Dispute Settlement
U.S. Trade Remedy Law: The Canadian Experience
V United States Countervailing Duty Investigations regarding Imports from Canada: Case Histories, 1991–1999
Note: Unlike the summaries covering the U.S. anti-dumping duty investigations regarding
imports from Canada, the summaries with respect to U.S. countervailing duty investigations
involving Canada do not include a separate section on Canadian government
participation in these proceedings. By definition, countervailing duty investigations
concern government programs, both federal and provincial. Accordingly, the provincial
and/or federal governments are direct participants in the proceedings. For the most part
it has become standard for the Government of Canada to participate not only as a direct
respondent but as occasional coordinator of overall strategy for all Canadian parties, both
governments and industry, involved in the investigation. Participation by the Government
of Canada in the proceedings has thus become an essential element of the investigations.
In view of their economic significance and role in the evolution of U.S. countervailing duty
law, policy and practice, case summaries are included of all three countervailing duty
investigations conducted by the Department of Commerce over the past two decades
regarding softwood lumber from Canada.
- 1 Softwood Lumber I
- 1.1 Summary
- 1.2 Case History
- 1.3 Key Issues
- 1.4 Programs Determined to Confer Subsidies
- 1.4.1 Canadian Federal Programs
- 1.4.1.1 Investment Tax Credit
- 1.4.1.2 Program for Export Market Development (PEMD)
- 1.4.1.3 Forest Industry Renewable Energy Program (FIRE)
- 1.4.1.4 Regional Development Incentives Program (RDIP)
- 1.4.1.5 Federal Employment Program—Community Based Industrial
Adjustment Program (CIAP)
- 1.4.2 Federal–Provincial Programs
- 1.4.2.1 Agricultural and Rural Development Agreements (ARDA)
- 1.4.2.2 General Development Agreements (GDAs)
- 1.4.2.2.1 British Columbia: Assistance to Small Enterprise Program (ASEP)
- 1.4.2.2.2 New Brunswick: Northeast, Kent and Industrial Development Agreements
- 1.4.2.2.3 Canada–Nova Scotia Forestry Subsidiary Agreement—Grants
- 1.4.3 Provincial Programs
- 1.4.3.1 Alberta: Stumpage Payment Deferral
- 1.4.3.2 British Columbia
- 1.4.3.2.1 Low Interest Loan Assistance (LILA)
- 1.4.3.2.2 Stumpage Payment Deferral
- 1.4.3.3 Ontario
- 1.4.3.3.1 Stumpage Prices for Non-Integrated Licensees
- 1.4.3.3.2 Stumpage Payment Deferral
- 1.4.3.4 Quebec
- 1.4.3.4.1 Stumpage Pricing on Timber Limits
- 1.4.3.4.2 Aide à la promotion des exportations (APEX)
- 1.4.3.4.3 Société de récupération, d’exploitation et de développement forestiers
du Québec (REXFOR) (Forest Salvage, Management and Development Corporation of Quebec)
- 1.5 Programs Determined Not to Confer Subsidies
- 1.5.1 Federal and Provincial Stumpage Programs
- 1.5.2 Federal Programs
- 1.5.2.1 Deductible Inventory Allowance
- 1.5.2.2 Capital Cost Allowance (CCA)
- 1.5.2.3 Export Development Corporation (EDC)
(now Export Development Canada)
- 1.5.2.4 Federal Employment Programs
- 1.5.2.4.1 Local Employment Assistance Program (LEAP)
- 1.5.2.4.2 Work Sharing Program
- 1.5.2.5 Regional Development Incentives Program (RDIP)—Loan Guarantees
- 1.5.2.6 Enterprise Development Program (EDP)
- 1.5.2.7 Transportation Programs
- 1.5.2.7.1 Rail Freight Rates
- 1.5.2.7.2 Currency Exchange Rate Tariff
- 1.5.2.7.3 Fuel Tax Refund and Exemption
- 1.5.3 Joint Federal–Provincial Programs
- 1.5.3.1 Forestry Subsidiary Agreements
- 1.5.3.1.1 Long-Term Forest Management
- 1.5.3.1.2 Saskatchewan: Opportunity Identification and Technological Assistance
- 1.5.3.1.3 Forestry Job Program—Employment Bridging Assistance Program (EBAP)
- 1.5.3.1.4 Canada–Nova Scotia and Canada–New Brunswick Grants for Private
Woodlot Owners
- 1.5.4 Provincial Programs
- 1.5.4.1 Alberta
- 1.5.4.2 British Columbia: Section 88 Roads
- 1.5.4.3 Ontario
- 1.5.4.4 Quebec
- 1.6 Programs Determined Not to be Used
- 1.6.1 Federal Programs
- 1.6.2 Federal–Provincial Programs
- 1.6.3 Provincial Programs
- 2 Softwood Lumber II
- 2.1 Summary
- 2.2 Case History
- 2.3 Key Issues
- 2.4 Programs Determined to Confer Subsidies
- 2.4.1 Stumpage Programs of the Alberta, British Columbia,
Ontario and Quebec Provincial Governments
- 2.4.2 Federal Programs
- 2.4.2.1 Certain Types of Investment Tax Credits
- 2.4.2.2 Program for Export Market Development (PEMD)
- 2.4.2.3 Regional Development Incentives Program (RDIP)—Grants
- 2.4.2.4 Industrial and Regional Development Program (IRDP)
- 2.4.2.5 Community-Based Industrial Adjustment Program (CIAP)
- 2.4.3 Federal–Provincial Programs
- 2.4.3.1 Agricultural and Rural Development Agreements (ARDA)
- 2.4.3.2 General Development Agreements (GDAs)
- 2.4.3.3 Economic and Regional Development Agreements (ERDAs)
- 2.4.3.4 Sawmill Improvement Program (SIP)
- 2.4.4 Provincial Programs
- 2.4.4.1 British Columbia
- 2.4.4.1.1 British Columbia Critical Industries Act
- 2.4.4.1.2 British Columbia Low-Interest Loan Assistance
- 2.4.4.2 Quebec
- 2.4.4.2.1 Quebec Tax Abatement Program
- 2.4.4.2.2 Aide à la promotion des exportations (APEX)
- 2.4.4.2.3 Forest Salvage, Management and Development Corporation of Quebec
(REXFOR)
- 2.4.4.2.4 Quebec Industrial Development Corporation (SDI)—
Export Expansion Program
- 2.4.4.2.5 Quebec Lumber Industry Consolidation and Expansion (LICEP) Program
- 2.5 Programs Determined Not to Confer Subsidies
- 2.5.1 Joint Federal–Provincial Programs
- 2.5.1.1 Forestry Development Agreements for Improvement of Crown Land
- 2.5.1.2 Newfoundland Rural Development Agreement
- 2.5.1.3 Rail Transportation Facilities for Lumber Industry
- 2.5.1.4 Newfoundland Rural Development Subsidiary Agreement
- 2.5.1.5 Forintek Research and Development
- 2.5.2 Provincial Programs
- 2.5.2.1 Quebec Industrial Development Financing and Development
Assistance Program
- 2.5.2.2 British Columbia Forest Stand Management Program
- 2.5.2.3 British Columbia Small Business Venture Capital Program
- 2.5.2.4 Alberta Research Projects for the Forest Industry
- 2.6 Programs Determined Not to be Used
- 2.6.1 Federal Programs
- 2.6.2 Joint Federal–Provincial Programs
- 2.6.3 Provincial Programs
- 2.7 Programs for which Commerce Needed Additional
Information
- 2.8 Programs Preliminarily Determined Not to Exist
- 3 Softwood Lumber III
- 3.1 Summary
- 3.2 Case History
- 3.3 Canada–U.S. Free Trade Agreement Chapter 19 Panel
(Commerce)
- 3.4 Canada–U.S. Free Trade Agreement:
Extraordinary Challenge
- 3.5 Canada–U.S. Free Trade Agreement Chapter 19 Panel
(ITC)
- 3.6 Final Determination—Programs Investigated
- 3.6.1 Programs Determined to Confer Subsidies
- 3.6.1.1 Provincial Stumpage Programs
- 3.6.1.1.1 The Specificity Test
- 3.6.1.1.2 The Preferentiality Test
- 3.6.1.1.2.1 Preferentiality Hierarchy
- 3.6.1.1.3 British Columbia
- 3.6.1.1.4 Quebec
- 3.6.1.1.5 Ontario
- 3.6.1.1.6 Alberta
- 3.6.1.1.7 Manitoba, Saskatchewan, Yukon and Northwest Territories
- 3.6.1.2 Provincial Log Export Restrictions
- 3.6.1.2.1 Market Distortion
- 3.6.1.2.2 Countervailability of Export Restrictions
- 3.6.1.2.3 Effect of Export Restrictions on Domestic Log Prices
- 3.6.1.2.4 Measurement of the Benefit
- 3.6.1.2.5 Calculation of the Subsidy
- 3.6.1.2.6 Country-wide Rate
- 3.6.1.3 General Calculation Issues
- 3.6.1.3.1 Country-wide Rate
- 3.6.1.3.2 Inclusion of Value of Remanufactured Products (Remans) in Shipment
Values
- 3.6.1.3.3 Allocation of Subsidy Amount to Other Products Made through the
Lumber Production Process
- 3.6.1.3.4 Pulplog/Sawlog Adjustment
- 3.6.1.3.5 Exclusion of Logs Sold by Tenure-Holders
- 3.6.1.4 Exclusion Requests for Specialty Products, Remanufactured Products
and Companies
- 3.6.1.4.1 Specialty Products
- 3.6.1.4.2 Remanufactured Products
- 3.6.1.4.3 Company Exclusion Requests
- 4 Live Swine and Fresh, Chilled and Frozen Pork Products
- 4.1 Case History
- 4.2 Legal and Subsequent Issues
- 4.2.1 CIT Challenge
- 4.2.2 Canada–U.S. Free Trade Agreement Fourth Administrative
Review
- 4.2.3 Extraordinary Challenge
- 4.2.4 Fifth Administrative Review
- 4.2.5 Sixth Administrative Review
- 4.2.6 Changed Circumstances Review
- 4.2.7 Administrative Reviews of Countervailing Duty Order
- 4.2.8 Sunset Review
- 4.3 Program Summary (Original investigation and
administrative reviews)
- 4.3.1 Federal Programs
- 4.3.1.1 Feed Freight Assistance Program (FFA)
- 4.3.1.2 Agricultural Stabilization Act (ASA) Hog Stabilization Programs
- 4.3.2 Federal–Provincial Programs
- 4.3.2.1 Record of Performance Program
- 4.3.2.2 National Tripartite Stabilization Program
- 4.3.2.3 National Transition Scheme for Hogs
- 4.3.2.4 Canada–Quebec Agri-Food Agreement—Technological Innovation
Program
- 4.3.3 Provincial Income Stabilization Programs
- 4.3.3.1 British Columbia Farm Income Insurance Program
- 4.3.3.2 British Columbia Swine Producers’ Farm Income Plan
- 4.3.3.3 Manitoba Hog Income Stabilization Plan (HISP)
- 4.3.3.4 New Brunswick Hog Price Stabilization Program
- 4.3.3.5 Newfoundland Hog Price Support Program
- 4.3.3.6 Nova Scotia Pork Price Stabilization Program (NSPPSP)
- 4.3.3.7 Prince Edward Island Price Stabilization Program
- 4.3.3.8 Quebec Farm Income Stabilization Insurance Program (FISI)
- 4.3.3.9 Saskatchewan Hog Assured Returns Program (SHARP)
- 4.3.4 Other Provincial Programs
- 4.3.4.1 Alberta Crow Benefit Offset Program
- 4.3.4.2 Alberta Livestock and Beeyard Compensation Program
- 4.3.4.3 New Brunswick Swine Assistance Policy on Boars
- 4.3.4.4 New Brunswick Swine Industry Financial Restructuring and
Agricultural Development Act—Swine Assistance Program
- 4.3.4.5 New Brunswick Loan Guarantees and Grants under the Livestock
Incentives Program
- 4.3.4.6 New Brunswick Hog Marketing Program
- 4.3.4.7 Nova Scotia Swine Herd Health Policy
- 4.3.4.8 Nova Scotia Transportation Assistance
- 4.3.4.9 Ontario Bear Damage to Livestock Compensation Program
- 4.3.4.10 Ontario Livestock and Poultry Honeybee Compensation Program
- 4.3.4.11 Ontario Export Sales Aid Program
- 4.3.4.12 Ontario Farm Tax Reduction Program
- 4.3.4.13 Ontario (Northern) Livestock Program
- 4.3.4.14 Ontario Rabies Indemnification Program
- 4.3.4.15 Prince Edward Island Hog Marketing and Transportation Subsidies
- 4.3.4.16 Quebec Meat Sector Rationalization Program
- 4.3.4.17 Quebec Special Credits for Hog Producers
- 4.3.4.18 Saskatchewan Financial Assistance for Livestock and Irrigation
- 4.3.4.19 Saskatchewan Livestock Investment Tax Credit
- 4.3.4.20 Saskatchewan Livestock Facilities Tax Credit Program
- 4.3.4.21 Saskatchewan Interim Red Meat Production Equalization Program
- 4.4 Programs Determined Not to Confer a Subsidy
- 4.4.1 Federal Programs
- 4.4.1.1 Financial Programs
- 4.4.1.2 Federal Hog Carcass Grading System
- 4.4.2 Federal–Provincial Programs
- 4.4.2.1 Canada–B.C. Agri-Food Regional Development Subsidiary
Agreement
- 4.4.2.2 Canada–Manitoba Agri-Food Development Program
- 4.4.2.3 Canada–Quebec Agri-Food Agreement—Technological Innovation
Program
- 4.4.3 Provincial Programs
- 5 Magnesium from Canada and Norway
- 5.1 Case History
- 5.2 Changed Circumstances
- 5.3 FTA/NAFTA Binational Panel Reviews
- 5.3.1 First Review
- 5.3.2 Second Review
- 5.3.3 Third Review
- 5.4 Other Key Issues
- 5.5 Administrative Reviews
- 5.6 Sunset Review
- 5.7 Programs Determined to Confer Subsidies
- 5.7.1 Federal Programs
- 5.7.1.1 Federal Funding for a Feasibility Study Under the Canada–Quebec
Subsidiary Agreement on Industrial Development
- 5.7.2 Provincial Programs
- 5.7.2.1 Exemption From Payment of Water Bills
- 5.7.2.2 Article 7 Grants from the Quebec Industrial Development
Corporation
- 5.7.2.3 Preferential Electricity Rates
- 5.8 Programs Determined not to be Countervailable
- 5.8.1 Federal–Provincial Programs
- 5.8.1.1 Research Conducted by the Institute of Magnesium Technology
(IMT)
- 5.8.2 Provincial Programs
- 5.8.2.1 Manpower Training Program
- 5.9 Programs Determined Not to be Used
- 6 Certain Laminated Hardwood Trailer
Flooring (LHF) from Canada
- 6.1 Case History
- 6.2 Key Issues
- 6.3 Programs Determined to be Countervailable
- 6.3.1 Joint Federal–Provincial Programs
- 6.3.1.1 Canada–Quebec Subsidiary Agreement on Industrial Development
(SID)
- 6.3.2 Federal Programs
- 6.3.2.1 Industrial and Regional Development Program (IRDP)
- 6.3.3 Provincial Programs
- 6.3.3.1 Quebec Industrial Development Corporation (SDI)—Expansion and
Modernization Program
- 6.3.3.2 Export Promotion Assistance Program (APEX)
- 6.4 Programs Determined Not to be Countervailable
- 6.4.1 Federal Programs
- 6.4.1.1 Export Development Corporation (EDC)
- 6.4.2 Provincial Programs
- 6.4.2.1 Société québécoise de développement de la main-d’oeuvre—
Program for the Development of Human Resources
- 6.4.2.2 Hydro-Québec Electrotechnology Implementation Program
- 6.4.2.3 Société québécoise de développement de la main-d’oeuvre—
Decentralized Fund for Job Creation Program
- 6.4.2.4 Société de placement dans l’entreprise québécoise (SPEQ)
- 6.4.2.5 Quebec Industrial Development Corporation—Programme d’appui
à la reprise (PREP)
- 6.5 Programs Determined Not to be Used
- 7 Certain Steelwire Rod from Canada
(and Germany, Trinidad and Tobago,
and Venezuela)
- 7.1 Case History
- 7.2 Key Issues
- 7.3 Programs Determined to be Countervailable
- 7.3.1 Provincial Programs
- 7.3.1.1 1988 Debt-to-Equity Conversion
- 7.3.1.2 1983–1992 Grants
- 7.4 Programs Determined Not to be Countervailable
- 7.4.1 Federal Programs
- 7.4.1.1 Canadian Steel Trade Employment Congress (CSTEC) Skill Training
Program
- 7.4.2 Provincial Programs
- 7.4.2.1 1987 Grant to Sidbec-Dosco, Inc.
- 7.4.2.2 1987 Debt-to-Equity Conversion
- 7.4.2.3 Contributed Surplus
- 7.4.2.4 Payments Against Accumulated Grants Receivable
- 7.4.2.5 1982 Assistance to Sidbec-Dosco, Inc.
