DEPARTMENT OF COMMERCE

[C-122-815]



Pure and Alloy Magnesium From Canada: Final Results of the First

(1992) Countervailing Duty Administrative Reviews



AGENCY: Import Administration, International Trade Administration,

Department of Commerce.



ACTION: Notice of final results of countervailing duty administrative

reviews.





SUMMARY: On March 19, 1996, the Department of Commerce (the Department)

published in the Federal Register its preliminary results of

administrative review of the countervailing duty orders on pure and

alloy magnesium from Canada for the period December 6, 1991 through

December 31, 1992 (see Preliminary Results of First Countervailing Duty

Administrative Reviews: Pure Magnesium and Alloy Magnesium From Canada

(Preliminary Results),  61 FR 11186 (March 19, 1996)). We have

completed these reviews and determine the net subsidy to be 9.86

percent ad valorem for Norsk Hydro Canada, Inc. and all other

producers/exporters except Timminco Limited, which has been excluded

from these orders. We will instruct the U.S. Customs Service to assess

countervailing duties as indicated above.



EFFECTIVE DATE: March 24, 1997.



FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai, Office 1, Group 1,

AD/CVD Enforcement, Import Administration, International Trade

Administration, U.S. Department of Commerce, 14th Street and

Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-

4087.



SUPPLEMENTARY INFORMATION:



Background



    On March 19, 1996, the Department published in the Federal Register

the Preliminary Results of its administrative



---- page 13858 ----



reviews of the countervailing duty orders on pure and alloy magnesium

from Canada (61 FR 11186). The Department has now completed these

administrative reviews in accordance with section 751 of the Tariff Act

of 1930, as amended (the Act).

    We invited interested parties to comment on the Preliminary

Results. On April 18 and 25, 1996, case briefs and rebuttals were

submitted by Norsk Hydro Canada, Inc. (NHCI), a producer of the subject

merchandise which exported pure and alloy magnesium to the United

States during the review period, the Government of Quebec (GOQ), and

the Magnesium Corporation of America (petitioner). At the request of

respondents, the Department held a public hearing on May 2, 1996.



Period of Review



    The reviews cover the period December 6, 1991 through December 31,

1992. The reviews involve one company and the following programs:

Exemption from Payment of Water Bills, Article 7 Grants from the Quebec

Industrial Development Corporation (SDI), St. Lawrence River

Environment Technology Development Program, Program for Export Market

Development, the Export Development Corporation, Canada-Quebec

Subsidiary Agreement on the Economic Development of the Regions of

Quebec, Opportunities to Stimulate Technology Programs, Development

Assistance Program, Industrial Feasibility Study Assistance Program,

Export Promotion Assistance Program, Creation of Scientific Jobs in

Industries, Business Investment Assistance Program, Business Financing

Program, Research and Innovation Activities Program, Export Assistance

Program, Energy Technologies Development Program, and Transportation

Research and Development Assistance Program.



Applicable Statute and Regulations



    The Department is conducting these administrative reviews in

accordance with section 751(a) of the Act. Unless otherwise indicated,

all citations to the statute and to the Department's regulations are in

reference to the provisions as they existed on December 31, 1994.

However, references to the Department's Countervailing Duties; Notice

of Proposed Rulemaking and Request for Public Comments, 54 FR 23366

(May 31, 1989) (Proposed Regulations), are provided solely for further

explanation of the Department's countervailing duty practice. Although

the Department has withdrawn the particular rulemaking proceeding

pursuant to which the Proposed Regulations were issued, the subject

matter of these regulations is being considered in connection with an

ongoing rulemaking proceeding which, among other things, is intended to

conform the Department's regulations to the Uruguay Round Agreements

Act. (See 60 FR 80 (Jan. 3, 1995)).



Scopes of the Reviews



    The products covered by these reviews are shipments of pure and

alloy magnesium from Canada. Pure magnesium contains at least 99.8

percent magnesium by weight and is sold in various slab and ingot forms

and sizes. Magnesium alloys contain less than 99.8 percent magnesium by

weight with magnesium being the largest metallic element in the alloy

by weight, and are sold in various ingot and billet forms and sizes.

