DEPARTMENT OF COMMERCE



International Trade Administration

[C-122-815]



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

(1993) 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 24, 1997, 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, 1993 through

December 31, 1993 (see Pure Magnesium and Alloy Magnesium From Canada;

Preliminary Results of Countervailing Duty Administrative Reviews

(Preliminary Results), 62 FR 13863). We have completed these reviews

and determine the net subsidy to be 7.34 percent ad valorem for Norsk

Hydro Canada, Inc. (NHIC) 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: September 16, 1997.



FOR FURTHER INFORMATION CONTACT:

Cynthia Thirumalai or Sally Hastings. AD/CVD Enforcement, Group 1,

Office 1, Import Administration, International Trade Administration,

U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,

Washington, DC 20230; telephone: (202) 482-4087 or (202) 482-3464,

respectively.



SUPPLEMENTARY INFORMATION:



Background



    On March 24, 1997, the Department published in the Federal Register

(62 FR 13863) the preliminary results of its administrative reviews of

the countervailing duty orders on pure and alloy magnesium from Canada

(62 FR 13863). 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 23, 1997, case briefs were submitted by NHCI, a

producer of subject merchandise which export pure and alloy magnesium

to the United States during the review period, and the Government of

Quebec (GOQ). At the request of respondents, the Department held a

public hearing on May 13, 1997.

    These reviews cover the period January 1, 1993 through December 31,

1993. 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, Financial Assistance

Program For Research Formation and for the Improvement of the Recycling

Industry, and Transportation Research and Development Assistance

Program.



Applicable Statute



    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.



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 classifiable under subheadings

8104.11.000 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.



Analysis of Programs



    Based upon the analysis of the 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 of the interested parties, summarized below, has not led

us to change our findings with respect to the countervailability of

this program. The net subsidy rate for this program is as follows:



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

                                                                 Rate

                   Manufacturer/exporter                      (percent)

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

NHCI.......................................................         1.00

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





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 with respect to the

countervailability of this program. The net subsidy for this program is

as follows:



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

                                                                 Rate

                   Manufacturer/exporter                      (percent)

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

NHCI.......................................................         6.34

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





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 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



---- page 48608 ----



· Business Financing Program

· Research and Innovation Activities Program

· Export Assistance Program

· Energy Technologies Development Program

· Financial Assistance Program for Research Formation and for

  the Improvement of the Recycling Industry

· 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: Countervailable Benefit Received From the Exemption From

Payment of Water Bills



    While agreeing that NHCI's contract with its supplier of water, La

Societe du Parc Industriel et Portuaire de Becancour (``Industrial

Park''), was linked with the credit it received from the GOQ to offset

its water bills and reflected a forecasted annual rate of consumption,

respondents argue that the GOQ's recalculation of NHCI's water bills

reflecting actual consumption is a more accurate measure of the

countervailable benefit than is the water bill credit received by NHCI

during the review period. Respondents state that a different billing

arrangement would have been made if a water credit had not been

received. In summary, respondents argue that the Department should look

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

compared to what NHCI paid with the credit and the contract to

determine the amount of the benefit conferred by the credit.

    DOC Position: 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. Simply put, the GOQ gave NHCI a credit based

on and because of the contract and NHCI's forecasted usage. The water

contract and the credit are inextricably linked. Again, we compare

NHCI's argument to a situation in which a company that received a low-

interest loan from a government argues to the Department that because

of the low interest rate, it borrowed a greater amount of money 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 between the two interest rates

regardless of the 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 regardless of any hypothetical

alternative arrangements. Therefore, as stated in the Preliminary

Results we determine that the countervailable 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,

the Department should calculate the benefit using its loan methodology

and reduce the interest rate charged by the amount of the interest

rebated because NHCI knew it would receive interest rebates from SDI

prior to taking out loans. Respondents state that this would be

consistent with the Department's methodology, and cite a number of

cases in support thereof (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, 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. Second, respondents argue that the

relationship between the interest rebates and the underlying loans was

not indirect.

    With respect to the first 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 expended 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.

    With respect to the second 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.

    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 a interest rebate, then under

the methodology adopted by the Department in 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 of 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, we examined a particular type of subsidy,

interest rebates, and determined which of our valuation methodologies

was most appropriate (See, e.g., Belgium Steel). The possible choices

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



---- page 48609 ----



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 in which a government

makes contributions towards a company's interest obligations. The

appropriate methodology depends on the nature of the subsidy. For

example, assume that the government sold 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.

    In these reviews, as in the 1993 steel cases, the Department is

seeking the most appropriate methodology for the 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 37082, at 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: Re-Examination 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 the Department is obliged to evaluate the

countervailability of a program previously determined to be de facto

specific, regardless of whether the parties have provided new

information. 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.

    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



---- page 48610 ----



Order, 59 FR 58814, November 15, 1994). In these reviews, no new facts

or evidence have been presented which would lead us to question our

previous determination.

    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 (59 FR 12243 (March 16, 1994)).) 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, once again we state that 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 proceeding involving different products (e.g., carbon

black from Mexico as opposed to 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.

Again, we state that 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.

    In addition, 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: FOB Adjustment: Respondents argue that the Department

used the correct sales denominator in the Preliminary Results, but in

the alternative has submitted NHCI's F.O.B. (port) value of total sales

during the POR.

    DOC Position: We have used NHCI's submission of its F.O.B. (port)

value of total sales in these reviews in determining the ad valorem

subsidy rate. In the Preliminary Results, we used NHCI's total sales

figure as recorded in the company's books. Due to this change, the

rates calculated in these final results differ from those in the

Preliminary Results.



Final Results of Review



    For the period January 1, 1993 through December 31, 1993, we

determine the net subsidy for NHCI to be 7.34 percent ad valorem.

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

following countervailing duties:



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

                                                                 Rate

                   Manufacturer/exporter                      (percent)

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

NHCI and all others, except for Timminco Ltd...............         7.34

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



    Prior to these 1993 results, the final results of the 3rd (1994)

administrative reviews were published (see 12994 Final Results). The

1994 reviews were conducted under the statutory provisions subject to

the URAA amendments. These statutory provisions 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. As a result,

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 section 777A(e)(2)(B)

of the Act. Therefore, 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)).) Accordingly, the

cash deposit rate that will be applied to companies not reviewed during

the 1994 reviews is that established in the most recently completed

administrative proceeding conducted pursuant to the statutory

provisions that were in effect prior to the URAA amendments, i.e.,

these 1993 administrative reviews. (See Pure and Alloy Magnesium from

Canada: Final Results of the First (1992) Countervailing Duty

Administrative Reviews (62 FR 13857 (March 24, 1997).) Since NHCI was

reviewed in the 1994 reviews, we will instruct Customs to collect cash

deposits for NHCI at the company-specific rate established for it in

the 1994 reviews of 4.48 percent ad valorem; for non-reviewed

companies, the cash deposit will be the rate calculated in these 1993

reviews of 7.34 percent ad valorem, except from Timminco Limited (which

was excluded from the order in the original investigations). In

addition, for the period January 1, 1993 through December 31, 1993, 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



---- page 48611 ----



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)) and 19 CFR 355.22.



    Dated: August 6, 1997.

Robert S. LaRussa,

Acting Assistant Secretary for Import Administration.

[FR Doc. 97-24565 Filed 9-15-97; 8:45 am]

BILLING CODE 3510-DS-M





The Contents entry for this article reads as follows:



International Trade Administration

NOTICES

Countervailing duties:

  Magnesium, pure and alloy, from--

    Canada, 48607