- 7.4.2.6 1980 and 1981 Grants
- 7.5 Programs Determined Not to be Used
- 7.5.1 Industrial Development of Quebec
- 8 Live Cattle from Canada
- 8.1 Case History
- 8.2 Key Issues
- 8.2.1 Standing
- 8.3 Programs Determined to Confer Subsidies
- 8.3.1 Federal Programs
- 8.3.1.1 Farm Improvement and Marketing Cooperative Loans Act (FIMCLA)
- 8.3.2 Provincial Programs
- 8.3.2.1 Alberta Feeder Associations Guarantee Program
- 8.3.2.2 Manitoba Cattle Feeder Associations Loan Guarantee Program
- 8.3.2.3 Ontario Feeder Cattle Loan Guarantee Program
- 8.3.2.4 Saskatchewan Feeder Associations Loan Guarantee Program
- 8.3.2.5 Prairie Farm Rehabilitation Community Pasture Program (PFRA)
- 8.3.2.6 Saskatchewan Crown Lands Program
- 8.3.2.7 Manitoba Crown Lands Program
- 8.3.2.8 Alberta Crown Lands Basic Grazing Program
- 8.3.3 Other Programs
- 8.3.3.1 Northern Ontario Heritage Fund Corporation Agriculture Assistance
- 8.3.3.2 Ontario Livestock, Poultry and Honeybee Protection Act
- 8.3.3.3 Ontario Rabies Indemnification Program
- 8.3.3.4 Saskatchewan Livestock and Horticultural Facilities Incentives
Program
- 8.4 Programs Determined Not to be Countervailable
- 8.4.1 Federal Programs
- 8.4.1.1 Canadian Wheat Board (CWB)
- 8.4.2 Provincial Programs Providing Goods or Services
- 8.4.2.1 Saskatchewan Pasture Program
- 8.4.2.2 Alberta Grazing Reserve Program
- 8.4.2.3 Canada–Alberta Beef Industry Development Fund (CABIDF)
- 8.4.2.4 Saskatchewan Beef Development Fund (SBDF)
- 8.4.2.5 Net Income Stabilization Account (NISA)
- 8.4.2.6 Alberta Public Grazing Lands Improvement Program
- 8.4.2.7 Saskatchewan Crown Land Improvement Policy
- 8.4.2.8 Saskatchewan Breeder Associations Loan Guarantee Program
- 8.5 Programs Determined Not to be Used
- 8.6 Programs Determined to be Terminated
- 8.7 Other Programs Reviewed
On October 7, 1982, three countervailing duty petitions were filed alleging that
imports from Canada of the following products were injuriously subsidized:
softwood lumber; softwood shakes and shingles; and softwood fence. The main
programs alleged to provide subsidies were the stumpage systems maintained by
the federal and several provincial governments. The investigation was terminated
when, in its final determination of May 31, 1983, Commerce found stumpage
programs to be generally available and therefore not countervailable. In support
of its finding, Commerce determined that the only limitation as to type of
industry using stumpage was the inherent characteristic of the resource itself and
the current level of technology. Furthermore, Commerce found that current limitations
on use of stumpage were not due to any government action.
On October 7, 1982, the ITC and Commerce accepted three petitions filed on
behalf of the United States Coalition for Fair Canadian Lumber Imports, a group
composed of eight trade associations and more than 350 U.S. producers of softwood
lumber products. The scope of the investigation was as follows: softwood
lumber; softwood shakes and shingles; and softwood fence (picket, stockade and
rail). On December 1, 1982, the ITC released a preliminary affirmative determination
of injury, finding a reasonable indication that the domestic industry was
threatened with material injury by reason of allegedly subsidized imports from
Canada. The ITC found that Canadian spruce-pine-fir products competed with
American yellow pine products despite differences in sizes, shapes and preferred
applications. While the ITC acknowledged that the steep decline in consumption
of softwood products was due in large part to the drop in residential housing
construction, it found a reasonable indication that allegedly subsidized Canadian
imports had caused or had threatened to cause injury. The absolute volume of
Canadian imports had declined, while the percentage of the U.S. market held by
imports had increased slightly.
On March 11, 1983, Commerce released a preliminary negative countervailing
duty determination, in which the estimated net subsidy rates for each of the three
investigated products were found to be de minimis.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.32% |
| Softwood shakes and shingles |
0.24% |
| Softwood fence |
0.29% |
On May 31, 1983, Commerce released a final negative countervailing duty determination
as follows. Again, estimated net subsidy rates for each of the three investigated
products were found to be de minimis.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.349% |
| Softwood shakes and shingles |
0.260% |
| Softwood fence |
0.304% |
The high value of Canadian softwood lumber exports to the United States
(approximately $3.0 billion) gave this case an unprecedented political profile.
Furthermore, a key element in the case was the decision to investigate a Canadian
natural resource management program (stumpage programs) as potentially
countervailable. Commerce determined that stumpage programs “were not
provided to a specific enterprise or industry [or group thereof] and did not entail
the provision of goods at preferential rates.”
With respect to stumpage programs, Commerce determined that any limitations
on their use were “not due to the actions of the Canadian governments” and that
“the actual users of stumpage spanned a wide range of industries.” Furthermore,
the programs were found not to constitute a domestic subsidy because they did
not provide goods at preferential rates to softwood producers. As a result,
stumpage programs were not found countervailable.
While the following programs were determined to be subsidies and were therefore
countervailable under U.S. trade law, the total estimated net subsidy for each
product under investigation was found to be de minimis (i.e. less than 0.5% of the
value of the production).
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.030% ad valorem |
| Softwood shakes and shingles |
0.030% ad valorem |
| Softwood fence |
0.018% ad valorem |
The Investment Tax Credit incentive was available to all secondary industries
purchasing new buildings, machinery and equipment for use in manufacturing
and processing activities. For qualified property, the basic Investment Tax Credit
was 7%, with an additional 3% or 13% for qualified property in certain economically
depressed regions. For “certified property” (i.e. qualified property in regions
characterized with high unemployment and low per capita income), the Investment
Tax Credit rate reached 50%. Since Investment Tax Credits of up to 7% were
available to all companies on equal terms, Commerce determined that such
credits did not confer a subsidy. However, credits over 7% were limited to
companies in specific regions, and therefore were found to confer a subsidy. Commerce
allocated the benefits offered by the Investment Tax Credit program according to
capital investment information pertaining to the sawmill, planing mill and wood
products industries, and their production volumes.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.001% ad valorem |
| Softwood shakes and shingles |
0.000% ad valorem |
| Softwood fence |
0.009% ad valorem |
PEMD was a program administered by the Department of External Affairs. It facilitated
the development of export markets for Canadian products by sharing with
exporters the costs of travel and promotional activities. PEMD assistance was in
the form of interest-free loans with forgivable repayment terms. Two small projects
were funded to develop U.S. market opportunities for softwood fence and
lumber. Commerce found that the sole purpose of PEMD was to stimulate exports;
the assistance provided under the program thus conferred benefits that constituted
export subsidies and that therefore were automatically deemed specific.
Accordingly, a specificity analysis and finding was not necessary. The funds
disbursed were treated as grants and expensed in the year of their receipt.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.003% ad valorem |
| Softwood shakes and shingles |
0.003% ad valorem |
| Softwood fence |
0.003% ad valorem |
The FIRE program was administered by the Department of Energy, Mines and
Resources, and was intended to encourage the substitution of biomass energy
sources for fossil fuels by companies that would otherwise have no incentive to
take such action. The program provided taxable grants tied to the purchase of
capital equipment. Prior to April 1, 1981, the benefits of this program were determined
to be limited to “forest industry firms” and thus countervailable.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.180% ad valorem |
| Softwood shakes and shingles |
0.070% ad valorem |
| Softwood fence |
0.151% ad valorem |
This program provided development incentives (grants or loan guarantees) to
attract capital investments to designated regions where employment and
economic opportunity were chronically low. Commerce found this program countervailable
because its benefits were limited to companies located within specific
regions.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.001% ad valorem |
| Softwood shakes and shingles |
0.000% ad valorem |
| Softwood fence |
0.000% ad valorem |
This program was designed to alleviate the distress caused in designated communities
by large-scale permanent industry dislocation in a given sector. Commerce
determined that the list of depressed communities eligible for CIAP assistance was
designated at the discretion of the federal government. One softwood producer
received a small grant in 1982 under this program. The program was found to be
limited to companies in specific regions, and therefore countervailable.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.005% ad valorem |
| Softwood shakes and shingles |
0.005% ad valorem |
| Softwood fence |
0.005% ad valorem |
The ARDA resulted from joint determinations by the federal and provincial
governments that action was needed to promote economic development and alleviate
conditions of economic and social disadvantages in certain rural areas. Of
the six programs under ARDA, only the Alternative Income and Employment
Opportunities in Rural Development Region program was relevant to this investigation.
The program provided grants in Ontario and British Columbia to establish,
expand or modernize production facilities. The Special ARDA program provided
funds aimed at improving employment and income opportunities for people of
Native ancestry in rural areas. As this program was limited to companies in
specific rural areas, both the provincial and federal benefits provided by the
program were found to be countervailable.
The GDAs were comprehensive development agreements between the federal and
provincial governments aimed at spurring regional development. Within each
GDA, specific subsidiary agreements were negotiated with individual provinces.
These mainly funded general planning, infrastructure and community development,
although some assistance was provided to individual companies. Both the
federal and provincial benefits provided under the GDAs were countervailed as
eligibility for funds was limited to areas within a province.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.002% ad valorem |
| Softwood shakes and shingles |
0.044% ad valorem |
| Softwood fence |
0.010% ad valorem |
ASEP offered interest-free, forgivable loans to companies in the manufacturing
and processing sector with annual revenue of less than $500,000. The program
was found to be specific because it was limited to companies located outside the
Lower Mainland and Southern Vancouver Island.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
0.001% ad valorem |
| Softwood shakes and shingles |
0.008% ad valorem |
| Softwood fence |
0.007% ad valorem |
These programs offered interest-free, forgivable loans to companies located within
specific regions with average sales of less than $1 million. The amount of the
funding provided could not exceed 50% of the cost of new manufacturing or
processing facilities, or 30% for modernization or expansion of such facilities.
Loans were dispersed pursuant to this program between 1978 and 1981. Since the
programs were limited to companies located in specific regions, they were determined
to be specific and therefore countervailable.
| Product |
Total Estimated Net Subsidy |
| All products |
0.008% ad valorem |
The sawmill improvement component of this program provided grants of up to
$5,000 per mill to encourage the adoption of improved sawmilling technology,
better safety and improved conditions. The program was found to confer a subsidy
on softwood lumber producers because eligibility was limited to sawmills.
| Product |
Total Estimated Net Subsidy |
| All products |
0.003% ad valorem |
In 1982, the Government of Alberta deferred the payment of stumpage dues for
one year without interest charges. Commerce concluded that the program was
countervailable because the government restricted the program of payment
deferral to a specific industry or group.
| Product |
Total Estimated Net Subsidy |
| All products |
less than 0.001% ad valorem |
Loans received by softwood producers between 1978 and 1979 were found countervailable
because their availability was limited to specific regions within British
Columbia. Commerce determined that the terms of the loans were inconsistent
with commercial considerations.
| Product |
Total Estimated Net Subsidy |
| All products |
less than 0.001% ad valorem |
As logging in the Fort Nelson swamplands could be undertaken only in winter, the
B.C. government allowed a deferral of the stumpage payments without interest
charges until that period. The program was found to be regionally specific and
inconsistent with commercial considerations.
| Product |
Total Estimated Net Subsidy |
| All products |
0.015% ad valorem |
Integrated licensees were stumpage users who also owned or operated pulp mills.
The stumpage fees for non-integrated licensees were found to be 90% of those for
integrated licensees. Commerce found that there was insufficient evidence to
explain this differential. Consequently, the price charged to non-integrated
licensees was found to be specific and to constitute preferential treatment, and
was therefore countervailable.
| Product |
Total Estimated Net Subsidy |
| All products |
0.005% ad valorem |
In 1982, the Government of Ontario deferred stumpage payments for one year.
Commerce concluded that the benefits of this program were limited to sawmill
operators and were inconsistent with commercial considerations, and thus
countervailable.
| Product |
Total Estimated Net Subsidy |
| All products |
0.061% |
Commerce determined that there was a price differential between government
charges for stumpage rights on “timber limits” and general pulpwood rights. It
found that the lower timber limits prices were specific and conferred a preferential
benefit, and hence were a countervailable subsidy.
| Product |
Total Estimated Net Subsidy |
| Softwood lumber |
less than 0.001% |
| Softwood shakes and shingles |
less than 0.001% |
| Softwood fence |
0.002% |
Under APEX, grants were awarded to companies for the promotion of Quebec
goods and services outside Canada. Commerce concluded that APEX was a countervailable
export subsidy, and that the products under investigation had benefited
from this program.
REXFOR was a provincial Crown corporation funded by the Ministère des
Finances du Québec; it owned sawmills and pulp and paper mills producing the
softwood products under investigation. As any funds provided by the government
were directed toward a specific industry, Commerce found them countervailable.
Commerce calculated REXFOR’s net subsidies to be as follows:
| Loans and loan guarantees |
All products under investigation: |
0.001% |
| Grants |
All products under investigation: |
0.001% |
| Loss coverage |
Softwood lumber:
Softwood shakes and shingles,
and softwood fence: |
0.017%
0.014% |
| Equity purchases |
All products under investigation: |
0.005% |
| Tax abatement program |
All products under investigation: |
0.005% |
| Export expansion program |
Softwood lumber: |
0.019% |
Commerce determined that since access to stumpage programs was not contingent
upon export performance, they could not be found to be export subsidies. It
indicated that the mere fact that significant quantities of softwood were exported
did not mean that stumpage programs conferred an export subsidy. Commerce
also found that stumpage programs did not confer a domestic subsidy because
they were not provided to a specific enterprise or industry, or group of enterprises
or industries. It found that the only limitations as to the types of industries that
used stumpage reflected the inherent characteristics of the natural resource and
the current level of technology. Commerce noted that several different Canadian
industries utilized stumpage programs. These included producers of lumber, wood
products, veneer, plywood, pulp and paper, furniture, turpentine processors, charcoal,
wood alcohol, and even food additives.
Commerce also found that even if stumpage programs were being provided to a
“specific group of industries,” they would not confer a domestic subsidy because
they did not provide goods at preferential rates—the standard required by the
Tariff Act of 1930 for a finding of preferentiality.160
Furthermore, the stumpage programs “do not assume a cost of producing the goods under investigations.”
“Assumption” was statutorily defined as the relief from a pre-existing statutory or
contractual obligation.
In addition, Commerce rejected the petitioner’s request to conduct cross-border
price comparisons to establish commercial benchmarks. It had been Commerce’s
policy not to use such comparisons. In addition, it was found that there was not
a unified North American market and that there was not a unified price for
stumpage.
The Canadian federal Income Tax Act authorized a deduction equal to 3% of the
opening value of inventories. Commerce did not find this program countervailable
as it was not limited to a specific industry.
The federal income tax regulations allowed a CCA for businesses that purchased
assets used in pollution abatement, manufacturing or energy conservation.
Commerce did not find this program countervailable as it was not limited to a
specific industry.
EDC, a Crown corporation, offers financial services to Canadian exporters,
including export credit insurance (which was the focus of the petitioners’ allegations).
EDC was found to be charging premiums sufficient to cover long-term
operating costs and losses. The export credit insurance was found to be consistent
with commercial considerations, and thus was not an export subsidy. The
program was also found to be generally available.
LEAP aimed to increase the self-sufficiency of chronically unemployed/underemployed
persons (e.g., persons with disabilities) through grants for job creation
and worker retraining. Commerce found that this program was not limited to any
specific industry/industries or region(s).
This program was designed to avert temporary layoffs during short-term economic
downturns by reducing work weeks, encouraging shared work and providing
unemployment benefits when no work was available. Employees of producers of
products under investigation received benefits under this program. Commerce
found that the program was not limited to any specific industry/industries or
region(s).
Although RDIP was found countervailable in this investigation, the loan guarantee
element of the program was exempted from the net subsidy determination as it
was determined to be consistent with commercial considerations.
The EDP was developed to promote productivity enhancement. The tools through
which it pursued this goal included:
- Loan Insurance
The federal government provided loan insurance to private lenders
for loans to companies approved for productivity projects.
- EDP Contributions (i.e. grants)
The federal government shared the cost of approved projects with
companies.
Commerce found that the loan insurance element of the EDP was fully consistent
with commercial considerations, and that neither element was limited to any
specific industry/industries or region(s).
Commerce examined the Canadian rail freight charges paid by softwood lumber
companies. Commerce concluded that not only was there no countervailable
subsidy conferred through these charges, but that the fees paid by lumber companies
were markedly higher than those for other commodities. Furthermore, shipping
rates were agreed upon after arm’s-length negotiations between the Canadian
railways and the shippers, with no government involvement.
The currency exchange rate tariff was implemented in 1921 on all rail shipments
to the United States, and was intended to adjust for differences in the value of the
U.S. and Canadian currencies. Because of currency fluctuations, the railroads
agreed that the value of the rail haul taking place in the United States should be
reflected in U.S. currency, and the value of the Canadian haul should be reflected
in Canadian currency. Since 1977, U.S. currency had been at a premium in relation
to Canadian currency. As a result, Canadian shippers were paying a
surcharge on exports to the United States.
Because Canadian shippers were paying a surcharge, Commerce found that no
benefits were being bestowed through the currency exchange rate tariff on
exports of softwood lumber. Furthermore, Commerce found that the tariff was not
intended nor did it operate to stimulate exports. Rather, it was a mechanism for
maintaining Canadian rail carrier revenue.
This program ensured that all U.S. states and Canadian provinces collected taxes
equal to the actual fuel consumed by motor carriers operating in their jurisdiction,
but purchased from outside that jurisdiction. Commerce found that the
program did not relieve shippers of any tax and was not specific to an industry.
Funding was provided for long-range resource management on public lands and
public infrastructure development (i.e. silviculture camps, tree nurseries).
These activities were conducted by the provinces on provincial land and did not
relieve any companies of obligations incurred in their licensing arrangements.