Secondary and granular magnesium are not included in the scope of the

orders. Pure and alloy magnesium are currently provided for in

subheadings 8104.11.0000 and 8104.19.0000, 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 is dispositive.

    Secondary and granular magnesium are not included in the scopes of

these orders. Our reasons for excluding granular magnesium are

summarized in the Preliminary Determination of Sales at Less Than Fair

Value: Pure and Alloy Magnesium from Canada (57 FR 6094, February 20,

1992).



Calculation Methodology for Assessment and Cash Deposit Purposes



    Since NHCI is the only known producer/exporter subject to these

orders, we used its ad valorem subsidy rate to determine the country-

wide ad valorem subsidy rate. This ad valorem subsidy rate does not

apply to Timminco Limited because it has been excluded from these

orders.



Analysis of Programs



    Based upon our analysis of our questionnaire responses and written

comments from the interested parties we determine the following:





I. Programs Conferring Subsidies



1. Exemption From Payment of Water Bills



    In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our findings from the Preliminary Results. On this

basis, the net subsidy rate for this program is as follows:



------------------------------------------------------------------------

                                                                 Rate

                   Manufacturer/exporter                      (percent)

------------------------------------------------------------------------

NHCI and All Other Producers/Exporters except Timminco Ltd.         1.31

------------------------------------------------------------------------





2. Article 7 Grants From the Quebec Industrial Development Corporation

    In the preliminary results, we found that this program conferred

countervailable benefits on the subject merchandise. Our analysis of

the comments submitted by the interested parties, summarized below, has

not led us to change our findings from the Preliminary Results. On this

basis, the net subsidy for this program is as follows:



------------------------------------------------------------------------

                                                                 Rate

                   Manufacturer/exporter                      (percent)

------------------------------------------------------------------------

NHCI and All Other Producers/Exporters except Timminco Ltd.         8.55

------------------------------------------------------------------------





II. Programs Found Not To Be Used



    In the preliminary results we found that the producers and/or

exporters of the subject merchandise did not apply for or receive

benefits under the following programs: 

    · St. Lawrence River Environment Technology Development Program.

    · Program for Export Market Development.

    · Export Development Corporation.

    · Canada-Quebec Subsidiary Agreement on the Economic

      Development of the Regions of Quebec.

    · Opportunities to Stimulate Technology Programs.

    · Development Assistance Program.

    · Industrial Feasibility Study Assistance Program.

    · Export Promotion Assistance Program.

    · Creation of Scientific Jobs in Industries.

    · Business Investment Assistance Program.

    · Business Financing Program.

    · Research and Innovation Activities Program.

    · Export Assistance Program.

    · Energy Technologies Development Program.

    · Transportation Research and Development Assistance Program.



    We received no comments on these programs from the interested

parties; therefore, we have not changed our findings from the

Preliminary Results.



---- page 13859 ----



Analysis of Comments



Comment 1: Countervailability of the Exemption From Payment of Water

Bills



    Respondents argue that the NHCI's contract with its supplier of

water, La Societe du Parc Industriel et Portuaire de Becancour

(``Industrial Park''), was inextricably linked with the credit it

received from the GOQ to offset its water bills. If the water credit

had not been received, respondents state that a different billing

arrangement would have been made. Therefore, in determining the amount

of the benefit conferred by the credit, the Department should look to

what NHCI would have paid absent the water credit and the contract

compared to what it paid with the credit and the contract. To calculate

what NHCI would have paid absent the credit and the contract,

respondents argue that the closest approximation is the amount NHCI

would have paid under its present contract based on actual water

consumption rather than forecasted consumption.

    Petitioner states that under the terms of the contract between NHCI

and the Industrial Park, the amount invoiced is based, in part, on

forecasted consumption and this amount is what NHCI would have paid in

the absence of the water credit. By countervailing the portion of the

water invoice that was offset by the water credit and, hence, not paid

by NHCI, petitioner states that the Department correctly calculated the

countervailable benefit in the Preliminary Results. Even if the

Department were to consider what NHCI would pay in the absence of the

credit and existing contract, petitioner points out that other

Industrial Park customers also are obligated to pay an amount based, in

part, on forecasted consumption although they are allowed to change

their forecasted consumption levels yearly. Hence, forecasted

consumption cannot be ignored as an element of the charge for water.

