of the Subsidy Calculation" section of this notice), because the
final mill data upon which the Department preferred to calculate its subsidy rate did not exist and could not reasonably be
calculated, and because the Department determined that Statistics Canada data used in the subsidy calculation accurately
reflected first mill data, the Department is directing Customs to apply the cash deposit and/or bonding requirements on a first mill
basis in the following situations if provided with the appropriate documentation *22624
(Cite as: 57 FR 22570, *22624)
demonstrating the first mill's F.O.B. price: (1) When a Canadian mill sells direct to a U.S. customer; (2) when a mill sells to a U.S.
customer but the product is further processed by a second mill prior to shipment to the United States, and (3) when the second
mill sells as well as remanufactures the product prior to shipment to the United States. With regard to (2) and (3) above, in
addition to documentation necessary to demonstrate the first mill's F.O.B. price, appropriate documentation must be presented to
Customs demonstrating that the transaction between the first mill and the second mill was made at arm's
(Cite as: 57 FR 22570, *22624)
length. It should be noted that further processing in this context does not include the planing process from rough-cut to planed
lumber.
The Department is also directing Customs to deduct inland transportation costs between the mill and the wholesaler or
reload/distribution center if provided with appropriate documentation regarding the actual inland freight expenses associated
with the entry. These instructions apply whether or not the sale to the U.S. customer took place before being sent to the
reload/distribution center as long the sale took place prior to shipment to the United States. These instructions also apply when
the original shipper to the reload center was a wholesaler rather than a mill as long as satisfactory freight documentation is
provided to Customs.
ITC Notification
In accordance with section 705(d) 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 (APO), without the written consent of the Assistant Secretary for
Import
(Cite as: 57 FR 22570, *22624)
Administration. This notice also serves as the only reminder to parties subject to APO of their responsibility concerning the
return or destruction of proprietary information disclosed under APO in accordance with 19 CFR 355.34(d). Failure to comply is a
violation of the APO.
This determination is published pursuant to section 705(d) of the Act (19 U.S.C. 1671d(d)) and 19 CFR 355.20.
Dated: May 15, 1992.
Alan M. Dunn,
Assistant Secretary for Import Administration.
(FR Doc. 92-12221 Filed 5-27-92; 8:45 am)
BILLING CODE 3510-DS-M