Furthermore, the benefits of the program accrued to the government, as owner of
the land, and not the short- or medium-term licensees. Commerce found that
federal government payments for the construction of forest access roads did not
constitute a subsidy because the roads were open to the public.
Commerce concluded that the results of the research and feasibility studies
funded by the provincial government under this program were publicly available
and thus not countervailable.
EBAP provided funds to qualifying industries to retrain skilled workers during
times of recession. The program was not limited to a specific group or industry,
and thus was not countervailable.
These grants were designed to provide technical assistance in effective management
of forest resources. As they were available to all private landowners, the
grants were not countervailable.
The following two Alberta programs were found not to be countervailable as they
were not limited to a specific enterprise or industry, or group thereof.
- Timber Salvage Incentive Program
This program was designed to provide incentives for the harvesting
of timber damaged by forest fires or diseases.
- Alberta Opportunity Company
This provincial Crown corporation provided assistance to a variety
of processing and manufacturing sectors.
Under section 88 of British Columbia’s Forest Act, certain licensee expenditures
for constructing approved roads on crown lands were credited against total
stumpage dues payable to the province. Commerce found that as the quality of
the roads had to be above that required for logging operations and they had to be
accessible to the public, the program did not benefit a specific industry.
The following two Ontario programs did not provide benefits limited to a specific
enterprise or industry, or group thereof, and thus were found not countervailable:
- Employment Development Fund (EDF)
This program was designed to promote long-term employment by
providing grants to job-creating investment projects.
- Non-Forestry Subsidiary Agreement Roads
Under this program, the province reimbursed companies building
primary and secondary roads on crown lands. Commerce found that
as the quality of these roads had to be above that required for logging
operations and they had to be accessible to the public, the program
did not benefit a specific industry.
The following five Quebec programs were found not to preferentially benefit a
specific enterprise or industry, or group thereof.
- Caisse de dépot et placement du Québec (CDPQ)
Commerce confirmed that the CDPQ managed several pension funds
and insurance programs, and invested over a broad range of sectors
on commercial terms.
- FRI Industrial Incentives Fund for Small and Medium-Sized
Businesses
This program allowed small and medium-sized businesses to deposit
up to half their income tax owed to the province into an escrow fund,
from which they could withdraw up to 25% of the cost of approved
development projects.
- Programme expérimental de création d’emplois communautaires
This program provided cash payments to entrepreneurs to assist them
in maintaining and creating jobs for the chronically unemployed.
- PME Innovation
This program assisted small and medium-sized businesses in
obtaining capital for production or marketing projects.
- Société de développement industriel du Québec (SDI)
Quebec Industrial Development Corporation Programs
Commerce found that the SDI-administered development grant
programs and loan guarantee programs were neither region-specific
nor inconsistent with commercial considerations.
- Enterprise Development Program—Loans
- Canada–Nova Scotia Forestry Subsidiary Agreement Grants
- Alberta: Inventory Financing
- British Columbia: Marketing Development Assistance
- Quebec: SDI Financial Assistance to Advanced Technology Firms
On May 19, 1986, Commerce initiated a second countervailing duty investigation
on imports of softwood lumber from Canada. Unlike in Softwood I, softwood fence
and softwood shakes and shingles were not subject to investigation. As in Softwood
I, the main programs under investigation were the stumpage systems maintained
by four provinces: Alberta, British Columbia, Ontario and Quebec. In this
investigation, the petitioners presented new evidence indicating that the use of
stumpage may have been limited by certain government policies. In addition,
petitioners contended that there had been an evolution in Commerce’s interpretation
of both the specificity and preferentiality tests since Softwood I.
In its preliminary determination of October 22, 1986, Commerce found that the
government exercised considerable discretion in allocating stumpage rights.
Accordingly, Commerce found stumpage to be specific and therefore countervailable.
Furthermore, unlike its finding in Softwood I, Commerce found that certain
industries did not in fact have stumpage rights (e.g., furniture producers) and
that, since lumber and pulp and paper producers tended to be horizontally integrated
into single enterprises, they could not be used to show that stumpage was
not limited to one group of industries. A preliminary countervailing duty rate of
15.0% was calculated for stumpage.
Prior to the final determination, Canada and the United States entered into a
memorandum of understanding (MOU) in which Canada agreed to collect a 15%
charge on lumber exports; the charge could be reduced or eliminated for
provinces initiating replacement measures (i.e. increasing stumpage). On
December 30, 1986, the petition was withdrawn and the investigation terminated.
On May 19, 1986, a petition was filed by the Coalition for Fair Lumber Imports,
a group composed of U.S. trade associations and producers of softwood lumber
products. The scope of investigation was softwood lumber, rough, dressed or
worked (including softwood flooring classified as lumber).
On July 16, 1986, the ITC released an affirmative preliminary injury determination,
finding a reasonable indication that the domestic industry was materially
injured by reason of allegedly subsidized imports from Canada.
The preliminary Commerce determination was postponed to October 16, 1986,
because the investigation was deemed to be extraordinarily complicated as a
result of the large number of Canadian producers and the broad range and
complex nature of the alleged subsidy practices.
On October 22, 1986, Commerce preliminarily determined that countervailable
benefits were being provided to manufacturers, producers or exporters in Canada
of certain softwood lumber products. Twenty Canadian exporters were excluded
from the order because Commerce was satisfied that the firms either did not
participate, or only participated at a de minimis level, in all programs under investigation.
The estimated net subsidy was calculated to be 15% ad valorem.
On December 30, 1986, Canada and the United States signed the Softwood
Lumber Memorandum of Understanding, under which Canada imposed a temporary
export tax of 15% on certain softwood lumber entering into the United States
from Canada. The agreement retained the export charge revenues in Canada
rather than sending them to the United States in the form of countervailing
duties. The charge could be reduced or eliminated for lumber from provinces that
instituted replacement measures increasing stumpage or other charges on the
harvest of timber. The Commerce final determination was to be issued on
December 31, 1986. In a letter dated December 30, 1986, the petitioner withdrew
its petition as filed on May 19, 1986. Based on the withdrawal, Commerce terminated
the investigation effective January 5, 1987.
The significant value of Canadian softwood lumber exports to the United States
(approximately $3 billion) and the fact that Softwood I had resulted in a de
minimis finding again gave this investigation a heightened public profile. The key
element in the investigation was the decision to investigate a Canadian natural
resource management program (i.e. provincial stumpage) as potentially countervailable
for the second time in four years.
Unlike in the previous softwood lumber case, Commerce preliminarily found
Canadian stumpage programs countervailable. The stated reasons for this reversal
were as follows:
- The stumpage programs were nominally generally available but, as a
result of government discretion in the program design and delivery,
the actual or de facto benefits were limited to a specific industry.
- Stumpage rights were provided at preferential rates as the governments
of Alberta, British Columbia, Ontario and Quebec did not
recover the costs of providing standing timber to stumpage holders;
expenditures directly related to commercial timber harvesting
exceeded directly related revenue.
Commerce’s determination of specificity was based upon a change in policy
further to the U.S. Court of International Trade’s 1985 decision, Cabot Corp. v.
United States.
In that decision, the CIT rejected Commerce’s specificity test and its application
in Carbon Black from Mexico (June 27, 1983). The Court stated, “The appropriate
standard focuses on the de facto case by case effect of benefits provided to
recipients rather than on the nominal availability of benefits.” In its preliminary
determination of October 22, 1986, Commerce noted that, based on its experience
with the specificity test, it concluded that it had to balance various factors
in analyzing the facts of a particular case (i.e. a test to determine “de facto” specificity).
These factors included: (1) the extent to which a government acts to limit
the availability of a program; (2) the number of enterprises, industries or groups
actually using a program (possibly involving the examination of disproportionate
or dominant use); and (3) the extent to which government exercises discretion in
making programs available.161
To determine whether stumpage rates were provided at preferential rates,
Commerce used the Preferentiality Appendix as contained in the Preliminary
Results of the Administrative Review of Carbon Black from Mexico (51 FR 13269)
(April 18, 1986). Here, Commerce found that the government’s cost of producing
the good, i.e. standing timber, exceeded the revenues received through stumpage
payments. The benefit was measured by comparing the costs of maintaining
timberland and administering stumpage programs (including an imputed cost
representing the value of standing timber) with stumpage payments. In Softwood
I, the Preferentiality Appendix did not yet exist and Commerce had found
that stumpage programs were non-preferential according to the standard
contained in the Tariff Act of 1930.
Countervailable Net Subsidy: 14.542% ad valorem
In Softwood Lumber I, Commerce had found that these programs were not
limited to “a group of enterprises or industries” because: (1) any limitations on
use were due to the physical characteristics of the products, and not the actions
of the government; and (2) the actual users of stumpage programs spanned a wide
range of industries.
In Softwood Lumber II, Commerce found that a re-examination of the provincial
stumpage programs was warranted in view of new evidence presented by the petitioners
and an evolution of the interpretation of countervailing duty law with
respect to the specificity test and the measure of preferentiality.
Commerce listed three factors it considered when applying the specificity test:
- the extent to which a foreign government acts to limit the availability
of a program;
- the number of enterprises, industries or groups thereof that actually
make use of a program (possibly involving examination of disproportionate
or dominant users); and
- the extent to which the government exercises discretion in making
the program available.
Commerce used best information available with respect to the specificity of the
provincial stumpage programs because inadequate responses were received from
the respondents.
Commerce preliminarily reversed its Softwood I finding and found that the
stumpage programs were de facto specific. Commerce concluded that while the
stumpage legislation allowed any potential user to apply, the four provincial
governments in fact exercised discretion in the allocation of stumpage licences.
While the existence of discretion does not per se make a benefit specific, significant
evidence indicated that the discretionary allocation of stumpage rights
resulted in targeting and distortion of the programs’ benefits. Contrary to the findings
in Softwood I, it was concluded that there were not many industries utilizing
the programs.
In attempting to determine whether stumpage rights were provided at preferential
rates, Commerce concluded that there was no generally available reference
price to use as a benchmark. Therefore, the Preferentiality Appendix to the
Preliminary Results of the Administrative Review of Carbon Black from Mexico
was used. The alternative tests contained in Carbon Black were designed to determine
whether a government had provided a good or service at preferential rates
for a limited number of users.
The tests, in hierarchical order, were as follows:
- prices charged by the government for a similar good or service;
- prices charged within the jurisdiction by other sellers of an identical
good or service;
- the government’s cost of producing that good or service; or
- external prices.
By using alternative (3) and determining that the government expenditures
involved did not recover the costs of providing standing timber to stumpage rights
holders, Commerce found that these programs did provide goods at preferential
rates. As the measure of the net subsidy, Commerce used the difference between
provincial government expenditures in providing stumpage rights and the
revenues directly derived from stumpage payments, divided by lumber sales.
Countervailable Net Subsidy: 0.047% ad valorem
For investment in “qualified property” (i.e. new plant and equipment used in
processing) the basic Investment Tax Credit was 7%, with an additional 3% or 13%
for qualified property in certain designated regions. For investment in “certified
property” (i.e. property in regions characterized by high unemployment and low
per capita income), the Investment Tax Credit rate was 50%.
For expenditures on “scientific research” (i.e. cost of capital equipment used for
scientific research and expenses related to scientific research) the basic Investment
Tax Credit rate was 20%. The rate was 35% for small Canadian companies
and 30% for expenditures made in designated regions.
A “research and development” Investment Tax Credit of 10% was available to all
companies in Canada (20% for small businesses).
Commerce found that the basic Investment Tax Credit rates were not limited to
a specific enterprise or industry, and hence were non-countervailable. However,
the Investment Tax Credit rates limited to specific regions were found to be
specific and thus countervailable.
Countervailable Net Subsidy: less than 0.001% ad valorem
PEMD was a program administered by the Department of External Affairs. It facilitated
the development of export markets for Canadian products by providing
assistance for project bidding, market identification, export consortia, sustained
export market development, participation in foreign trade fairs, and bringing in
foreign buyers. PEMD assistance was in the form of interest-free loans with repayment
terms dependent upon the success of the export promotion activity. Since
PEMD loans were provided for export activities at preferential rates, Commerce
found them to be interest-free loans specifically for export promotion, and therefore
countervailable.
Countervailable Net Subsidy: 0.048% ad valorem
This program provided development incentives (grants or loan guarantees) to
attract capital investments to designated regions where employment and
economic opportunity were chronically low. Although the program was terminated
in 1983, RDIP grants were provided through 1985. Commerce found this
program countervailable because its benefits were limited to companies located
within specific regions.
Countervailable Net Subsidy: 0.145% ad valorem
IRDP was established in 1983 as the successor to RDIP. The goal of the program
was to increase industrial development through the provision of grants to
encourage the development of new and/or more productive industrial processes
and products in less developed areas. The program classified each of Canada’s 260
census districts into one of four tiers. Tier IV districts were the most economically
disadvantaged regions, and were eligible for the highest share of assistance under
IRDP. Tier I districts were the most economically developed regions, and were
therefore eligible for a lesser share of IRDP assistance. Commerce concluded that
while benefits available in the Tier I region were not countervailable because of
their general availability, benefits provided above and beyond Tier I (i.e. benefits
available in Tiers II to IV) were countervailable because of regional specificity.
Countervailable Net Subsidy: 0.002% ad valorem
CIAP, which existed between 1981 and 1984, provided grants to promote business
investments in communities affected by serious industrial dislocations.
The following programs were found to be limited to specific enterprises and industries
or specific regions, and thus countervailable.
Countervailable Net Subsidy: 0.003% ad valorem
The ARDA was designed to promote economic development and alleviate social
and economic disadvantages in certain rural regions through the provision of
grants funded jointly by the federal and provincial governments. The focus of the
programs was alternative land use, soil and water conservation, and economic
development. The ARDAs signed with Manitoba, British Columbia, the Yukon and
the Northwest Territories provided benefits to the softwood industry. The assistance
was found to be specific because it was limited to rural areas.
Countervailable Net Subsidy: 0.002% ad valorem
GDAs were umbrella development agreements between the federal and provincial
governments, designed to encourage regional development. Only the GDA
subsidiary agreement on Manitoba Northern Development provided assistance to
the softwood lumber industry.
Countervailable Net Subsidy: 0.001% ad valorem
ERDAs were essentially continuations of the GDAs. The Saskatchewan Northern
Development Subsidiary Agreement provided grants to the softwood lumber
industry.
Countervailable Net Subsidy: 0.002% ad valorem
SIP was conducted by Forintek, a private not-for-profit entity incorporated as
Canada’s “Wood Products Research Institute.” Forintek derived its operating
funds from membership fees from member companies, contracts, and contributions
from the federal and provincial governments. Forintek members accounted
for about 75% of Canada’s lumber production. Under SIP, Forintek conducted
confidential studies of the efficiency of mill operations. Commerce found the
government’s funding of Forintek’s studies countervailable as this research was
confidential and benefited specific enterprises.
The following programs were found to be limited to specific enterprises and
industries or specific regions, and thus countervailable.
Countervailable Net Subsidy: 0.006% ad valorem
This program provided various forms of assistance to industries designated as
“critical” by the provincial government. “Critical” could refer to either the
economic conditions facing that industry or the importance of the industry to the
economy. As the designation of “critical” was left to the government’s discretion
and the government had not provided any objective criteria for such a designation,
the program was found to be specific.
Countervailable Net Subsidy: less than 0.001% ad valorem
Loans received by softwood lumber producers in 1978 and 1979 were found to be
countervailable because their availability was limited to specific regions within
British Columbia. Commerce determined that the terms of the loans were inconsistent
with commercial considerations.
Countervailable Net Subsidy: 0.001% ad valorem
This program, which was terminated in 1981, permitted manufacturing enterprises
located in any part of the province outside of Montreal to deduct from taxes
payable 25% of the value of allowable capital investments.
Countervailable Net Subsidy: less than 0.001% ad valorem
In 1985, this program was split into two. APEX-Prospection provided grants to
companies to facilitate the initial phases of exporting outside Quebec. APEX Marketing
was designed to enable firms that had identified a promising export
market to analyze the market and develop a marketing plan. Because assistance
was provided to promote exports of subject goods to the United States, Commerce
found the program to be a countervailable export subsidy.
Countervailable Net Subsidy: 0.173% ad valorem
REXFOR was a provincial Crown corporation funded by the Ministère des
Finances du Québec; it owned sawmills and pulp and paper mills producing the
softwood products under investigation. REXFOR received funding from the
Quebec and federal governments, and in turn funded the Quebec forestry
industry through loans and equity transfusions. REXFOR’s funding included a
significant equity transfusion to Bois de l’Est du Québec (BEQ, an affiliate of
REXFOR) for the purchase and reorganization of six sawmills. Commerce found
this program countervailable because the benefits were limited to a specific enterprise
on terms inconsistent with commercial considerations.
Countervailable Net Subsidy: 0.012% ad valorem
The SDI was a Crown corporation acting as an investment corporation and development
program administrator on behalf of the Government of Quebec.
Commerce concluded that the SDI’s financing assistance and development assistance
programs were neither regionally specific nor inconsistent with commercial
considerations. However, the export expansion program, which offered interest
cost reimbursements contingent on export performance, was found to be a countervailable
export subsidy.
Countervailable Net Subsidy: 0.012% ad valorem
Under this program, the Government of Quebec provided 60% to 95% of the costs
of engineering and management consulting related to wood processing facilities.
The Government of Quebec also paid for 50% of the salary of personnel with
expertise in production management or engineering, and 25% of the costs of feasibility
studies for computer systems and the cost of purchasing and installing
computer systems. The program was found to be specific to a particular industry.
