DEPARTMENT OF COMMERCE



International Trade Administration

[C-122-815]



Pure and Alloy Magnesium From Canada; Final Results of the Third

(1994) 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 October 7, 1996, the Department of Commerce (the

Department) published in the Federal Register its preliminary results

of administrative reviews of the countervailing duty orders on pure and

alloy magnesium from Canada for the period January 1, 1994 through

December 31, 1994 (see Pure Magnesium and Alloy Magnesium From Canada;

Preliminary Results of Countervailing Duty Administrative Reviews

(Preliminary Results), 61 FR 52435. We have completed these reviews and

determine the net subsidy to be 4.48 percent ad valorem for Norsk Hydro

Canada, Inc. (NHCI) and all other producers/exporters except Timminco

Limited, which has been excluded from these orders. We will instruct

the U.S.



---- page 18750 ----



Customs Service to assess countervailing duties as indicated above.



EFFECTIVE DATE: April 17, 1997.



FOR FURTHER INFORMATION CONTACT: Cynthia Thirumalai or Steven Harris,

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; tel. (202)

482-4087 and (202) 482-2239, respectively.



SUPPLEMENTARY INFORMATION:



Background



    Pursuant to 19 CFR 355.22(a), these reviews cover only those

producers or exporters of the subject merchandise for which reviews

were specifically requested. Accordingly, these reviews cover only

NHCI, a producer of the subject merchandise which exported pure and

alloy magnesium to the United States during the review period.

    On October 7, 1996, the Department published in the Federal

Register the Preliminary Results of its administrative reviews of the

countervailing duty orders on pure and alloy magnesium from Canada (61

FR 52435). We invited interested parties to comment on the Preliminary

Results. On November 6 and 13, 1997, case briefs and rebuttals were

submitted by NHCI, the Government of Quebec (GOQ), and the Magnesium

Corporation of America (petitioner). At the request of respondents, the

Department held a public hearing on December 4, 1996.

    These reviews cover the period January 1, 1994 through December 31,

1994. The reviews involve one company (NHCI) 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



    Unless otherwise indicated, all citations to the statute are in

reference to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the

Act). The Department is conducting these administrative reviews in

accordance with section 751(a) of the Act.



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).



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



A. 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.......................................................         0.65

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





B. 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.......................................................         3.83

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





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.



Analysis of Comments



Comment 1: Countervailability of the Exemption from Payment of Water

Bills



    Respondents argue that 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



---- page 18751 ----



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 in these reviews and previous ones the

Department has thoroughly analyzed the relevant issues with respect to

NHCI's contract with the Industrial Park and has correctly calculated

the countervailable benefit in the Preliminary Results.



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 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 these reviews, 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



    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 the 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.

    Petitioner agrees with the Department's treatment of the Article 7

benefits received by NHCI and emphasizes that in these reviews and in

prior reviews the Department has addressed the germane issues regarding

the Article 7 benefits.



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



---- page 18752 ----



cases was never intended to dictate that the Department should apply

the loan methodology in every situation in which a government makes

contributions toward a company's interest obligations. 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 the 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) appended to Final Countervailing Duty Determination; Certain

Steel Products from Austria (58 FR 37063, 37226, 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: Reexamination of Specificity of the Article 7 Assistance



    In the event the Department continues to treat the 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 (928 F.2d 1568,

1577 (Fed.Cir. 1991)), Geneva Steel v. United States (914 F.Supp. 563,

598 (CIT 1996)), and Final Affirmative Countervailing Duty

Determinations: Certain Steel Products from Brazil (58 FR 37295, 37303

(July 9, 1993)) 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

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. To this end, the GOQ provided information on the Article

7 assistance extended up to, and including, the POR in a submission

dated April 4, 1996. The GOQ also provided information on assistance

provided under Article 9 of the SDI Act in that same submission.

According to the GOQ, assistance under Article 9 should be included in

the Article 7 specificity analysis because Article 9 was the

predecessor of Article 7 and the provisions of Article 9 functioned

basically the same as those of Article 7.

    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 under Articles 7 and 9 to determine whether NHCI received a

disproportionate share of benefits.

    Petitioner concurs with the Department's decisions on this issue in

these reviews and in prior segments of the proceedings.



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 these

reviews, no new facts or evidence have



---- page 18753 ----



been presented which would lead us to question that determination. We

address respondents' arguments in favor of making a POR-specific

determination and the relevance of the information submitted for

consideration below.

POR-Specific Determinations Re: De Facto Specificity

    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 of the

order on live swine from Canada, 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.

Relevance Of Submitted Information

    As stated in the preceding section, the proper time period for a

specificity determination is the time of bestowal. Therefore,

information submitted by the GOQ on assistance provided subsequent to

the time of bestowal of the assistance granted to NHCI under Article 7

of the SDI Act is not relevant to the specificity determination. The

remaining information presented by the GOQ on the Article 7 assistance

granted prior to and including the time of bestowal of NHCI's Article 7

benefits is nearly identical to that utilized by the Department in its

original specificity determination. Differences between the updated

information on Article 7 provided by the GOQ and information used in

the original specificity determination are sufficiently small so as not

to compromise the original specificity determination.