Petitioner also points out that, in addition to requiring the

Industrial Park to supply the actual amount of water used by NHCI, the

contract also bound the Industrial Park to certain other potential

obligations upon the request of NHCI. According to petitioner, the

contract was structured to compensate the Industrial Park for any costs

it might incur in meeting those other potential obligations.

    DOC Response: We disagree with respondents that we are required to

hypothesize what NHCI would have paid for its water in the absence of

the credit and the contract it entered into to measure the benefit

conferred by the credit. The position put forward by NHCI is analogous

to a situation where a company received a low-interest loan from a

government and argues to the Department that because of the low

interest rate, it borrowed more than it otherwise would have.

Therefore, the company would contend, to calculate the benefit

conferred by the low-interest loan, the Department should compare the

actual amount of interest paid on the low-interest loan with the actual

amount of interest the company would have paid on a smaller loan at a

higher benchmark interest rate. In this loan situation, we would not

enter into a hypothetical calculation of what amount the company would

have borrowed absent the low-interest loan. Instead, consistent with

section 771(5)(A)(II)(c) of the Act, we would simply countervail the

difference in the two interest rates without regard to what effect the

interest rate has on the other terms of the loan, i.e., the amount

borrowed.

    In this review, the terms of the contract between NHCI and the

Industrial Park unambiguously state that NHCI is required to pay an

amount based, in part, on forecasted consumption. To the extent the

GOQ's provision of the credit relieved NHCI from paying its water

bills, a countervailable benefit existed without regard to whether NHCI

would have received different terms under an alternative arrangement.

Therefore, we determine that the benefit is the full amount of the

credit.



Comment 2: Article 7 Assistance Under the SDI Act



    Petitioner states that the label ``interest rebate'' placed on the

Article 7 assistance provided by the SDI does not change the nature of

the assistance and that it remains, in substance, a grant. According to

petitioner, the purpose, amount and disbursement timetable for the

Article 7 assistance was inextricably linked to NHCI's purchase of

specified environmental protection equipment. Petitioner further points

out that the Article 7 assistance was not tied to the cost of NHCI's

plant, the total amount of NHCI borrowing, the interest rate paid by

NHCI on its borrowings, or the total amount of interest incurred by

NHCI. Petitioner argues that the assistance had the impact of

encouraging NHCI to install specified environmental protection

equipment as opposed to encouraging NHCI to borrow money that it

otherwise would not have borrowed. In light of the above, petitioner

concludes that the funding was in the form of a non-recurring grant.

Petitioner emphasizes that the Department should not allow respondents

to engage in ``subsidy engineering'' by turning a large non-recurring

capital grant into some other type of benefit.

    Respondents argue that the Department improperly applied its grant

methodology to the Article 7 assistance provided to NHCI. According to

respondents, because NHCI knew it would receive interest rebates from

SDI prior to taking out loans, the Department should calculate the

benefit using its loan methodology and reduce the interest rate charged

by the amount of the interest rebated. Respondents state that this

would be consistent with the Department's methodology, citing a number

of cases (e.g., Final Affirmative Countervailing Duty Determination;

Certain Steel Products From the United Kingdom (UK Steel), 58 FR 37393,

37397 (July 9, 1993)).

    Respondents further contend that the Preliminary Results were based

on significant errors of fact regarding the interest rebates received

by NHCI. First, respondents argue that the relationship between the

interest rebates and the underlying loans was not indirect. Second, the

interest rebates received by NHCI reduced NHCI's costs of borrowing for

the construction of its plant, not its costs of purchasing

environmental equipment.

    With respect to the first point, respondents argue that the

Department was incorrect in its assertion that the Article 7 assistance

was more closely linked to the acquisition of certain assets than the

accumulation of interest costs. Moreover, respondents maintain that the

SDI assistance was not intended solely for the purchase of

environmental protection equipment, but was also intended to facilitate

the construction of NHCI's facility in Quebec. The fact that the

Article 7 assistance was intended to achieve more than one objective

does not distinguish the Article 7 assistance from other interest

rebate programs which the Department has treated under its loan

methodology, according to respondents.