Under GDAs, ERDAs and ARDAs, agreements had been signed between the
federal and provincial governments to develop forest land held by the Crown and
by private owners. Commerce determined that the benefits of the silviculture,
reforestation, forest management and administrative support elements of this
program accrued to the Crown as owner of the lands, and not to the producers of
the goods under investigation; accordingly it found these benefits not countervailable.
Furthermore, as the resulting research was available to the public, and
the benefits were available to all private landowners, Commerce found the
program to be non-countervailable.
This program was designed to promote the small industrial sector in rural
Newfoundland. As this GDA subsidiary agreement was not limited to a specific
industry or locale within Newfoundland, it was found non-countervailable.
Commerce found that there were no instances in which Canadian railroads
provided preferential benefits to, or facilities for, the softwood lumber industry. The
rail services provided were not found to be limited to a specific industry or region.
This program was designed to promote manufacturing operations in a wide range
of Newfoundland industries. As this ERDA subsidiary agreement was not limited
to a specific industry or locale within Newfoundland, it was found non-countervailable.
Forintek was a private, non-profit entity dedicated to assisting the Canadian
forest product industry. While some of Forintek’s research activities were funded
by the federal government, the results were made publicly available, and benefits
therefore were not specific to an industry.
Commerce concluded that the grant, loan, loan guarantee and equity protection
programs administered by this overall program were neither regionally specific
nor limited to a specific enterprise or region.
This program assisted individuals on welfare in acquiring forestry management
skills. The program did not relieve timber licensees of any obligations or responsibilities,
nor did it provide benefits to producers of the subject merchandise.
This program provided incentives for investment in equity capital of small businesses
in British Columbia. The eligibility requirements for the program did not
limit its benefits to a specific industry or enterprise.
Commerce found that the results of research funded by the Alberta government
were publicly available and therefore not countervailable.
- Special Areas Act
- Forest Industry Renewable Energy Program
- Prince Edward Island Comprehensive Development Plan
- British Columbia Preferential Rail Rates
- British Columbia Market Development Assistance
- Quebec Industrial Development Corporation Program to
Promote the Export of Products and Services
- Quebec Laws Concerning Forest Credit
- Quebec Reimbursement of Real Estate Taxes
- British Columbia Income Tax Holidays
- British Columbia Development Corporation Industrial Parks
- Alberta Timber Salvage Program
- Fort Nelson Extension in British Columbia
- Quebec Office of Planning and Development Exports
Assistance Program
On October 31, 1991, Commerce initiated a third countervailing duty investigation
after Canada notified the United States that it was terminating the Softwood
Memorandum of Understanding. In December 1991, U.S. petitioners added Canadian
log export restrictions as an alleged countervailable subsidy. On March 5,
1992, Commerce issued its preliminary subsidy determination, in which it found
stumpage in Alberta, British Columbia, Ontario and Quebec to confer a subsidy
of 6.25%, and log export restrictions in British Columbia to confer a subsidy of
8.23%. A preliminary subsidy rate of 14.48% was applied to lumber from all
provinces except the Atlantic Provinces. Commerce abandoned the cost-revenue
comparison methodology used in Softwood II and instead found that stumpage
prices were below market prices, providing a subsidy that was passed to the
lumber producers. It also found that stumpage programs were, in fact, limited to
a group of industries.
On May 28, 1992, Commerce published its final determination, reducing the rate
for stumpage to 2.91% and the rate for export restrictions to 3.60%. A final subsidy
rate of 6.51% was then applied to lumber from all provinces except the Atlantic
Provinces. On July 15, 1992, the ITC released an affirmative final injury determination.
The ITC found injury primarily on the basis that Canadian lumber
imports consistently accounted for a very large share of apparent U.S. consumption.
Subsidized Canadian lumber, and spruce-pine-fir in particular, was found to
have caused price depression in the U.S. market. On July 29, 1992, a panel was
convened under Chapter 19 of the Canada–U.S. Free Trade Agreement to review
Commerce’s final determination. On May 6, 1993, the panel issued remand
instructions to Commerce. On September 17, 1993, Commerce issued its determination
on remand, in which it affirmed its previous determinations and
increased the rate from 6.51% to 11.54%.
On May 17, 1993, the panel issued its decision on remand. It concluded that
Commerce had failed to provide a rational basis for its finding that stumpage was
specific, and remanded the issue back to Commerce for a determination that
stumpage was not provided to a specific enterprise or industry. The panel further
concluded that Commerce had not empirically shown that the stumpage
programs produced market distortions (i.e. it had not performed an effects test).
With respect to log export restrictions, the panel found that Commerce had failed
to determine precisely the beneficiaries of the export restrictions, and therefore
rejected Commerce’s specificity finding. With a panel remand to make determinations
that both stumpage and log export restrictions were not specific and
therefore not countervailable, Commerce terminated the order.
162
On September 3, 1991, the Government of Canada announced its intention to
terminate the Canada–U.S. Memorandum of Understanding on Softwood, effective
October 4, 1991. On October 4, 1991, the U.S. Trade Representative initiated a
“Section 301”163
investigation of Canadian softwood lumber exports. The USTR
determined to withhold or extend liquidation of entries of imports of softwood
lumber until the completion of a countervailing duty investigation by Commerce.
To that end, Canadian softwood lumber was made subject to duties of up to
15% ad valorem, depending on the province of origin. The imposition of such
duties was made contingent upon an affirmative final subsidy and injury determination
in the countervailing duty investigation, and applied to entries filed on
or after October 4, 1991.
Also, on October 4, 1991, Commerce self-initiated a countervailing duty investigation.
Commerce stated that it undertook this action because Canada had unilaterally
breached the terms of the MOU, and affirmed that it possessed information
regarding the extent of Canadian subsidies and the likelihood of injury. Companies
located in the Maritime Provinces had been exempt from payment of the
export charge since 1988, and were thus exempted from this investigation.
On December 20, 1991, the ITC released an affirmative preliminary determination,
finding a reasonable indication that the domestic industry was threatened
with material injury by reason of allegedly subsidized imports from Canada.
On March 12, 1992, Commerce issued its preliminary subsidy determination.
Alberta, British Columbia, Ontario and Quebec were found to maintain stumpage
programs conferring countervailable subsidies.
Commerce calculated a country-wide rate for stumpage programs of 6.25%, multiplying
the rates for the four provinces by their relative share of total Canadian
softwood lumber exports to the United States during the period of investigation.
In addition, British Columbia was found to maintain log export restrictions that
conferred a countervailable subsidy. Commerce calculated a country-wide rate for
log export restrictions of 8.23%, multiplying the rate for British Columbia by that
province’s relative share of total Canadian softwood lumber exports to the United
States during the period of investigation. Taken together, a preliminary subsidy
rate of 14.48% was applied to lumber from all provinces except the Atlantic
Provinces. Six companies that used only U.S.-origin logs in their production were
also excluded from the investigation.
On May 28, 1992, Commerce published its final determination. Weight-averaging
each province’s rate (Alberta, 1.25%; British Columbia, 3.30%; Ontario,
5.95%; Quebec, 0.01%) by the province’s share of exports to the United States,
it calculated a country-wide rate of 2.91% for stumpage programs. British
Columbia’s log export regulations were found to provide a countervailable
subsidy of 4.65%, weight-averaged for a country-wide rate of 3.60%. Taken
together, a final subsidy rate of 6.51% was applied to lumber from all provinces
except the Atlantic Provinces.
On July 15, 1992, the ITC released an affirmative final injury determination,
thereby confirming a countervailing duty order. Canadian lumber imports consistently
accounted for a large share of apparent U.S. consumption during the period
of investigation, and increased when measured by value (although they decreased
when measured by market share and quantity). The ITC found that prices for
spruce-pine-fir were a bellwether in the market and that Canadian-origin imports
of these species served to limit potential price increases in the U.S. market. Log
costs for Canadian producers did not increase as steeply as log costs in the United
States, a fact that the ITC attributed in part to Canadian subsidies. The ITC
concluded that U.S. producers’ inability to raise prices commensurate with rising
costs clearly demonstrated significant price suppression and was attributable, at
least in part, to sales of imported subsidized Canadian lumber.
On May 25, 1992, the Government of Canada, the governments of Alberta, British
Columbia, Manitoba, Ontario, Saskatchewan, Quebec, the Northwest Territories
and the Yukon, and the Canadian Forest Industries Council and affiliated companies
requested an FTA Binational Panel Review of Commerce’s final determination.
On July 29, 1992, a panel was convened under Chapter 19 of the Free Trade
Agreement to review Commerce’s final determination. On May 6, 1993, the panel
unanimously affirmed in part and remanded in part the final determination:
- In the case of the stumpage programs, Commerce had found them to
be specific on the grounds that the program had a limited number of
users. The panel concluded that Commerce was required to consider
all four of the specificity elements in its Proposed Regulations, as
well as any other relevant record of evidence in making its specificity
finding.
- Commerce had found that the federal government’s pricing policies
for timber-cutting rights were preferential when measured against
benchmark prices charged in alternative markets. Accordingly, the
policies were found to convey a subsidy to softwood lumber
exporters. Commerce was instructed to consider whether or not the
stumpage program did in fact distort the market so as to give a
competitive advantage to Canadian exporters (i.e. it was instructed
to perform an effects test).
- The panel found Commerce’s conclusion that British Columbia’s log
export restrictions were de jure specific to be contrary to U.S. law,
and it remanded the matter to Commerce for reconsideration
because it felt that Commerce should have undertaken a de facto
specificity analysis. A panel majority found that Commerce was
entitled to treat the restrictions as subsidies. However, Commerce
was directed to reconsider and recalculate a number of the economic
and statistical methodologies used to determine whether the log
export restrictions conferred a benefit upon B.C. softwood
producers, entitling the United States to treat lumber imports from
that province as countervailable. Two of the panellists found log
export restrictions not to be countervailable and therefore dissented
from the majority on log export restrictions.
On September 17, 1993, Commerce issued its determination on remand, in which
it affirmed its previous determinations and increased the subsidy rate from 6.51%
to 11.54%. As requested, Commerce analyzed the four factors identified in its
1989 Proposed Regulations relating to specificity. It re-affirmed its prior determination
that the stumpage programs were countervailable for the reason that the
recipients of these benefits were “too few” in number. Commerce agreed with the
panel that the log export restrictions were not de jure specific, but after reconsideration
it found that they were de facto specific for substantially the same
reasons given with respect to the stumpage program. Commerce adhered to its
original position that it was not required to perform an analysis of “market distortion.”
However, in accordance with the panel’s instructions, Commerce reviewed
the record of evidence and concluded that the provincial programs had the effect
of distorting the market.
On December 17, 1993, the panel issued its decision on remand. By a majority of
3 to 2, the panel concluded that Commerce had failed to provide a rational basis
for its finding that stumpage was specific, and it remanded the issue back to
Commerce with instructions to provide a determination that stumpage was not
provided to a specific enterprise or industry.
On the question of whether the stumpage programs distorted or otherwise had an
effect on markets, the majority took the position that a subsidy cannot be countervailed
unless a competitive advantage is conferred upon the object of the
subsidy, or unless market distortion flows from the subsidy. The panel concluded
that Commerce had not empirically shown that the stumpage programs produced
market distortions. With respect to log export restrictions, the panel accepted
Commerce’s remand determination that the restrictions had an effect on the price
of logs. However, the panel found that Commerce had failed to determine
precisely the beneficiaries of the export restrictions; and since the panel believed
that they were not necessarily the same as those benefiting from stumpage
programs, it rejected Commerce’s specificity finding. Two panel members
dissented and concluded that under U.S. principles of judicial review of agency
action, the panel gave too little deference to Commerce’s choice of methodologies
in determining specificity. With a panel remand to make determinations that both
stumpage and log export restrictions were not specific and therefore not countervailable,
Commerce was effectively instructed to revoke the order.
On April 6, 1994, the USTR filed a Request for an Extraordinary Challenge
Committee to review the findings made by the Binational Panel that reviewed
Commerce’s final determination and its determination on remand. The request
for the extraordinary challenge stated that two members of the panel materially
violated the FTA Rules of Conduct by failing to disclose information that revealed
at least the appearance of partiality or bias and, in the case of one of the panellists,
that indicated a serious conflict of interest. Moreover, the panel manifestly
exceeded its powers, authority and jurisdiction by ignoring the Chapter 19
standard of review, including substantive law and the facts, in overturning
Commerce’s finding that the subsidies at issue were provided to a specific
industry or group of industries and inventing a legal requirement that Commerce
examine whether subsidies distorted the market (i.e. that it perform an effects
test). The request stated that these actions materially affected the panel’s decision
and threatened the integrity of the Binational Panel Review process.
On August 3, 1994, by a majority of 2 to 1, the Extraordinary Challenge Committee
upheld the earlier findings of the Binational Panel. The majority found that the
panel followed an appropriate standard of review and properly interpreted U.S.
law164
when it ruled that Commerce, in this unique situation, was required to
assess whether or not there was any competitive advantage or market distortion
created by the Canadian stumpage systems or the B.C. log export restrictions
before determining whether or not a countervailable subsidy existed.
The majority found that the panel had articulated the proper standard of review
and had conscientiously applied the appropriate law with respect to its reversal of
Commerce’s specificity findings, based on the agency’s failure to consider all of
the enumerated factors.
The minority held that since the Softwood III decision, the U.S. Federal Circuit’s
decision in Daewoo Electrics v. International Union of Electric 6 F. 3d 1511
(Fed. Cir. 1993) required greater deference to Commerce’s specificity methodology
and its decision that market distortion is not a required element. The panel
majority seems to have agreed with the Canadian position that the decision in
Daewoo was not relevant and did not add to what had been laid down in earlier
judicial decisions. Moreover, Justice Hart found that when Canada and the United
States replaced domestic judicial review with panel review, they must have realized
that such panels would exhibit less deference to administering agencies than
would domestic courts.
With respect to the allegation of bias and gross misconduct lodged against two of
the Canadian panel members, the majority found that the standard of gross
misconduct, bias, serious conflict of interest or material violation of the rules of
conduct had not been met. While Judge Morgan found that the two panellists had
been remiss in not disclosing certain advice given and services rendered to
various interested parties on unrelated issues, there had been no material violation
of the rules of conduct. Justice Hart found that there was no intentional
refusal to reveal any matter that would justify their removal, and that any omission
had been inadvertent. The majority also noted that the concerns about the
two panellists were not raised until after the second remand determination. In
dissent, Judge Wilkey found that it was inappropriate for the Extraordinary Challenge
Committee to speculate on the significance of the undisclosed conflicts of
interest, and that new panellists should accordingly be chosen.
Judge Wilkey also asserted that the Extraordinary Challenge Committee was to
operate in a manner equivalent to the U.S. Federal Circuit in terms of its review
of panel decisions—namely, to determine whether the panel had manifestly
exceeded its powers, authority or jurisdiction so as to threaten the integrity of the
Binational Panel process. Furthermore, Judge Wilkey found that the panel had not
shown sufficient deference to the expertise of the U.S. agency, and had substituted
its theories and beliefs for those of the agency. Finally, he questioned the
entire rationale of having independent “experts” reviewing agency decisions and
the feasibility of educating Canadians about U.S. law.
In light of the Extraordinary Challenge Committee’s affirmation of the Binational
Panel’s order, the countervailing duty order on certain softwood lumber products
from Canada was revoked on August 16, 1994.
On July 24, 1992, the Government of Canada, the governments of Alberta, British
Columbia, Manitoba, Ontario and Quebec, the Canadian Forest Industries
Council and affiliated companies, and the Quebec Lumber Manufacturers’ Association
and its individual member companies requested a panel review of the
ITC’s final injury determination.
On July 27, 1993, the panel found that the ITC’s determination was not supported
by substantial evidence on the record, and it directed the ITC to make a determination
about causation of material injury. The panel found that substantial
evidence supported the ITC’s finding that the subject goods from Canada and the
United States were highly substitutable and that the volume of Canadian imports
during the period of investigation was “significant.” However, in the absence of
increases in quantities or shares, or other indicia, the mere presence of a significant
volume of unfairly traded imports is insufficient to support an affirmative
injury determination.
The panel instructed the ITC that if price suppression was the basis of a new affirmative
determination, the ITC should have indicated the actual price-suppressing
effect of the subject goods. The ITC should have also addressed the “to a significant
degree” requirement of 19 U.S.C. sec. 1677 (7) (C) (ii). The panel further
found that should the ITC on remand decide to rely on a cross-sectoral comparison,
it must explain the statutory and other bases permitting such a comparison.
An appropriate methodology must also be established, defined and explained.
Finally, the ITC was instructed to provide an adequate explanation of the basis for
its findings that imports of softwood lumber from Quebec were not entitled to a
separate injury determination.
The ITC released its determination on remand on October 25, 1993, again finding
material injury by reason of Canadian softwood lumber imports. The ITC found
that U.S. price increases had been less than they otherwise would have been and
that this price suppression was caused in a significant part by Canadian imports.
It supported this conclusion with: (1) price trend evidence showing that Canadian
prices rose more slowly and fell more rapidly than U.S. prices; (2) evidence that
prices of Canadian spruce-pine-fur lumber had a dominant impact on prices in
the U.S. market; and (3) evidence that U.S. prices were lowest in the Northeast
(where Canadian import penetration was highest) and highest in the Southeast
(where Canadian import penetration was lowest).
On January 28, 1994, the panel issued its review of the ITC’s first remand determination.
The panel upheld the ITC’s determination not to accord Quebec a separate
injury determination as the ITC did not have the statutory authority to vary
the scope of Commerce’s determination, which in the instant case was a
“country-wide” subsidy finding.