    As for the GOQ's argument that assistance under Article 9 should

also be included in the specificity analysis, we note that the GOQ

neither alleged that Articles 7 and 9 are integrally linked nor

provided information which would allow us to make a determination on

integral linkage. Information on the record in these proceedings with

respect to Article 9 consists only of the following statement by the

GOQ in its original response to the questionnaire:



    Article 7 replaced Article 9 of the SDI Act in 1986. Article 9

operated almost identically to Article 7. Article 9 assistance, like

Article 7, required authorization by the Gouvernement du Quebec.



In order for the Department to treat two programs as one for purposes

of its specificity analysis, it must be demonstrated that the two

programs are integrally linked. When examining the issue of integral

linkage, it has been the Department's practice to examine, among other

things, the administration of the programs, evidence of a government

policy to treat industries equally, the purposes of the programs as

stated in their enabling legislation and the manner of funding the

program (see Final Negative Countervailing Duty Determination and Final

Negative Critical Circumstances Determination: Certain Laminated

Hardwood Trailer Flooring From Canada 62 FR 5201, 5210 (February 4,

1997)). As can be seen from the foregoing, the GOQ has failed to

provide any evidence supporting its implicit claim that Articles 7 and

9 should be treated as one program. Since Articles 7 and 9 are separate

programs, information submitted on Article 9 assistance does not call

into question the original specificity determination regarding Article

7.

    Based on all of the arguments above, we find that the GOQ has not

provided new information which would cause us to revisit our original

specificity determination. As a result, the bases of the original

specificity determination and the conclusions of that determination are

still valid. We, therefore, maintain that assistance provided to NHCI

under Article 7 of the SDI Act is 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,



---- page 18754 ----



respondents claim the Department denied NHCI due process by preventing

it from rebutting the presumption and 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 agrees with the Department's decisions and analyses of

this issue in these reviews and in prior segments of these proceedings.



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 were 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.



Final Results of Review



    In accordance with 19 CFR 355.22(c)(4)(ii), we calculated an

individual subsidy rate for each producer/exporter subject to these

administrative reviews. For the period January 1, 1994 through December

31, 1994, we determine the net subsidy for



---- page 18755 ----



NHCI to be 4.48 percent ad valorem. This rate adjusts the rate of 4.01

percent found in the Preliminary Results to a f.o.b. basis (see the GIA

at 37237). We will instruct the U.S. Customs Service to assess

countervailing duties as indicated above. The Department will also

instruct Customs to collect cash deposits of estimated countervailing

duties in the percentages detailed above of the f.o.b. invoice price on

all shipments of subject merchandise from reviewed companies, except

from Timminco Limited (which was excluded from the order in the

original investigations), entered, or withdrawn from warehouse, for

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

these reviews.

    Because the URAA replaced the general rule in favor of a country-

wide rate with a general rule in favor of individual rates for

investigated and reviewed companies, the procedures for establishing

countervailing duty rates, including those for non-reviewed companies,

are now essentially the same as those in antidumping cases, except as

provided for in Sec. 777A(e)(2)(B) of the Act. The requested review

will normally cover only those companies specifically named. See 19 CFR

355.22(a). Pursuant to 19 CFR 355.22(g), for all companies for which a

review was not requested, duties must be assessed at the cash deposit

rate, and cash deposits must continue to be collected at the rate

previously ordered. As such the countervailing duty cash deposit rate

applicable to a company can no longer change, except pursuant to a

request for a review of that company. See Federal-Mogul Corporation and

The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and

Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)

(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic

assessment, which is identical to 19 CFR 355.22(g)). Therefore, the

cash deposit rates for all companies except those covered by these

reviews will be unchanged by the results of these reviews.

    We will instruct Customs to continue to collect cash deposits for

non-reviewed companies at the most recent company-specific or country-

wide rate applicable to the company, except from Timminco Limited

(which was excluded from the order in the original investigations).

Accordingly, the cash deposit rates that will be applied to non-

reviewed companies covered by these orders are those established in the

most recently completed administrative proceeding, conducted pursuant

to the statutory provisions that were in effect prior to the URAA

amendments. See Pure and Alloy Magnesium from Canada: Final Results of

the First (1992) Countervailing Duty Administrative Reviews (62 FR

13857 (March 24, 1997)). These rates shall apply to all non-reviewed

companies until a review of a company assigned these rates is

requested. In addition, for the period January 1, 1994 through December

1994, the assessment rates applicable to all non-reviewed companies

covered by these orders are the cash deposit rates in effect at the

time of entry.

    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.

    These administrative reviews and notice are in accordance with

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



    Dated: April 7, 1997.

Robert S. LaRussa,

Assistant Secretary for Import Administration (Acting).

[FR Doc. 97-9962 Filed 4-16-97; 8:45 am]

BILLING CODE 3510-DS-P





The Contents entry for this article reads as follows:



International Trade Administration

NOTICES

Countervailing duties:

  Pure and alloy magnesium from--

    Canada, 18749