    With respect to the second point, respondents argue that since the

Department wrongly assumed that Article 7 assistance was provided

solely for the purchase of environmental equipment, the Department was

able to conclude that the interest rebates exceeded the interest that

would be in connection with the purchase of the environmental

equipment. Hence, the Department concluded that the Article 7

assistance should not be treated as an interest rebate. However,

because the Article 7 assistance was intended to reduce the cost of

financing for the project as a whole, the assistance was not excessive

in the sense described by the Department.



---- page 13860 ----



    DOC Position: The issue presented by this case is whether the

Article 7 assistance received by NHCI should be treated as an interest

rebate or as a grant. If it is treated as an interest rebate, then

under the methodology adopted by the Department in the 1993 steel

cases, the benefit of the Article 7 assistance would be countervailed

according to our loan methodology (Final Affirmative Countervailing

Duty Determinations: Certain Steel Products From Belgium, (Belgium

Steel) 58 FR 37273, 37276, July 9, 1993). However, if treated as a

grant, the benefits would be allocated over a period corresponding to

the life of the company's assets.

    In their brief, respondents argue that the interest rebate

methodology reflects the fact that companies face a choice between debt

and equity financing. If a company knows that the government is willing

to rebate interest charges before the company takes out a loan, the

government is encouraging the company to borrow rather than sell

equity. Hence, respondents conclude, the benefit should be measured

with reference to the duration of the borrowing for which the rebate is

provided.

    We disagree that the Department's interest rebate methodology was

intended to reflect the choice between equity and loan financing. In

the 1993 steel cases, (See, e.g., Belgium Steel), we examined a

particular type of subsidy, interest rebates, and determined which of

our valuation methodologies was most appropriate. The possible choices

were between the grant and loan methodologies. Where the company had

knowledge prior to taking the loan out that it would receive an

interest rebate, we decided that the loan methodology was most

appropriate because there is virtually no difference between the

government offering a loan at 5 percent interest (which would be

countervailed according to the loan methodology) and offering to rebate

half of the interest paid on a 10 percent loan from a commercial bank

each time the company makes an interest payment. Hence, we were seeking

the closest methodological fit for different types of interest rebates.

    However, the interest rebate methodology described in the 1993

steel cases was never intended to dictate that the Department should

apply the loan methodology in every situation. The appropriate

methodology depends on the nature of the subsidy. For example, assume

that the government told a company that it would make all interest

payments on all construction loans the company took out during the next

year up to $6 million. This type of ``interest rebate'' operates

essentially like a $6 million grant restricted to a specific purpose.

Whether the purpose is to pay interest expenses or buy a piece of

equipment does not change the nature of the subsidy. In contrast, the

interest rebate methodology is appropriate for the type of interest

rebate programs investigated in the 1993 steel cases, i.e., partial

interest rebates paid over a period of years on particular long-term

loans.

    As we did in the 1993 steel cases, the Department in these reviews

is seeking the most appropriate methodology for the Article 7

assistance. We erred in our Preliminary Results of First Countervailing

Duty Administrative Reviews: Pure Magnesium and Alloy Magnesium from

Canada, 61 FR 11186 (March 19, 1996), in stating that the primary

purpose of the Article 7 assistance was to underwrite the purchase of

environmental equipment. However, it cannot be disputed that the

environmental equipment played a crucial role in the agreement between

SDI and NHCI. Most importantly, the aggregate amount of assistance to

be provided was determined by reference to the cost of environmental

equipment to be purchased. In this respect, the Article 7 assistance is

like a grant for capital equipment.

    Further, the assistance provided by SDI is distinguishable from the

interest rebates addressed in the 1993 steel cases in that the interest

payments in the steel cases rebated a portion of the interest paid on

particular long-term loans. Here, although the disbursement of Article

7 assistance was contingent, inter alia, on NHCI making interest

payments, the disbursements were not tied to the amount borrowed, the

number of loans taken out or the interest rates charged on those loans.