The panel found that the ITC’s price trend data and analysis did not constitute
substantial evidence in support of its conclusion that the significant price
suppression was caused by imports from Canada. The ITC did not provide sufficient
information as to how its conclusions were reached. Furthermore, the panel
was concerned about the use of Producer Price Indices, as opposed to actual
prices, to establish price trends and determine that subsidized Canadian lumber
increased in price more slowly and decreased in price more rapidly than U.S.
lumber. If the ITC on remand relied on price trend information to support an affirmative
determination, it was instructed to provide a full analysis and explanation
of the underlying data and methodology.
On remand, the ITC again found that Canadian imports had a price-suppressive
effect on domestically produced softwood lumber because the price of subsidized
Canadian lumber had a dominant impact on lumber prices in the U.S. market.
The panel found that there was not sufficient evidence to support the ITC’s
finding that the Canadian prices served as a reference point for the pricing of U.S.
lumber. Furthermore, even if there was substantial evidence on the record, it
would not be sufficient to establish causation. The panel found that the evidence
used by the ITC in it regional analysis was insufficient because it was based on
data previously rejected and now used without adequate explanation. Moreover,
the analysis contained a relatively low level of statistical certainty.
In its second remand determination released on March 14, 1994, the ITC
concluded that the panel had rejected any reliance on price trends and so it did
not discuss the issue further.
The ITC plurality (two of the three Commissioners who had found injury)
re-affirmed their earlier conclusion: that the U.S. industry was experiencing material
injury; that lumber is a competitive, commodity market; that subsidized
Canadian imports accounted for over one quarter of the market, and that they
were therefore significant and causally linked to the material injury suffered by
the U.S. industry; and that although their price effects on U.S. prices were uncertain,
no other causes fully explained the injury. The Commissioners’ view of the
finding was that imports were significant and that this fact was tantamount to a
finding of injury causation.
On July 6, 1994, the panel released its review of the ITC’s second remand determination.
The panel stated that the ITC had misunderstood its findings on price
trend analysis and the panel had in fact indicated that it would be open to such
analysis if conducted appropriately.
The panel rejected as not in accordance with law the ITC assertion that the
existence of significant Canadian imports could be presumed to be a cause of
material injury to the U.S. industry. Such imports, it maintained, could be viewed
only as support for a determination of such causation. The panel remanded the
plurality’s determination that no cause other than significant Canadian imports
fully explained the losses suffered by the U.S. industry. The panel concluded that
this finding was based in part upon the ITC’s cross-sectoral comparison, a practice
which in its first and second review had been remanded to the ITC to address
several methodological and statutory concerns. The panel remanded the determination
of the third Commissioner, who had offered a separate but concurring
finding, so that several methodological concerns relating to the economic model
employed could be addressed.
The Panel Review of the ITC decision effectively ended at this point. Further
proceedings were stayed initially in light of a constitutional challenge to the panel
process in U.S. courts, but were later terminated after the United States revoked
the order on August 16, 1994.
Based upon its analysis of the stumpage and log export programs, Commerce
calculated a country-wide countervailing duty rate of 6.51% ad valorem. In view
of the complexity of the investigation, the following detailed analysis is presented.
To find the provincial stumpage programs countervailable, Commerce had to first
determine whether the programs were limited to “a specific enterprise or
industry, or group of enterprises or industries.” Second, Commerce had to determine
whether the provinces provided “goods or services at preferential rates.”
In Softwood I, Commerce found that stumpage programs were limited to a
specific industry because of the “inherent characteristics” of timber. In its preliminary
decision in Softwood II and in this decision, Commerce reversed itself and
found the stumpage programs to be specific, as they benefited only two industries:
the solid wood products industry and the pulp and paper industry.
166
Commerce offered two reasons for this reversal: (1) its belief that the 1988 Omnibus Trade
and Competitiveness Act was intended to overrule any prior Commerce cases in
which programs were found non-specific based upon the “inherent characteristics”
doctrine; and (2) its belief that, even if the 1988 Trade Act did not overrule
the “inherent characteristics” doctrine, the act did not adopt the doctrine, leaving
Commerce with the discretion to overturn its earlier finding.
Commerce rejected the respondents’ argument that “purposeful government
action” to limit a program must be shown for a program to be considered specific.
The respondents argued that “purposeful government action” means that the
program is restricted or limited by government action to a specific enterprise.
Commerce found that use of the “purposeful government action” test would lead
to the absurd result of finding all natural resource programs to be non-specific.
Commerce stated that it had considered all of the specificity factors contained in
the 1989 Proposed Regulations, and found that one of them—the limited number
of users—required a finding of specificity. While conceding that a wide variety of
products were produced by covered companies, Commerce employed a broad
meaning to the term “industry” so as to include a wide variety of downstream
products made from the same base products, i.e. solid wood and pulp.
Having determined that the stumpage programs were specific, Commerce
addressed the second key issue: whether they provided stumpage at preferential
rates. Commerce found the stumpage programs in Alberta, British Columbia,
Ontario and Quebec to be preferential and therefore countervailable. Commerce
rejected the respondents’ argument that the programs could not be countervailed
because they did not cause “market distortion,” i.e. did not cause higher output
or lower lumber prices than what would be obtained in a purely competitive
market (i.e. they did not meet the effects test).
Commerce also relied upon the legislative history of the “offset” provision
concerning the treatment of regional subsidies in support of its finding that
Congress did not intend Commerce to consider “market distortion.” Prior to the
1979 Trade Agreements Act, the Treasury Department had a practice of taking
into account the effects of government subsidies on the competitive position of
subsidy-receiving firms. In the 1979 act, Congress specifically eliminated this
offset practice. Commerce indicated that this reflected Congress’ position that
Commerce should not assess the economic effects of a subsidy on recipients in
either defining or evaluating a government program.
In support of their position, the respondents relied in part upon several U.S. countervailing
duty investigations in which Commerce had performed an effects test.
Commerce stated, however, that the cited decisions were of no relevance in this
case because they concerned imports from non-market economies. The cited
cases did not indicate that Commerce would necessarily use a market distortion
test in countervailing duty cases involving imports from a market economy
country. An effects test was necessary in a non-market economy case because the
concept of “subsidy” has no meaning outside the context of a market economy.
In a market-economy case, the existence of a “market distortion” is normally
presumed once the receipt of a countervailable subsidy has been established.
The respondents relied on an economic analysis performed by Dr. Nordhaus to
advance their argument that the stumpage programs did not have a distortive
effect. Commerce not only found the study to be irrelevant given its determination
concerning the effects test, but disputed the methodology and conclusion
reached by Dr. Nordhaus.
Commerce had devised a hierarchical methodology for determining and measuring
when goods and services are being provided at preferential rates. Commerce
stated that it had done so in the interest of maximizing administrative
predictability, as the statute did not provide considerable guidance in this area.
Commerce’s preferred test (test one of the Preferentiality Appendix)
167
to determine preferentiality is to examine whether the government has provided a good
or service at a price that is lower than the prices the government charges to the
same or other users of that product within the same political jurisdiction.
Commerce used this benchmark for British Columbia, Alberta and Ontario, but it
used its first alternative benchmark—private prices charged for the identical
good—for Quebec-origin products.
Where comparisons based on price discrimination within the jurisdiction cannot
be reliably made, one of three further hierarchically ranked alternatives are
used.168
Commerce indicated that its ranking was not “immutable” but would be followed
unless “presented with facts or arguments demonstrating that it is inappropriate,
which was not the case here.”
Commerce rejected the respondents’ argument that each province’s revenues
exceeded its costs, meaning that the third alternative benchmark—the government’s
cost—should be used. Commerce did not use the cost benchmark because
it could use higher-ranked benchmarks in each province. Moreover, Commerce
indicated that the cost benchmark raised particular problems when applied to
natural resources, and Ontario, Quebec and Alberta had expressed concerns over
the use of the cost benchmark in their provinces.
Commerce refused to use a cross-border comparison between U.S. stumpage
charges and Canadian charges because its long-standing practice has been to
measure preferentiality within the foreign jurisdiction. Commerce also noted that
it was convinced that too many factors affected the comparability of U.S. and
Canadian stumpage charges.
Commerce determined that British Columbia provided stumpage at preferential
prices as administratively set prices were lower than competitively bid prices
under section 16 of the Small Business Forest Enterprise Program. Commerce
utilized section 16 prices as the benchmark because they were determined solely
by competitive market forces and were thus non-preferential.
Commerce accepted the respondents’ argument that it should use all softwood log
prices in calculating both the administratively set price and the competitive benchmark,
since sawmills use both sawlogs and pulplogs in their milling operations.
Subsidy Calculation: Commerce found a final countervailing duty rate of 3.30%.
169
The rate in Commerce’s preliminary determination was 6.88%.
To determine whether Quebec’s Timber Supply Forest Management Agreement
(TSFMA) program, which accounted for over 95% of the stumpage harvested on
provincial lands, provided preferential rates, Commerce used its second alternative
benchmark—private sales of stumpage.
Commerce found that its preferred benchmark—the government’s price for the
identical good on a non-specific and non-preferential basis—was not available,
and that its first alternative benchmark could not be used since the government
did not sell “similar” goods. Based upon its comparison of adjusted TSFMA rates
and weight-averaged private stumpage rates, Commerce found the TSFMA rates
to be lower and thus preferential.
Subsidy Calculation: Commerce calculated a final countervailing duty rate of
0.01%. The rate in its preliminary determination was 3.78%.
Commerce found that the Ontario government charged non-integrated mills (i.e.
mills not related to pulp/paper mills) lower stumpage rates than those it charged
integrated mills. It was determined that the rate charged to integrated mills was
non-preferential and thus provided an appropriate benchmark. Since Ontario’s
rates were set only by reference to the end user rather than by the type of timber
harvested, no pulplog/sawlog adjustments needed to be made. Commerce made
no adjustments to the integrated and non-integrated rates since both types of
users shared the same responsibilities.
Subsidy Calculation: Comparing the integrated and non-integrated rates,
Commerce found a final countervailing duty rate of 5.95%. Commerce had calculated
a 5.21% rate for Ontario in its preliminary determination.
Alberta provided timber under three types of tenures: Forest Management Agreements
(FMAs); Timber Quota Certificates (TQs); and Commercial Timber Permits
(CTPs). Commerce used the FMA pulplog rate as the benchmark to measure the
preferentiality of the FMA sawlog rate, since the pulplog rate was found to fluctuate
based on published pulp and paper prices. According to Commerce, this fact made
the pulplog rates non-preferential and thus an appropriate basis for comparison.
Commerce found the FMA sawlog rate to be countervailable since it was lower than
the pulplog rate. Commerce determined that some TQs involved competitive bids,
whereas others involved administered prices. Commerce used the competitive TQ
bid prices as the benchmark for administered TQs and found a countervailable
benefit. By comparing the prices of competitive-bid CTPs with the administrative
prices for other CTPs, Commerce found a countervailable benefit.
Subsidy Calculation: Based upon its analysis of the three tenures, Commerce
found a final countervailing duty rate of 1.25%. In its preliminary determination,
Commerce calculated a 4.16% rate.
Commerce also found the stumpage programs in these provinces and territories
to be countervailable. However, Commerce decided that, since the calculated
rates would have an insignificant impact on the country-wide countervailing duty
rate, it would not separately construct a margin for these jurisdictions. These
provinces and territories received the country-wide rate calculated under
Commerce’s analysis of Alberta, British Columbia, Ontario and Quebec.
Country-wide Rate for Stumpage: For each province, Commerce divided the
countervailable benefit calculated above by the total value of that province’s
lumber and lumber co-product (e.g., chips and sawdust) shipments. Commerce
then weight-averaged the resulting provincial rates according to each province’s
percentage share of softwood lumber exports to the United States. Commerce
calculated a country-wide stumpage rate of 2.91%.
Commerce maintained its preliminary determination that B.C. log export restrictions
provided countervailable benefits to lumber producers and that regulations
in Alberta, Ontario and Quebec did not.
As discussed above, Commerce found that the 1979 Trade Act did not require
proof of market distortion (i.e. effects test) as a prerequisite to a finding of a
subsidy. More specifically, Commerce determined that while the ITC was
precluded by statute from measuring benefits on the basis of the net economic
effect on the subsidy recipient (i.e. an increase in output or a decrease in price),
the ITC was not precluded from identifying and analyzing a subsidy in terms of
market distortion (i.e. marginal cost and price changes). Commerce therefore
used a supply-and-demand analysis for the purposes of the log export restriction
issue, because this analysis was found to be the only method by which it could be
determined whether B.C. softwood lumber manufacturers received countervailable
benefits as a result of the log export restrictions.
Commerce noted that both the stumpage programs and the log export restriction
had a net economic effect on the recipient as they decreased the cost of the major
raw material input (logs) and thereby lowered the recipient’s marginal cost.
Commerce stressed that its analysis of the supply-and-demand forces at play in
the B.C. log market demonstrated that marginal cost was affected by the export
restriction.
Commerce recognized that prior to Leather from Argentina (a 1991 decision in
which Commerce countervailed an export restriction on hides), its practice was
not to countervail border measures. Commerce noted, however, that it was free
to alter its long-standing practice so long as it provided a reasonable basis for
doing so and demonstrated that the new practice was consistent with the statute.
Commerce stated that prior to Leather, its decisions—in which border measures,
such as the log export restrictions, were found per se to be non-countervailable—
had been erroneous.
While conceding that Congress had not expressly addressed the issue of countervailability
of export restrictions, Commerce stated that its review of the historical
background, legislative history and statutory language indicated that Congress
had intended the terms “subsidy” and “bounty or grant” to be read broadly.
Therefore, according to Commerce, had Congress directly confronted this issue,
it would have applied the countervailable law as a matter of law to border measures,
such as export restrictions.
Commerce also stressed that the illustrative examples of domestic subsidies
Congress had included in the Trade Act of 1979 did not constitute an exhaustive
list and did not restrict the definition of subsidy. Commerce was free to expand
the list in a manner “consistent with the underlying principles implicit in [those]
enumerations.”
According to Commerce, Congress had intended it to countervail programs
having the indirect effect of lowering a foreign producer’s manufacturing cost by
limiting the demand for the resource. Commerce found that the B.C. log export
restrictions did indirectly lower lumber manufacturers’ marginal costs, while the
export restrictions maintained by other provinces did not confer any countervailable
benefits.
Relying on the statute’s explicit provision that programs providing “indirect”
benefits can be countervailed, Commerce rejected the respondents’ argument
that a program must involve some kind of a financial contribution to be countervailable.
Having established that export restrictions can be considered domestic subsidies
under U.S. law, Commerce next considered whether there was a correlation
between the B.C. export restrictions and the domestic price of B.C. logs.
Commerce determined that the Margolick and Uhler study170
established that the
B.C. program had a “direct and discernible effect” on domestic log prices.
By reducing the demand for B.C. logs that otherwise would exist in the absence
of the export restrictions, the B.C. measures had the effect of reducing the price
of logs sold in the B.C. market. Commerce noted that, although the study did not
establish a correlation with absolute certainty, it provided a “high probability”
that B.C. export restrictions were primarily responsible for the price differential
that existed between domestic and export log prices. Commerce found the log
export restrictions to be de jure limited to a specific group of industries using B.C.
logs, namely the solid wood products industry and the pulp and paper industry.
Commerce determined that the B.C. log export restrictions depressed domestic
log prices only on the coast and in the tidewater and border interior areas of
British Columbia. Only cutting-right tenure-holders in these areas could respond
to a lifting of the restrictions by increasing log exports. The tenure-holders located
in the north-central interior of the province could not economically export and
would not experience a price effect.
Commerce rejected the respondents’ arguments that any differential between
export and domestic log prices could be accounted for by quality and transportation
differences. Commerce also found unpersuasive the respondents’ assertion
that British Columbia’s log export restrictions were not distortive because they
merely offset the distortive effects of Japanese and U.S. policies on the coast and
in the tidewater interior of British Columbia. Commerce noted that it was
concerned with the effects of a program within the foreign government’s jurisdiction,
not the effects of policies in other political jurisdictions.
While conceding that a significant volume of logs were exported from British
Columbia, Commerce maintained its preliminary finding that the B.C. regulations
effectively restricted exports, which would otherwise be more significant,
resulting in an artificially high domestic supply of logs.
Commerce compared current domestic log prices with what prices would be
without the log restrictions. Commerce rejected the petitioner’s request that it
use a cross-border analysis because, as noted with respect to stumpage,
Commerce’s methodology focused on circumstances within the political jurisdiction
under investigation.
Domestic Price: Commerce calculated prices for coastal log exports based on
Vancouver log market prices. It used observed log prices for the tidewater interior
and 1989 Statistics Canada information for the border interior. Commerce
weight-averaged the data according to the percentage of the harvest from each
area capable of exporting. Commerce made a species/grade adjustment to the
domestic prices to account for differences between timber in the interior and
coastal areas.
Export Price: Commerce derived export prices from Statistics Canada data.
Commerce then adjusted the export prices downwards by a price equilibrium
factor to reflect the decrease in export prices that would occur if the log export
restrictions were lifted. Commerce also made adjustments to the export price for
export-related costs (i.e. export sort costs).
Integrated Firms: Commerce found that the log export restrictions benefited integrated
firms as well as firms that purchased logs. The restrictions served to subsidize
lumber production of integrated firms because the firms were discouraged
from selling or exporting logs as a result of the reduced prices and the restrictions.
Commerce compared the domestic and adjusted export prices. It allocated the
benefit to lumber and other products made in the lumber production process
based upon the value of shipments. The resulting rate was weight-averaged based
upon British Columbia’s percentage share of exports to the United States.
Commerce found a log export subsidy of 3.60%. In its preliminary determination,
Commerce had calculated an 8.23% rate.
Commerce calculated a single country-wide rate instead of province-specific
rates. Commerce noted that its long-standing practice was to calculate countrywide,
and not province-specific, rates. Commerce did not calculate any companyspecific
rates.
Commerce determined that the first mill shipment values reported by Statistics
Canada, which it used to calculate the subsidy amount, were acceptable even
though they included some shipment value for remans made from that lumber.
Commerce stated that, in calculating the value of shipments, the overall impact
of including reman values was small and not to the clear advantage of either party.
Commerce allocated the subsidy amount not only to softwood lumber but also to
the other products (e.g., chips and sawdust) that resulted from the lumber
production process. Allocation was based upon the value of shipments of those
products.
Commerce rejected the petitioners’ argument that it should adjust for quality
differences between sawlogs and pulplogs because the provinces did not use the
terms “sawlog” and “pulplog” to distinguish between logs in terms of quality or
size. Instead, the terms were used to distinguish the final use of what in reality
were often similar logs.
Commerce did not exclude from its subsidy calculation logs sold by tenureholders
to unrelated parties because it could not separate out those sales.
Commerce did not exclude from the scope of the investigation products made
from Western Red Cedar, Yellow Cypress, Eastern White Cedar, Eastern White
and Red Pine, and clear and shop grades of lumber for two main reasons: (1) these
species and grades of timber were sold under the same stumpage programs as any
other coniferous species; and (2) they could be used to make the same or similar
lumber products as those made from other coniferous species.
Commerce decided not to exclude remanufactured products from the investigation.
First, Commerce noted that the investigation covered softwood lumber products,
including remans. Second, Commerce noted that it had no precise definition
of remans or “reasonable, objective criteria” that it could follow to separate
remans from other softwood products in excluding them from the investigation.
Third, Commerce found the list of remanufactured products excluded from the
MOU to be unpersuasive since the list resulted from a series of negotiations and
did not legally define a class of merchandise that should be excluded. Fourth,
Commerce determined that stumpage holders produced many reman products;
consequently, at least some remanufacturers benefited directly from the
stumpage programs. Commerce decided to collect duties based upon the first mill
value of the lumber used to make the remans.
Commerce decided that it was impracticable to review all the 334 company exclusion
requests. Commerce did exclude 15 companies that used exclusively or
primarily U.S.-origin logs.
Postscript
The Uruguay Round Agreements Act of 1995 made two significant clarifications
of U.S. countervailing duty law regarding the issues under review by the panel on
softwood lumber. With respect to the two issues—specificity and the so-called
“effects test”—pre-URAA U.S. law, regulation and procedure were often vague,
confusing and contradictory. Commerce applied different tests in different cases.
The Statement of Administrative Action to the URAA, and the URAA itself, clarified
that in determining de facto specificity, Commerce would stop its analysis if
it found that a single factor justified a specificity finding.
Furthermore, the Tariff Act of 1930 was amended to explicitly state that
Commerce did not have to perform an “effects test” in order to determine that a
subsidy program is countervailable.
According to the SAA, this amendment was made to prevent future misinterpretations
of U.S. countervailing duty law, such as those made by the softwood
lumber Binational Panel. Much effort was expended by Canada in attempting to
persuade the U.S. administration to either eliminate or ameliorate these amendments.
It was thought, at least by certain parties, that elimination of the “effects
test” in particular would have the result of overturning the softwood lumber
panel. These attempts were unsuccessful.
On November 2, 1984, Commerce and the ITC received a petition filed by the
U.S. National Pork Producers Council (NPPC) alleging that subsidized imports of
various pork products from Canada were injuring U.S. industry. After initiation of
an investigation, on December 19, 1984, the ITC issued an affirmative preliminary
determination, finding a reasonable indication that an industry in the United
States was materially injured by reason of allegedly subsidized Canadian imports.
On April 3, 1985, Commerce issued an affirmative preliminary determination.
The bonding/deposit rate was C$0.053/lb. for live swine and for fresh, chilled and
frozen pork products. Suspension of liquidation of all Canadian subject goods was
ordered. Because of the large number of individual producers and government
programs at issue, this investigation was deemed “extraordinarily complicated”
and the deadline for release of the preliminary determination was extended.
On June 17, 1985, Commerce issued an affirmative final determination. There
were no specific companies named as Commerce had used a country rate.
Countervailing duty
| Live Swine |
C$0.04386/lb. |
| Fresh, Chilled and Frozen Pork Products |
C$0.05523/lb. |
On September 7, 1985, the ITC released an affirmative final determination with
respect to live swine, and a negative final determination with respect to fresh,
chilled and frozen pork products. Based on differences in physical characteristics,
uses and production facilities, the ITC found two like products: (1) live swine; and
(2) fresh, chilled, and frozen pork products. The ITC also found two domestic
industries, one producing live swine and the other fresh, chilled and frozen pork
products. Although the primary purpose of raising slaughter hogs was to produce
pig meat and pork products, hog growers and packing facilities were not sufficiently
economically integrated to be considered a single industry.
U.S. imports of Canadian swine more than doubled from 1981 to 1982, increased
by 53% in 1983, and almost tripled from 1983 to 1984. During the period from
January to March 1985, imports increased by 97% compared with the corresponding period in 1984. This rapid increase in market share was found to have had a
disruptive effect on the U.S. market, leading the ITC to conclude that the U.S.
industry had been injured by Canadian imports of live swine.
The condition of the pork products industry during the period of investigation had
deteriorated, as evidenced by the industry’s declining financial situation and
declining capacity utilization rate. The industry was unprofitable and was experiencing
material injury. Although imports of pork products increased in volume,
the import penetration ratios remained low (less than 3% of U.S. consumption).
The pricing data revealed no discernible trends regarding the effect of the subject
imports, and the price of U.S. pork generally rose as imports from Canada
increased. These indicators led the ITC to conclude that the U.S. industry was not
suffering material injury by reason of Canadian pork product imports. Canadian
pork production, exportation and consumption levels had all decreased slightly,
indicating that Canadian-origin imports did not pose a threat to the U.S. industry.
On August 15, 1985, the countervailing duty order was issued. A cash deposit of
C$0.04386/lb. was required for all entries of live swine. The suspension of liquidation
with respect to fresh, chilled and frozen pork products was terminated as
a result of the negative ITC determination. For a further discussion of the original
investigation, see U.S. Trade Remedy Law (March 1993).
The Canadian Meat Council (CMC) took the original subsidy ruling to the U.S.
Court of International Trade. The basis of its appeal was that the Commerce decision
had assumed a pass-through of subsidies on live swine to pork producers,
without actually conducting an upstream investigation to determine the extent or
existence of such a pass-through. Commerce had refused to conduct an upstream
subsidy investigation because, in its view, swine were not an input into pork
production. In effect, Commerce was arguing that swine and pork were the same
product. In May 1987, the Court ruled in favour of the CMC and remanded the
case back to Commerce to perform a full upstream subsidy investigation.
However, as the CIT upheld the ITC no-injury determination, which had been
appealed by the U.S. National Pork Producers Council, the issue of the upstream
subsidy investigation (and lack thereof) became moot.
The Alberta Pork Producers’ Marketing Board also challenged Commerce’s original
decision with respect to the countervailability of the Agricultural Stabilization
Act (ASA) Hog Stabilization Program.172
The CIT affirmed Commerce’s determination,
finding that: (1) hogs received benefits as a “named” commodity; and
(2) the ASA discriminated between commodities by providing pre-authorized,
regular payments to producers of named commodities while offering unpredictable
benefits to others who might apply for designation.
On July 8, 1991, the Canadian Pork Council (CPC), the Government of Canada and
the Government of Quebec filed requests for a Binational Panel Review under
Article 1904 of the FTA. Panel Review concerned the final results of the fourth
administrative review covering the period from April 1, 1988, through March 31,
1989. On May 19, 1992, the panel affirmed in part and remanded in part the determinations
made by Commerce during the fourth administrative review. The
complainants challenged Commerce’s determinations with respect to seven of the
nine programs found to confer countervailable subsidies. Complainant Pry me Pork
Ltd. also challenged Commerce’s refusal either to exclude weanlings from the scope
of the order or to establish a separate rate (or sub-class) for weanlings. Furthermore,
Pryme asserted that it should have been assigned a separate company rate.
The panel remanded the determinations on the National Tripartite Stabilization
Program for hogs, the Quebec Farm Income Stabilization Insurance Program
(FISI), the Saskatchewan Hog Assured Returns Program (SHARP), the Alberta
Crow Benefit Offset Program (ACBOP), the Feed Freight Assistance Program
(FFA) and the establishment of a sub-class for weanlings for further examination
and/or explanation by Commerce. Commerce’s determinations regarding the
B.C. Feed Program and the British Columbia Farm Income Insurance Program
(FIIP), and inclusion of weanlings within the scope of the order, were upheld.
Last, the panel denied Pryme’s request for a separate company rate and exclusion
of sows and boars from the scope of the order.
On July 20, 1992, Commerce issued its remand determination with respect to
the panel report issued in May 1992. On August 10, 1992, CPC, Pryme Pork Ltd.,
and the governments of Quebec and Canada filed challenges of ITC’s remand
determination. Canada and other complainants also filed a motion for oral argument
on the remand determination. This motion was granted by the panel on
August 28, 1992.
On October 30, 1992, the panel majority remanded Commerce’s remand determination
with specific instructions. In its remand determination, Commerce
once again concluded that Canada’s National Tripartite Stabilization Program
for hogs and Quebec’s Farm Income Stabilization Insurance Program were
limited de facto to a specific group of agricultural commodities and were therefore
countervailable. The panel found that this determination was not in accordance
with law because the test used to determine de facto specificity was inappropriate
and purely mathematical. Commerce also determined that it was
unable to comply with the panel’s remand order with respect to weanlings, or to
determine a separate rate for this specific category of hogs based on the
evidence in the administrative record. The panel remanded again, with specific
instructions, on these two issues
With respect to the Saskatchewan Hog Assured Returns Program, the Alberta
Crow Benefit Offset Program and the Feed Freight Assistance Program,
Commerce recalculated the benefits to live swine under these programs, in accordance
with the panel’s instructions.
On November 9, 1992, the Binational Panel affirmed in part and remanded in part
Commerce’s determination made on remand concerning the final results of the
fourth administrative review of the order.
The panel denied Commerce’s request to reopen the record to include additional
reports on the number of agricultural commodities in Canada. The panel rejected
Commerce’s finding of specificity with respect to two government agricultural
support programs, instead directing Commerce to find that the programs were not
specific. Furthermore, Commerce was directed to calculate a separate rate for
weanlings. Commerce did so on November 19, 1992, and on December 21, 1992,
the panel affirmed the determination on remand.
On February 9, 1993, the Office of the U.S. Trade Representative filed a request
for an Extraordinary Challenge Committee to review both decisions made by the
Binational Panel with respect to the fourth administrative review and the redetermination
pursuant to the remand by Commerce, based on the allegation that
the panel did not apply the appropriate standard of review.
On April 8, 1993, the Extraordinary Challenge Committee issued its decision,
declining to amend or overturn the decision of the Swine IV panel. The
Committee stated that, based upon the record before it, it could not conclude that
the panel “did not conscientiously apply the appropriate standard of review.”
On July 8, 1991, the Canadian Pork Council filed a request for a Binational Panel
Review, as did the Government of Canada and the Government of Quebec. Panel
review was requested of the final results of the fifth administrative review covering
the period from April 1, 1989, through March 31, 1990.
On August 26, 1992, the panel affirmed Commerce’s determination regarding the
Government of Canada’s Feed Freight Assistance Program. The panel also
affirmed Commerce’s determination that sows, boars and weanlings were within
the scope of the order. The panel remanded to Commerce its determinations
regarding:
- the National Tripartite Stabilization Program for hogs;
- the Quebec Farm Income Stabilization Insurance Program;
- the British Columbia Farm Income Insurance Program; and
- the Alberta Crow Benefit Offset Program.
The panel also remanded to Commerce for further explanation its determination
that it could not establish a separate rate for weanlings or a separate companyspecific
rate for Pryme Pork Ltd. The panel affirmed Commerce’s decision not to
conduct a scope inquiry regarding weanlings in the fifth administrative review.
On October 30, 1992, Commerce filed the final results of its redetermination
pursuant to remand. Commerce redetermined that the Tripartite, FISI and FIIP
programs conferred countervailable subsidies upon specific industries or groups
of industries. Commerce also redetermined that Pryme’s request for the establishment
of a separate sub-class for weanlings was untimely and that, in any
event, the record did not contain sufficient information for it to determine any
such separate rate. With respect to ACBOP, Commerce recalculated the benefit
conferred under the program. The redetermination was challenged by the
complainants.
On June 11, 1993, the panel affirmed Commerce’s redetermination that the
Tripartite programs were countervailable during the review period. The panel
concluded that substantial evidence in the record supported Commerce’s redeterminations
that: (1) hog producers were the dominant users of Tripartite
programs; (2) no more than 20% of eligible commodities actually participated in
the program; and (3) no other factor or record of evidence raised a significant
question with regard to Commerce’s determination of countervailability.
The panel affirmed Commerce’s redetermination that FIIP was de jure countervailable
during the review period. Insofar as FIIP was concerned, there was no
challenge to the redetermination. The panel affirmed Commerce’s redetermination
regarding ACBOP. The panel reviewed Commerce’s recalculations and
concluded that the reasoning of Commerce as to how and why it proceeded to
make certain adjustments was adequately articulated, was based upon substantial
record of evidence, and was otherwise in accordance with law. The panel also
affirmed Commerce’s redetermination that, while there was some evidence on the
record concerning weanlings, it was insufficient to create a sub-class.
The panel remanded Commerce’s redetermination regarding FISI, with instructions
for it to remove FISI benefits from its duty calculation. The panel concluded
that Commerce’s redetermination that FISI provided a subsidy to a specific enterprise
or industry, or group of enterprises or industries, was based primarily upon
a “mathematical formula,” which failed to show that Commerce exercised judgment
and had balanced the various factors in analyzing the facts of this particular
case. On June 25, 1993, Commerce complied with the panel’s instructions
concerning FISI. On July 16, 1993, the panel issued an order affirming all aspects
of Commerce’s determination on remand. On September 7, 1993, Commerce
released the redetermined subsidy rates. They were:
Sows and boars: C$0.0045/lb.
Other live swine: C$0.0927/lb.
On March 30, 1994, P. Quintaine & Son Ltd. of Brandon, Manitoba, filed a request
for a Binational Panel Review of the final countervailing duty determination made
by Commerce with respect to the sixth administrative review covering the period
from April 1, 1990, through March 31, 1991. A request for Panel Review was also
filed by Pryme Pork Ltd. and Earle Baxter Trucking.
On May 30, 1995, the panel affirmed in part and remanded in part the Commerce
determination. The petitioners challenged Commerce’s denial of separate treatment
for sows and boars, and for a category of weanlings covered by the order.
In all prior review periods for which separate rates had been calculated,
Commerce had found that these categories of swine received zero or de minimis
subsidies under the Canadian programs being countervailed.
The panel affirmed Commerce’s finding that sows and boars as well as weanlings
were within the scope of the order. The panel remanded with directions to
Commerce to: (1) reinstate the sows and boars sub-class and determine a separate
countervailing duty rate for it; and (2) consider Pryme’s application for a subclass
for weanlings employing the same criteria used in creating the sows and
boars sub-class, and calculate a separate rate for that sub-class.
The panel found that Commerce had failed to provide a factual basis or legal argument
to warrant the abolition of the separate sub-class. The panel expressed no
view on Commerce’s treatment of Pryme’s request for an individual review and a
company-specific rate.
On August 14, 1995, Commerce submitted to the panel its remanded determination.
Commerce: (1) reinstated sows and boars as a sub-class; (2) calculated a
de minimis CVD rate for sows and boars; (3) ordered U.S. Customs to liquidate
sows and boars entries without regard to duties, and collect zero cash deposits;
(4) determined an unspecified de minimis rate for Pryme Pork by a consent
motion; and (5) ordered Customs to assess zero duties against Pryme Pork and to
collect zero cash deposits on Pryme Pork’s entries. The amended subsidy rates
were as follows:
Sows and boars: C$0.0036/kg (de minimis)
Other live swine: C$0.0296/kg
On August 29, 1996, Commerce released the final results of a changed circumstance
administrative review. The ITC revoked the order with respect to slaughter
sows, boars and weanlings (effective April 1, 1991) because of affirmative statements
of no interest by petitioners.
The 13 administrative reviews carried out annually since 1985 examined the
changes in the level of support to Canadian swine producers. The results were as
follows.