Instead, the disbursements were tied to NHCI meeting specific

investment targets and generally to NHCI having incurred interest costs

on borrowing related to the construction of its facility.

    Therefore, while we recognize that NHCI had to borrow and pay

interest in order to receive individual disbursements of Article 7

assistance, we do not agree that this fact is dispositive of whether

the interest rebate methodology used in the 1993 steel cases is

appropriate. We believe this program more closely resembles the

scenario described above where the government agrees to pay all

interest incurred on construction loans taken out by a company over the

next year up to a specified amount. Because, in this case, the amount

of assistance is calculated by reference to capital equipment purchases

(something extraneous to the interest on the loan) and the

reimbursements do not relate to particular loans, we determine that the

Article 7 assistance should be treated as a grant.

    The Department has in past cases classified subsidies according to

their characteristics. For example, in the General Issues Appendix

(GIA) attached to the Final Affirmative Countervailing Duty

Determination: Certain Steel Products from Austria 58 FR 37217, 37254

(July 9, 1993), we developed a hierarchy for determining whether so-

called ``hybrid instruments'' should be countervailed according to our

loan, grant or equity methodologies. In short, we were asking whether

the details of particular government ``contributions'' made them more

like a loan, a grant or an equity infusion. Similarly, when a company

receives a grant, we look to the nature of the grant to determine

whether the grant should be treated as recurring or non-recurring. In

these reviews, we have undertaken the same type of analysis, i.e.,

determining an appropriate calculation methodology based on the nature

of the subsidy in question. As with hybrid instruments and recurring/

non-recurring grants, it is appropriate to determine which methodology

is most appropriate based on the specific facts of the Article 7

assistance. Although the Article 7 assistance exhibits characteristics

of both an interest rebate and a grant, based on an overview of the

contract under which the assistance was provided, we determine that the

weight of the evidence in this case supports our treatment of the

Article 7 assistance as a grant.



Comment 3: Re-Examination of Specificity of Article 7 Assistance



    In the event the Department continues to treat Article 7 assistance

as a non-recurring grant, respondents state that the Department is

obliged to make a finding that the Article 7 assistance conferred a

subsidy to NHCI during the POR. The Department may not, as it has here,

rely on a factual finding of disproportionality during a different time

period and different amounts of assistance. Respondents state that a

finding of de facto specificity requires a case-by-case analysis,

citing PPG Industries, Inc. v. United States, Geneva Steel v. United

States, and Certain Steel Products from Brazil to support their

reasoning. Respondents also cite the sixth administrative review of

Live Swine from Canada; Final Results of Countervailing Duty

Administrative Review (Live Swine) (59 FR 12243 (March 16, 1994)) as an

example where the Department reexamined the



---- page 13861 ----



countervailability of benefits found to be de facto specific in prior

reviews.

    Respondents maintain that given the Department's responsibility to

make a finding of specificity and countervailability based on the

information relevant to the POR, the Department should consider any new

assistance provided by SDI since the end of the original period of

investigation. Respondents then present a methodology they believe

should be employed whereby the Department would compare the portion of

NHCI's original grant allocated to the POR, based on the Department's

standard allocation methodology, and the portions of benefits allocated

to the POR for all assistance bestowed to all other enterprises

receiving SDI assistance to determine whether NHCI received a

disproportionate share of benefits. Respondents state that the

Department had a responsibility to gather the information necessary to

make the specificity determination they have described. Since the

Department has not gathered the information required for their proposed

methodology, respondents conclude that a determination of de facto

specificity during the POR is not possible.

    Petitioner counters that since the Article 7 assistance was in the

form of a non-recurring grant, the Department properly looked at the

time period when the government granted the assistance to make the

specificity finding. According to petitioner, the provision of the

assistance was, and always will be, specific regardless of how the GOQ

administers the program in future years--even if it were to abolish the

program. In other words, petitioner states that no future action by the

GOQ could retroactively make the subsidy non-specific. Simply because

the Department's grant calculation methodology assigns an amortized

portion of the assistance to this review period, it does not mean that

the GOQ is granting a new subsidy worthy of a new specificity analysis.