First Administrative Review
| Review Period: |
April 3, 1985–March 31, 1986 |
|
| Preliminary Determination (June 14, 1988) |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . . . .de minimis |
| All other live swine: |
. . . . . . .C$0.022/lb. |
| Final Determination (January 9, 1989) |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . . . .de minimis |
| All other live swine: |
. . . . . . .C$0.022/lb. |
Second and Third Administrative Reviews
| Review Periods: |
April 1, 1986–March 31, 1987
April 1, 1987–March 31, 1988 |
|
| Preliminary Determination (May 21, 1990) |
| Period: |
April 1, 1986–March 31, 1987 |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . . .de minimis |
| All other live swine: |
. . . . . .C$0.061/lb. |
| Period: |
April 1, 1987–March 31, 1988 |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . . .de minimis |
| All other live swine: |
. . . . . .C$0.071/lb. |
| Final Determination (March 12, 1991) |
| Period: |
April 1, 1986–March 31, 1987 |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . .C$0.0001/lb. |
| All other live swine: |
. . . . .C$0.0039/lb. |
| Period: |
April 1, 1987–March 31, 1988 |
| Net Subsidy: |
Slaughter sows and boars: |
. . . . .C$0.0030/lb. |
| All other live swine: |
. . . . .C$0.0032/lb. |
Fourth Administrative Review
| Review Period: |
April 1, 1988–March 31, 1989 |
|
| Preliminary Determination (February 12, 1991) |
| Net Subsidy: |
Sows and boars: |
. . . . C$0.0051/lb. |
| All other live swine: |
. . . . C$0.0548/lb. |
| Final Determination (June 21, 1991) |
| Net Subsidy: |
Sows and boars: |
. . . .C$0.0047/lb. |
| All other live swine: |
. . . . C$0.0449/lb. |
In accordance with the FTA Binational Panel remand, Commerce
recalculated its final results: |
| Final Determination (amended) (April 30, 1993) |
| Net Subsidy: |
Sows and boars: |
. . . . C$0.0040/lb. |
| Weanlings: |
. . . . C$0.0005/lb. |
| Live swine: |
. . . .C$0.0051/lb. |
Fifth Administrative Review
| Review Period: |
April 1, 1989–March 31, 1990 |
|
| Preliminary Determination (June 26, 1991) |
| Net Subsidy: |
Sows and boars: |
. . . . C$0.0051/lb. |
| All other live swine: |
. . . . C$0.0937/lb. |
| Final Determination (September 7, 1993) |
| Net Subsidy: |
Sows and boars: |
. . . .C$0.0045/lb. |
| All other live swine: |
. . . . C$0.0927/lb. |
Sixth Administrative Review
| Review Period: |
April 1, 1990–March 31, 1991 |
|
| Preliminary Determination (October 20, 1993) |
| Net Subsidy: |
Live swine: |
. . . C$0.0289/lb. |
| Final Determination (March 16, 1994) |
| Net Subsidy: |
Live swine: |
. . . C$0.0295/lb. |
In accordance with the NAFTA Panel Review decision, Commerce
amended its determination. |
| Net Subsidy: |
Sows and boars: |
. . . C$0.0036/kg
(de minimis) |
| All other live swine: |
. . . C$0.0296/kg |
| All swine produced by Pryme Pork: |
. CVD duties and
cash deposit zero |
Seventh, Eighth and Ninth Administrative Reviews
| Review Periods: |
April 1, 1991–March 31, 1992
April 1, 1992–March 31, 1993
April 1, 1993–March 31, 1994 |
|
| Preliminary Determination (May 29, 1996) |
| Net Subsidies: |
| |
April 1, 1991–March 31, 1992 |
. . . .C$0.0594/kg |
| |
April 1, 1992–March 31, 1993 |
. . . .C$0.0609/kg |
| |
April 1, 1993–March 31, 1994 |
. . . . C$0.0099/kg |
| Amended Final Determination (November 14, 1996) |
| Net Subsidies: |
| |
April 1, 1991–March 31, 1992 |
. . . . C$0.0597/kg |
| |
April 1, 1992–March 31, 1993 |
. . . . C$0.0611/kg |
| |
April 1, 1993–March 31, 1994 |
. . . . C$0.0100/kg |
Tenth Administrative Review
| Review Period: |
April 1, 1994–March 31, 1995 |
|
| Preliminary Determination (October 7, 1996) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0271/kg |
| Final Determination (April 14, 1997) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0098/kg |
Eleventh Administrative Review
| Review Period: |
April 1, 1995–March 31, 1996 |
|
| Preliminary Determination (September 9, 1997) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0271/kg |
| Final Determination (January 14, 1998) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0071/kg
(duties) |
| |
Cash deposit: |
. . . .C$0.0055/kg
(de minimis) |
U.S. Customs waived cash deposits on shipments of all live swine
from Canada.The cash deposit rate was different from the assessment
rate because of program-wide changes in calculating the
cash deposit rate.
Twelfth Administrative Review
| Review Period: |
April 1, 1996–March 31, 1997 |
|
| Preliminary Determination (April 30, 1998) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0041/kg
(de minimis) |
| Final Determination (September 4, 1998) |
| Net Subsidy: |
Live swine: |
. . . .C$0.0041/kg
(de minimis) |
On November 4, 1999, Commerce released its negative final determination of the
likelihood of continuation or recurrence of a countervailable subsidy in connection
with the subject five-year review. Accordingly, on November 8, the five-year
review of the countervailing duty order concerning live swine from Canada was
terminated by the ITC.
This program was intended to ensure: (1) the availability of feed grain to meet the
needs of livestock feeders; (2) the availability of adequate storage space in Eastern
Canada to meet the needs of livestock feeders; (3) reasonable stability in the price
of feed grain in Eastern Canada to meet the needs of livestock feeders; and
(4) equalization of feed grain prices to livestock feeders in Eastern Canada, British
Columbia and the territories. Although the program was clearly designed to
benefit livestock feeders, FFA payments were also made to grain mills that transformed
the feed grain into livestock feed whenever these mills were the first
purchasers of the grain.
Commerce found this program de jure specific and thus countervailable because
benefits were available only to a specific group of enterprises or industries (livestock
feeders and feed mills). Subsequently, an FTA Binational Panel (USA-91-
1904-04) affirmed the Commerce determination.
The program was found countervailable in administrative reviews for the periods
of 1991–1992, 1992–1993 and 1993–1994.
The ASA was enacted to provide for the stabilization of prices of certain agricultural
products through the use of price support systems. The program offered
different support mechanisms for certain products (including live swine).
Commerce found that the program offered additional, specific benefits for certain
products and industries, and thus that the support payments delivered to hog
farmers were countervailable.
Prior to the first administrative review, the ASA was amended. Changes included
an expanded list of commodities and the adoption of identical methodologies for
the calculation of support for commodities. However, Commerce continued to
find the ASA program countervailable, determining that only a limited number of
commodities benefited from the program.
This program tested purebred swine to increase the efficiency of hog production.
During the original investigation, Commerce found that as the program was
limited to a specific group of industries, it was countervailable. In the first administrative
review, Commerce decided that as the results of the program were available
to other countries and industries, it was “generally available” and therefore
not countervailable.
This program provided for cost-sharing schemes involving producers, the federal
government and the provinces. The general terms were as follows: all participating
hog producers received the same level of support per market-hog unit; the
cost of the scheme was shared equally between the federal government, the
provincial government and the producers; producer participation in the scheme
was voluntary; the provinces were not to offer separate stabilization or assistance
plans for hogs (with the exception of Quebec’s FISI program); and the scheme was
to operate at a level that limited losses but did not stimulate overproduction.
Stabilization payments were made when the market price fell below the calculated
support price. The difference between the support price and the market
price was the amount of the stabilization payment.
Commerce determined that the program was de facto specific because benefits
were being provided to a specific enterprise or industry, or group thereof. It was
found countervailable in administrative reviews for the periods of 1991–1992,
1992–1993 and 1994–1995.
After termination of the National Tripartite Stabilization Program for hogs in July
1994, hog producers became eligible for the National Transition Scheme for Hogs,
which provided for one-time payments to producers of hogs marketed from April
3, 1994, through December 31, 1994. The Transition Scheme provided payments
to hog producers of C$1.50 per hog from the federal government and a matching
C$1.50 from the provincial government. In the tenth administrative review,
Commerce found this program to be de jure specific, and thus countervailable,
because the agreement expressly limited its availability to a specific industry
(swine producers). Commerce determined that the amounts provided by both the
federal and provincial governments to the hog producers during that review
period constituted a non-recurring grant.
Funding for this agreement was shared equally by the federal and provincial
governments. Through the agreement, grants were made to private businesses
and academic organizations to fund projects in the areas of research, technological
innovation and support for strategic alliances as they related to the agri-food
industry. Since assistance under the Technological Innovation Program was
provided by the federal government to industries located within a designated
geographic region of Canada (i.e. Quebec), Commerce determined that the
federal contributions were countervailable.
Commerce determined all the following hog price stabilization programs to be
limited to a specific group of enterprises or industries, and thus countervailable.
This program was intended to assure income to farmers when commodity
market prices went below the basic costs of production. It was funded equally
by producers and the provincial government. Premiums were paid in all quarters
regardless of market returns. In the administrative reviews for the periods
of 1992–1993 and 1993–1994, Commerce found the program to be countervailable
because it was limited to a specific group of enterprises or industries. It was
found countervailable in administrative reviews for the periods of 1992–1993
and 1993–1994.
Created in 1979, this program assured hog producers in British Columbia a specified
level of return over certain basic production costs. The program was funded
in roughly equal proportion by the provincial government and participating hog
producers. In 1984, the provincial share of the support payment to hog producers
averaged C$10.73 per hog.
Created in 1983 and ending in 1986, the HISP provided price support payments
to hog producers in Manitoba. It was funded by both the Government of Manitoba
and hog producers in the province. Participation in the program was voluntary.
Provincial government contributions accounted for approximately 30% of the
stabilization payment. In fiscal year 1984, the provincial share of the support
payment to hog producers averaged C$5.26 per hog.
This program was created to provide income stabilization to hog producers during
periods of both high and low market prices. Created in 1974, the program was
terminated on March 31, 1989, with the fund showing a sizeable deficit based on
the loans made by the provincial government to cover pay-outs to producers. In
view of the termination date, the program was found to be terminated and to have
provided no residual benefits during subsequent review periods.
This program began in April 1985. Under the program, producers were paid an
amount ($0.85/lb. in the period from April 3, 1985 to March 31, 1986) for all hogs
indexing 80 or above (excluding sows and boars) that were purchased by the
Newfoundland Farm Products Corporation (a provincial Crown corporation).
Producers did not contribute to the program, and hogs were the only agricultural
commodity in Newfoundland receiving stabilization payments.
The program was deemed limited to a specific industry and therefore countervailable.
Despite the fact that Newfoundland did not directly export to the United
States, it was held that since Newfoundland swine were sent to Ontario and then
exported to the United States, Newfoundland’s swine were indeed being exported
to the United States (1985–1986 review period). In the 1986–1987 period the
program was found not to be countervailable since Newfoundland was not found
to be exporting any swine to the United States. In the review period from April 1,
1991, to March 31, 1994, and for all subsequent administrative reviews, the
program was found not to be used.
The purpose of the program was to provide price stability for hogs by compensating
farmers for fluctuations in prices, and to ensure that producers consistently
recovered direct operating costs. The NSPPSP was funded jointly by producer
premiums (which became equity in the fund) and provincial government contributions,
and was available on a voluntary basis to all producers who sold hogs
through the Nova Scotia Pork Price Stabilization Board. In the period from April
1, 1983, to March 31, 1984, the program was in a deficit position. Producers were
not required to fund their share of the deficiency payment through a premium but
received a loan from the province. However, the deficiency payment, which could
include loans, was C$16.74 per hog. For the period from April 3, 1985, to March
31, 1986, the program was found to be countervailable because the stabilization
payments were limited to a particular industry, namely swine producers. In that
period, when producer equity was exhausted, the deficiency payment was made
by the provincial government in the form of an interest-free loan. The loan
portion was eliminated and replaced with a purely grant-based system on
September 20, 1985. The program was terminated on September 30, 1987.
This program was established by the PEI Hog Commodity Marketing Board in
1973. The program provided income stability to hog producers by compensating
them for price fluctuations caused by traditional hog-price cycles. It was made up
of equal contributions from both the provincial government and producers.
Contributions were made when the average weekly price for hogs increased, while
payments were made not when the market price fell below the contribution level
but rather when the market price fell below a predetermined “stabilization price.”
The payment equalled one half of the difference between the depressed market
price and the stabilization price. In fiscal year 1984, the provincial share of the
support payment to hog producers averaged C$9.33 per hog. Half the amount of
the payments came from the provincial government, with the other half drawn
from the producers’ equity. If the producers’ equity was exhausted, the government
assumed the producers’ portion in the form of an interest-free loan. During
fiscal year 1985 the producers did not contribute to the fund.
While the Natural Products Marketing Act established marketing boards for a
number of agricultural products, hogs were the only commodity to receive stabilization
payments. The program was found to be countervailable in the original
investigation. For the review period from April 1, 1995, to March 31, 1996, the
program was found to be terminated.
Administered by the Régie des assurances agricoles du Québec, a provincial
Crown corporation, the program was intended to guarantee a net annual income
to participating producers. The program was voluntary, although some conditions
applied. For example, Quebec producers had to agree to stay with the program for
at least five years and to produce at least 100 hogs and own 15 sows during the
first year, with a participating ceiling of 5,000 hogs or 400 sows. The provincial
government annually assessed participants for contributions to the income stabilization
fund. The contributions made up one third of the fund; the government
covered the balance. In fiscal year 1984, the provincial share of the support
payment to hog producers averaged C$15.08 per hog.
The Government of Quebec argued that since the program covered 11 commodities
and 71% of total farm production, it should not be deemed to be targeted to
specific industries. Commerce was not persuaded and deemed the program to be
nonetheless limited to a specific group of industries or enterprises, and therefore
countervailable. Even if the program were not found to be de jure specific,
Commerce held that it would still be considered de facto specific. In the 1991–
1992 administrative review, Quebec argued that FISI was integrally linked to the
crop insurance program and the supply management system. Again, Commerce
was not persuaded by the integral linkage argument and it once more found the
program countervailable. In the 1994–1995 review period, FISI was found not to
be used. However in the 1995–1996 review period, the program was determined
to confer a subsidy of C$0.0008 per kilogram.
SHARP provided income stabilization payments to hog producers when market
prices fell below a designated “floor price,” which was calculated quarterly. The
program was funded by levies from participating producers on the sale of hogs
covered by the program; they ranged from 1.5% to 4.5% of market returns, and
were matched by the provincial government. When the balance in the SHARP
account was insufficient to cover payments to producers, the provincial government
provided financing on commercial terms. The principal and interest on
these loans was to be repaid from producer and provincial government contributions.
SHARP was terminated on March 31, 1991. Commerce found the SHARP
program to be de jure specific and thus countervailable because the legislation
expressly made the program available only to a single industry (hog producers).
SHARP was found countervailable in administrative reviews for the periods of
1991–1992, 1992–1993, 1993–1994 and 1994–1995.
This program was designed to compensate producers and users of feed grain for
market distortions in feed grain prices. Assistance was provided for feed grain
produced in Alberta, feed grain produced outside Alberta but sold in Alberta, and
feed grain produced in Alberta to be fed to livestock on the same farm where it
was produced. The program was terminated on March 31, 1994, and there were
no residual benefits. Commerce found the program to be de jure specific and thus
countervailable because the legislation expressly made it available only to a
specific group of enterprises or industries (producers and users of feed grain). It
was found countervailable in administrative reviews for the periods of 1991–1992,
1992–1993, 1993–1994 and 1994–1995.
This program was found countervailable in administrative reviews for the periods
of 1991–1992, 1992–1993 and 1993–1994. The program compensated Alberta
livestock producers for losses of food-producing livestock (including cattle, sheep,
hogs, goats, rabbits and poultry) to predators. The Alberta Department of Agriculture
administered the program and provided assistance in the form of grants
compensating farmers for up to 100% of the value of the livestock.
This program was intended to encourage breeding stock producers to produce
quality boars at reasonable prices for use in commercial swine herds. The
program provided assistance in the form of grants to swine producers (to a
maximum of C$110) for the purchase of boars. Commerce found the program to
be countervailable because it was limited to a specific industry.
Under this program, hog producers indebted to the Farm Adjustment Board
because of earlier loans were granted an interest rebate on the portion of their
total debt that exceeded the “standard debt load” as of March 31, 1984.
Commerce found the program to be countervailable because loans were provided
to a specific industry on terms inconsistent with commercial considerations.
This program provided loan guarantees to livestock producers. Loans ranging from
$1,000 to $90,000 were granted by commercial lending institutions and guaranteed
by the Government of New Brunswick. The interest rate for the loans was set
at the prime rate plus 1.0 percentage point. Commerce established as its benchmark
the Bank of Canada prime rate plus 1.5 percentage points. This rate represented
the average of the spread above prime charged by commercial banks on
comparable loans. The amount that a recipient paid on such a loan was therefore
less than what the recipient would have paid on a comparable commercial loan.
Commerce found the program to be de jure specific and therefore countervailable
because the legislation expressly made it available only to livestock producers.
With the closure of slaughterhouses in northern New Brunswick, it became more
expensive for farmers in that area to move their hogs to market. This program was
aimed at equalizing the cost of moving hogs to markets across the province. In
1984, the provincial government paid C$1.25 per hog marketed. Because these
grants targeted specific groups, the program was found countervailable.
This program reimbursed veterinarians for house calls to enrolled producers. Any
hog producer could enroll, but each had to agree to follow specific health practices
and to pay the veterinarian a stipulated fee for the services provided. Because the
program was limited to a specific enterprise or industry, or group of enterprises or
industries, Commerce found that it conferred countervailable benefits.
This program defrayed the cost of transporting hogs to pork processing plants.
The funds were distributed based on the number of hogs marketed per year and
the distance from the processing facility. The grant was limited to a specific enterprise
or industry, or group of enterprises or industries, and was found to be countervailable
in 1984.
This program provided compensation for the destruction of, or injury to, certain
types of livestock by bears. Grants for damage to live swine could not exceed
C$200 per head. In the tenth administrative review, Commerce determined that
the program was de jure specific and thus countervailable because the legislation
expressly made it available only to livestock producers. During earlier administrative
reviews, Commerce determined that the program had not been used.
This program provided assistance in the form of grants compensating producers for
livestock and poultry injured or killed by wolves, coyotes or dogs. Commerce found
the program to be de jure specific and thus countervailable because the legislation
expressly made it available only to a specific group of enterprises or industries
(livestock, poultry farmers and beekeepers). It was found countervailable in
administrative reviews for the periods of 1991–1992, 1992–1993 and 1993–1994.