Indeed, states petitioner, if a new subsidy were being analyzed, the

Department's specificity analysis would not take into account portions

of old subsidies amortized into the period being examined.

    DOC Position: It is the Department's policy not to revisit

specificity determinations absent the presentation of new facts or

evidence (see, e.g., Carbon Steel Wire Rod From Saudi Arabia; Final

Results of Countervailing Duty Administrative Review and Revocation of

Countervailing Duty Order, 59 FR 58814, November 15, 1994). In this

review, no new facts or evidence have been presented which would lead

us to question that determination. We address respondents' arguments in

favor of making a POR-specific determination below.

    Respondents refer to the various reviews of the countervailing duty

order on live swine from Canada as demonstrating that the Department

has, as a matter of course, revisited its de facto specificity

determinations from one segment of a proceeding to another. While

distinct de facto specificity determinations were made with respect to

the Tripartite program in the fourth, fifth and sixth reviews, these

were not done as a matter of course. The Department reexamined

specificity in these reviews of live swine only as a result of an

adverse decision by the Binational Panel. Because the Binational Panel

overturned the Department's finding of specificity regarding the

Tripartite program in the fourth review of live swine for lack of

evidence (and eventually rejected its analysis regarding specificity in

the fifth review but upheld its decision), the Department continued to

collect information in the sixth review, which was running concurrently

with the Binational proceedings. In explaining its actions in the sixth

review, the Department recognized that it does not routinely revisit

specificity determinations, as respondents would have us believe, in

stating the following:



Although our practice is not to reexamine a specificity

determination (affirmative or negative) made in the investigation or

in a review absent new facts or evidence of changed circumstances,

the record in the prior reviews did not contain all of the

information we consider necessary to define the agricultural

universe in Canada.



(See Live Swine.) As can be seen from the foregoing, the facts

surrounding the live swine reviews do not correspond to the situation

presented here. In particular, the issue of specificity had not been

conclusively settled in the live swine reviews and was in the process

of litigation, and different information was available; unlike this

case in which a definitive specificity determination had already been

established.

    As for respondents' arguments that de facto specificity

determinations should be done on a case-by-case basis, we agree.

However, we disagree with respondents as to what ``case-by-case''

means. In each of the citations respondents refer to, ``case'' referred

not to a separate segment of the same proceeding (e.g., the first

review of an order distinct from the second review), but to a separate

investigation or review of different products (e.g., an investigation

of carbon black from Mexico as opposed to an investigation of steel

products from Brazil) . It is this latter definition of ``case'' we

find to be the proper basis for examination of de facto specificity

determinations. Since a separate de facto specificity determination was

made in the investigations of pure and alloy magnesium, we find that

the analysis was properly conducted.

    In proposing that the Department base a POR-specific de facto

specificity finding on the portions of non-recurring grants allocated

to the POR, the respondents appear to be confusing the initial

specificity determination based on the action of the granting authority

at the time of bestowal with the allocation of the benefit over time.

These are two separate processes. The portions of grants allocated to

periods of time using the Department's standard allocation methodology

are irrelevant to an examination of the actual distribution of benefits

by the granting government at the time of bestowal. We agree with

petitioner that the determination of whether a non-recurring subsidy

was specific (or not) at the time of bestowal then becomes attached to

the subsidy.

    Based on all of the arguments above, we find that the bases of the

original specificity determination are still valid. Since no new

evidence has been presented which would cause us to revisit the

original specificity determination, we continue to find assistance

under Article 7 of the SDI Act to be specific and, therefore,

countervailable.



Comment 4: Appropriate Denominator



    Respondents state that in the Preliminary Results the Department

deviated from its standard practice in determining the denominator for

companies with multinational production facilities that fail to rebut

the presumption that subsidies are domestically tied. In particular,

respondents argue that it is the Department's policy to tie such

subsidies to domestic operations, by allocating benefits to sales by

the domestic company regardless of country of manufacture, as opposed

to tying to domestic production, as was done in the Preliminary

Results. Respondents additionally state that the Department both failed

to explain its basis for presuming that the subsidies were tied to

Canadian production and to respond to NHCI's arguments in favor of

allocating the subsidies over sales by NHCI of subject merchandise

regardless of country of manufacture. In so doing, respondents claim

the Department denied NHCI due process by preventing it from rebutting

the presumption and



---- page 13862 ----



from responding to the rationale the Department used to support its

decision to tie the subsidies to domestic production. In support of

their assertion that the subsidies NHCI received are tied to its

domestic operations, respondents state that any funds received

benefited all employment-related activities in Canada (e.g., sales of

all products) and that these activities are related to both domestic

and foreign production. Respondents elaborate further that the

denominator policy used by the Department in this case is a deviation

from the fungibility of money principle.

    Respondents also cite British Steel plc v. United States (British

Steel) (479 F. Supp. 1254, 1371) in which the Court reversed and

remanded the Department's determinations because it found that the

Department should have given plaintiffs due notice of its decision to

apply the rebuttable presumption that the subsidies at issue were tied

to domestic production in order to allow plaintiffs the opportunity to

rebut the Department's presumption.

    Petitioner states that there is nothing on the record indicating

that the GOQ intended the funds it provided to NHCI to benefit

production in another country. Therefore, the Department should

continue to allocate the subsidies received over sales of merchandise

produced in Canada.

    DOC Response: Respondents cite British Steel in an attempt to imply

that the Department must inform parties early during the course of each

proceeding of its intent to use the rebuttable presumption that

subsidies to companies with foreign manufacturing operations are tied

to domestic production. However, the facts involved in British Steel

are readily distinguishable. Therefore, the holding in that case does

not apply to the present situation.

    In British Steel, the Court was examining the Department's policy

of using the rebuttable presumption articulated in the GIA. In

particular, the Court took issue with the introduction of the new

policy in the final-determination stage of the investigation because

the timing prevented parties from both commenting on the methodology

and from presenting evidence rebutting the presumption. It is important

to note that the Department's remand determination, as affirmed by the

Court, upheld the appropriateness of using the rebuttable presumption.

The Department has continued to use the rebuttal presumption and this

policy has become accepted Department practice. Unlike British Steel,

we are not dealing with the introduction of a new policy late into the

course of a proceeding in this case. Therefore, the Department was not

required to forewarn respondents of the use of the rebuttable

presumption.

    We also note that the use of a denominator based only on

domestically produced merchandise did not come as a surprise to

respondents. To begin, in the original investigations of these cases

(which pre-dated the rebuttable presumption) the Department used a

denominator based only on sales of domestically produced merchandise

(Final Affirmative Countervailing Duty Determinations: Pure Magnesium

and Alloy Magnesium From Canada, 57 FR 30946 (July 13, 1992)). Since

the investigations in these cases, there has been a changed

circumstances review (57 FR 54047 (November 16, 1992)) and a Binational

Panel proceeding. In all of the proceedings, the denominators have

included only domestically produced merchandise and in no case have

respondents objected to those denominators. In addition, the

questionnaire for these reviews requested information on sales

denominators based on domestically produced merchandise. NHCI provided

the requested sales denominator information along with denominators

based on total sales by NHCI and arguments why those based on total

sales should be used. Moreover, sales of domestically produced

merchandise was used as the denominator in the Preliminary Results. As

can be seen from the foregoing, respondents were aware as to the

possible use of a denominator based on domestically produced

merchandise and did indeed have an opportunity to attempt to rebut the

presumption.

    Respondents also argue that the Department must explain the basis

of its presumption. However, the idea behind the use of a rebuttable

presumption is that the fact presumed--in this case that subsidies

bestowed on companies with foreign manufacturing operations are tied to

domestic production--becomes the default position and does not have to

be explained in each case. As the Department stated in the GIA, ``Thus,

under the Department's refined ``tied'' analysis, the Department will

begin by presuming that a subsidy provided by the government of the

country under investigation is tied to domestic production'' (GIA at

37231). It follows that the Department will find that subsidies are

tied to domestic production in the absence of evidence to the contrary.

    As for respondents' complaint that the Department failed to address

its arguments that the subsidies received by NHCI benefited all of the

company's operations, not just its manufacturing activities, we note

that in the GIA it states, ``A party may rebut this presumption by

presenting evidence tending to show that the subsidy was not tied to

domestic production * * *'' The phrase, ``tending to show'' means that

the party attempting to rebut the presumption must provide enough

evidence to convince a reasonable fact-finder of the non-existence of

the presumed fact--that subsidies are tied to the recipient firm's

domestic production (Results of Redetermination Pursuant to Court

Remand on General Issue of Sales Denominator: British Steel plc v.

United States, Consol. Ct. No. 93-09-00550-CVD, Slip Op. 95-17 and

Order (CIT Feb. 9, 1995) at 17). The mere absence of evidence limiting

the government's intended scope of the benefit to domestic production

is not sufficient. In this case, respondents' arguments have not risen

to the level of evidence that would convince us that the GOQ intended

that the subsidies it bestowed on NHCI were to benefit more than just

domestic production. Therefore, respondents have failed to rebut the

presumption that the subsidies received by NHCI were tied to domestic

production.

    The Department's methodology for determining what to include in the

denominator when a company has foreign manufacturing operations is

explained in the GIA: ``If we determine that the subsidy is tied to

domestic production, we will allocate the benefit of the subsidy fully

to sales of domestically produced merchandise'' [emphasis added] (GIA

at 37231). This quotation makes it clear that sales of foreign-produced

merchandise by a respondent company would not be included in the

denominator. Even if we were to consider tying the subsidies at issue

to domestic operations, using respondents' suggestion of a sales

denominator based on total NHCI sales would be improper since such a

figure would include sales of foreign-produced merchandise by NHCI and,

therefore, value-added from operations in other countries. Based on the

foregoing arguments, we have continued to allocate subsidies received

by NHCI to the company's merchandise produced in Canada.



Comment 5: Suspension of Liquidation for the Period April 4, 1992 to

August 31, 1992



    Respondents argue that since the Department terminated suspension

of liquidation for entries on or after April 4, 1992 to August 31,

1992,



---- page 13863 ----



countervailing duties cannot be reassessed for that period.

    DOC Position: We agree with respondents.



Final Results of Review



    For the period December 6, 1991 through December 31, 1992, we

determine the net subsidy to be 9.86 percent ad valorem for Norsk Hydro

Canada Inc. and all other companies except Timminco Limited, which has

been excluded from these orders. This rate corrects the rate of 9.87

found in the Preliminary Results which arose from a rounding error.

    The Department will instruct the U.S. Customs Service to assess the

following countervailing duties on entries during the periods December

6, 1991 to April 3, 1992 and September 1, 1992 to December 31, 1992:



------------------------------------------------------------------------

                                                                 Rate

                   Manufacturer/exporter                      (percent)

------------------------------------------------------------------------

Norsk Hydro Canada Inc. and All Other Companies Except

 Timminco Limited (which is excluded from these orders)....         9.86

------------------------------------------------------------------------



    The Department will also instruct the U.S. Customs Service to

collect a cash deposit of estimated countervailing duties of 9.86

percent of the f.o.b. invoice price on all shipments of the subject

merchandise from Norsk Hydro Canada Inc. and all other companies except

Timminco Limited (which was excluded from the order during the original

investigation), entered, or withdrawn from warehouse, for consumption

on or after the date of publication of the final results of these

reviews.

    This notice serves as a reminder to parties subject to

administrative protective order (APO) of their responsibility

concerning the disposition of proprietary information disclosed under

APO in accordance with 19 CFR 355.34(d). Timely written notification of

return/destruction of APO materials or conversion to judicial

protective order is hereby requested. Failure to comply with the

regulations and the terms of an APO is a sanctionable violation.

    This administrative review and notice are in accordance with

section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.



    Dated: March 12, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-7358 Filed 3-21-97; 8:45 am]

BILLING CODE 3510-DS-P



The Contents entry for this article reads as follows:



International Trade Administration

NOTICES

Countervailing duties:

  Magnesium, pure and alloy, from--

    Canada, 13857