This program was established in 1987 to assist producers and processors of agricultural
and food products in developing export markets. The Ontario government
provided reimbursements in the form of grants for up to 50% of the costs
incurred in developing export marketing materials, with a maximum dollar
amount. Commerce determined the program to be a countervailable subsidy
because receipt of benefits was contingent upon actual or expected exportation.
It was found countervailable in administrative reviews for the periods of
1991–1992 and 1993–1994.
This program provided a rebate of up to 75% of municipal property taxes on eligible
farmland. As eligibility varied by location, this was found to be a regional subsidy
and thus countervailable. A rate of C$0.00003182/lb. dressed-weight was determined
in 1984. However, in an administrative review in 1991–1992, Commerce
verified that there was no restriction on the types of farm products that received
these rebates, and no evidence that the Ontario government exercised discretion
in the distribution of the rebates. Commerce therefore reconsidered its decision
and determined that the program was not specific and not countervailable.
This program reimbursed Northern Ontario farmers for 20% of the purchase costs
of boars (among other animals). It was determined that the program was terminated
prior to April 1, 1991, and that no residual benefits were provided during
the 1991–1992, 1992–1993 and 1993–1994 review periods.
This program enabled producers to apply for compensation through a federal
inspector, who determined whether an animal was rabid and had to be destroyed.
Farmers received a maximum of C$100 per hog under the program. Commerce
found it to be countervailable on the basis that the legislation made the program
available only to livestock producers. It was found countervailable for the review
periods of 1991–1992, 1992–1993 and 1993–1994.
This program defrayed the cost of hog transportation and processing. Inasmuch
as these benefits were regional subsidies within the province, it was found to be
countervailable in 1984.
This program provided technical assistance and grants for the establishment,
standardization, expansion or modernization of slaughterhouses, processing
plants, or plants preparing food containing meat. Because the grants were limited
to the meat sector and thus to specific groups, the program was found to be countervailable.
This program provided low-interest loans or loan interest subsidies to agricultural
producers during “critical” periods. A critical period was defined as a natural
disaster that created an emergency, an unexpected, uncontrollable drop in prices,
or the disappearance of production for reasons beyond the control of the
producer. Because of the specificity of the program, it was found to be countervailable.
The Government of Quebec reported that it had stopped giving interest
subsidies to pork producers as of March 1983. However, delayed payments were
made in 1984 and were therefore calculated for that period.
This program provided low-interest long-term loans, grants and loan guarantees
to farmers for the acquisition of livestock, including swine. Loans to each participant
were limited to C$350,000. This programme was found to confer countervailable
subsidies.
This program provided tax credits to owners of livestock marketed or slaughtered
by December 31, 1989. Eligible claimants received credits of $3.00 per hog.
Although the program was terminated on December 31, 1989, tax credits were
carried forward through the end of fiscal year 1996. Commerce found the
program to be de jure specific and thus countervailable because the legislation
expressly made the program available only to livestock producers. It was found
countervailable in administrative reviews for the periods of 1991–1992,
1992–1993 and 1993–1994.
This program, which was terminated on December 31, 1989, provided tax credits
to livestock producers based on their investments in livestock production facilities.
The tax credits could be used only to offset provincial taxes, and could be
carried forward for up to seven years or until no later than fiscal year 1996. The
program paid 15% of 95% of project costs, or 14.25% of total costs.
Commerce found the program to be de jure specific and thus countervailable
because the legislation expressly made the program available only to livestock
producers. It was found countervailable in administrative reviews for the periods
of 1991–1992, 1992–1993 and 1993–1994.
This program provided grants to livestock producers who raised and fed their livestock
in Saskatchewan. In order to qualify, producers had to have sold a minimum
number of eligible livestock. Commerce found the program de jure specific and
thus countervailable because the legislation expressly limited the program’s availability
to a specific group of enterprises or industries (livestock producers).
Commerce also determined that the grants were recurring because recipients
could expect to receive benefits on an ongoing basis. The last date on which
producers could apply for or claim benefits was November 30, 1994, and the last
date on which producers could receive benefits was March 31, 1995. The program
was found countervailable in administrative reviews for the periods of 1992–1993,
1993–1994 and 1994–1995.
Commerce found that as the following programs did not designate specific products
for financing, they were not limited to a specific industry and were not countervailable:
- Farm Credit Act
- Farm Syndicates Credit Act
- Special Farm Assistance Programs
As numerous agricultural products were similarly graded at government cost,
this program was not limited to a specific industry and was found not to be
countervailable.
The aim of this agreement was to promote agricultural development cooperation
between the two governments. The federal and B.C. governments shared funding
for projects in the areas of productivity enhancement, resource development and
commodity development. The program was not found countervailable during the
1988–1989 review, and was not used during the 1989–1990 and 1990–1991
reviews. Again during the 1991–1992, 1992–1993 and 1993–1994 reviews, the
program was found not to confer subsidies. It was terminated in 1995.
Under this 1984 agreement, the federal and Manitoba governments supported
research for the development of agriculture. Both levels of government shared
the funding in the following areas: (1) enhanced agricultural productivity;
(2) enhanced soil and water resource management; (3) human resources management;
and (4) analysis, evaluation and public relations. The program was found
not countervailable during the administration review of 1988–1989, and not used
during 1989–1990. Again during the 1991–1992, 1992–1993 and 1993–1994
reviews, it was found not countervailable. The program was terminated in 1995.
Funding for this agreement was shared equally by the federal and provincial
governments. Through the agreement, grants were made to private businesses
and academic organizations to fund projects in the areas of research, technological
innovation and support for strategic alliances as they related to the agrifood
industry. The results of research carried out under the program were made
publicly available and were published in an annual report upon completion. The
federal and Quebec governments reported that all projects completed under the
program were made publicly available. Because the research results were publicly
available, Commerce determined that the research program did not confer
countervailable subsidies to live swine.
The following programs did not designate specific products or regions for the
receipt of funding, nor did they establish differing terms for specified products.
They therefore were not limited to any specific enterprise(s) or industry/industries
and were not found countervailable.
Grant Programs in Quebec
- grants under the Act to Promote the Development of Agricultural
Operations
- grants to Provincial Pork Packers under the Quebec Industrial Assistance
Act
Financing Programs in Quebec
- low-interest financing under the Act to Promote Long-Term Farm
Credit by Private Institutions
- low-interest financing under the Farm Credit Act
- low-interest guaranteed loans under an Act to Promote Farm
Improvement
- interest-free loans under the Act to Promote the Establishment of
Young Farmers
- low-interest mortgages under the Farm Loan Act
- certain short-term loans
Financing Programs in Ontario
- Ontario Farm Adjustment Assistance Program
- Ontario Beginning Farmer Assistance Program
- Ontario Young-Farmer Credit Program
New Brunswick Financing under the 1980 Farm Adjustment Act
Newfoundland Loans under the Farm Development Loan Act
Nova Scotia Farm Loan Board Program
Prince Edward Island Lending Authority Long- and Short-Term Loans
Alberta Agricultural Development Corporation Low-Interest Loans and Loan
Guarantees
Financing Programs in British Columbia
- low-interest loans and loan guarantees by the B.C. Ministry of Agriculture
and Food
- partial interest reimbursement
Manitoba Agricultural Credit Corporation Loans and Loan Guarantees
Saskatchewan Economic Development Corporation Financial Assistance
Saskatchewan Livestock Cash Advance Program
Ontario Farm Credit Tax Rebate Program
Prince Edward Island Pork Assistance Program
On September 5, 1991, Commerce and the ITC accepted a petition filed by Magnesium
Corp. of America, of Salt Lake City, Utah, alleging that subsidized imports of
magnesium from Canada were injuring U.S. industry. A concurrent anti-dumping
petition was also filed. In October 1991, Commerce dismissed the countervailing
duty petition and terminated the proceedings with respect to Norway. Commerce
found that the information provided in the petition did not contain a sufficient
basis to initiate an investigation with regard to Norwegian goods. On October 30,
1991, the ITC released an affirmative preliminary determination, finding a reasonable
indication that an industry in the United States was materially injured by
reason of allegedly subsidized and dumped Canadian imports.
On December 6, 1991, Commerce released an affirmative preliminary determination
which established the following rates:
| Manufacturer/Exporter |
Ad valorem CVD rate |
|
| |
Norsk Hydro Canada |
. . . . . . . . . . . . . . . 8.95% |
| |
Timminco |
. . . . . . . . . . . . . . . . . . . 0.04% |
| |
(de minimis and exempt from liquidation) |
| |
All others |
. . . . . . . . . . . . . . . . . 8.95% |
On February 20, 1992, Commerce announced that on the request of the
petitioner, the date of the final countervailing duty determination would be
delayed to coincide with the date of the final anti-dumping determination with
respect to the same product. On July 13, 1992, Commerce released an affirmative
final determination. The period of investigation was the calendar year 1990.
Commerce calculated a single rate for both pure and alloy magnesium. Commerce
determined that the subsidies provided to the respondents benefited the production
of both pure and alloy magnesium, and could not be segregated. A single estimated
net subsidy was therefore calculated for both classes of merchandise for
Norsk Hydro Canada Inc. (NHCI).
| Manufacturer/Exporter |
Ad valorem CVD rate |
|
| |
Norsk Hydro Canada |
. . . . . . . . . . . . . . . 21.61% |
| |
Timminco |
. . . . . . . . . . . . . . . . . . . 0.09% |
| |
(de minimis and exempt from liquidation) |
| |
All others |
. . . . . . . . . . . . . . . . . 21.61% |
On August 26, 1992, the ITC released an affirmative final determination. The ITC
determined that the volume and market penetration of the subject imports
increased dramatically during the period of investigation. Coincident with this
large increase, U.S. producers’ production, domestic shipments and market share
declined steadily in both quantity and value, while inventories increased. The
financial performance of the domestic industry also steadily declined, with
decreases in operating income margins, gross profit and net sales. Correspondingly,
the prices for both U.S.- and Canadian-produced magnesium declined
during the period of investigation, leading to a direct loss of profits.
On September 10, 1992, Commerce initiated a changed circumstances review to
determine the effect of an amendment in the electricity contract between NHCI
and Hydro-Québec. On November 16, 1992, it was determined that as a result of
the amended contract, no subsidy was conferred upon NHCI through its purchase
of electricity from Hydro-Québec.
NHCI was being treated as any other similar user, and the price being charged to
NHCI was consistent with Hydro-Québec’s standard pricing mechanism. Accordingly,
the CVD rate was reduced to 7.61%.
On September 25, 1992, NHCI and the Government of Quebec filed a request for
a Chapter 19 (FTA) Binational Panel Review of the ITC’s final affirmative injury
determination. The Government of Canada subsequently filed a notice of appearance
in support of Quebec and NHCI. This Panel Review was consolidated with
the Panel Review concerning the ITC determination of injury with respect to the
concurrent anti-dumping investigation.
On August 27, 1993, the panel found that the ITC’s determination that pure and
alloy magnesium constituted one class of merchandise was not supported by the
record. Evidence of the existence of similar distribution channels and shared core
production processes was considered by the panel to be an insufficient basis on
which to reasonably conclude that only one like product existed.
The panel also found the ITC’s alternative conclusion—that even if two separate
products existed, it would have reached an affirmative material injury determination
with respect to each of these industries—was not supported by adequate
analysis concerning the impact of imports on the domestic industry. The determination
was remanded to the ITC for separate injury determinations for pure
and alloy magnesium.
On January 27, 1994, the panel upheld the ITC’s injury determination on remand.
The ITC determined that the U.S. industry producing pure magnesium was materially
injured by reason of subsidized (and dumped) Canadian imports of pure
magnesium, and that the U.S. industry producing alloy magnesium was materially
injured by reason of subsidized Canadian imports of alloy magnesium. The panel
found that the ITC’s determination that there was an absolute increase in Canadian
imports relative to consumption and a steady decline in prices for both U.S.-
and Canadian-produced alloy magnesium was adequately stated and supported by
substantial evidence.
With respect to the impact of Canadian imports on domestic producers, the ITC
based its determination of causality on: evidence of a high degree of substitutability
between imported and domestic magnesium; the relatively inelastic
demand for the product; and the significant increase in Canadian imports, coinciding
with a decline in market share and revenues for U.S. producers. The
complainants argued that non-price factors in the market were responsible for the
growth in Canadian imports and the difficulties experienced by U.S. producers.
The panel conceded that there was evidence to support this position but it determined
that the ITC had acted within its discretion in finding that non-price
factors did not negate the significance of price in buyers’ purchasing decisions.
On August 10, 1992, the Government of Quebec filed a Request for a Binational
Panel Review (FTA) of Commerce’s affirmative final determination. NHCI also
filed a request for Panel Review in this matter.
On August 16, 1993, the Binational Panel remanded in part and affirmed in part
Commerce’s final determination. The panel affirmed Commerce’s policy of
assuming that the petitioner has standing, in the absence of any expressed opposition
to the petition by a majority of the U.S. industry. Quebec had argued that
Commerce’s determination that the Quebec Industrial Development Corporation
(SDI) program provided benefits to a “specific” enterprise or industry was improper.
It was argued that the sole basis for the specificity determination was a finding of
disproportionate use of the SDI program, and that Commerce had failed to consider
and weigh the other three factors contained in its Proposed Regulations. The panel
concluded that Commerce’s reliance on the “disproportionality” factor to find specificity
was within Commerce’s discretion. The panel found that Commerce had
considered the other factors, but found them unnecessary for its determination.
Quebec submitted that Commerce should have conducted its “disproportionality”
analysis on an industry-by-industry rather than an enterprise-by-enterprise basis.
The panel found that although Commerce has statutory discretion to conduct an
analysis by enterprise rather than by industry, it nevertheless had a duty to justify
its choice by giving a cogent explanation for the exercise of its discretion.
In its final determination, Commerce allocated the benefits of the SDI grant for
the purchase of pollution control equipment over 14 years—the average life of
assets in the magnesium industry, according to the 1977 Class Life Asset Depreciation
Range System developed by the Internal Revenue Service (IRS). Quebec
argued that Commerce should have used the depreciation period used by Norsk
instead of the IRS table. The panel stated that Commerce must consider the IRS
tables and the producer records, in a manner that satisfies the standard articulated
in the Ipsco case of “an allocation period which will accurately reflect the
commercial and competitive benefit received by the plaintiffs,” and that
Commerce must provide a satisfactory explanation in support of whatever decision
it reached. The panel was also satisfied with Commerce’s explanation
concerning the use of IRS tables to determine the useful life of equipment bought
with an SDI subsidy. This action was seen as a reasonable exercise of discretion
in view of Commerce’s stated review of available financial records.
SDI entered into a grant contract in which it agreed to reimburse NHCI for
interest payments made on outstanding debt obligations. The SDI grant was
calculated as a percentage of the cost of pollution control equipment. Quebec
asserted that because the interest payments made on the outstanding debt obligations
were directly tied to recurring interest payments, Commerce should have
treated the assistance as a recurring grant. The panel affirmed Commerce’s determination
that the assistance was authorized and disbursed in one act—meaning
that it should be deemed a non-recurring grant.
Quebec submitted that Commerce should only have countervailed the portion of
the SDI grant that was above the line of proportionality because countervailing
duty law was intended to simply offset the benefit conferred and not to penalize
firms that received subsidies. The panel, however, affirmed Commerce’s decision
to countervail the entire grant in accordance with its past practice and its
Proposed Regulations.
It was asserted that the subsidy related to NHCI’s exemption from payment for
water should be limited to the exemption from payment of actual water
consumed, not the amount of water NHCI was forecast to consume. It was argued
that Norsk Hydro received no benefit from not having to pay for the water it did
not use. The panel affirmed Commerce’s determination that actual use was irrelevant
since all companies in the industrial park concerned were normally billed
for their “hypothetical/forecasted” water use rather than actual use.
On December 14, 1993, the Binational Panel affirmed in all aspects the remanded
determination made by Commerce. The panel found that Commerce’s use of an
enterprise- rather than an industry-based “disproportionality” analysis was
reasonable as Commerce had the discretion to use either type of analysis.
Furthermore, the enterprise data was provided by the respondents, rendering an
industry analysis unnecessary once the enterprise analysis indicated specificity.
On May 16, 1997, the Quebec government filed a request for Panel Review. On
May 19, 1997, a second request was filed on behalf of Norsk Hydro. Both
concerned the final results of the third (1994) countervailing duty administrative
review respecting pure and alloy magnesium from Canada, released on April 17,
1997. Pursuant to a motion filed by the requesters, the Panel Review was terminated
on June 20, 1997.
Commerce determined that the discounted electricity rate received by NHCI
constituted a subsidy because there was no evidence to suggest that similar industrial
users of electricity in Quebec received such rates. Commerce rejected the
respondents’ argument that no subsidy existed because Hydro-Québec possessed
projected surplus power and entered into a commercially sound contract with
NHCI on the issue of SDI funding. Commerce determined that the funding NHCI
received under Article 7 of the SDI Act should not be examined in the context of
SDI funding in general. Article 7 assistance and general SDI assistance were not
integrally linked programs, as evidenced by differing administration methods,
government policy and funding mechanisms.
First Administrative Review
| Review Period: |
December 6, 1991–December 31, 1992 |
|
| Preliminary Determination (March 19, 1996) |
| Final Determination (March 24, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters
(except Timminco): |
. . . . . . 9.86% ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 1.31% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 8.55% ad valorem |
Second Administrative Review
| Review Period: |
January 1, 1993–December 31, 1993 |
|
| Preliminary Determination (March 24, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters
(except Timminco): |
. . . . . . 7.13% ad valorem |
| Final Determination (September 16, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters
(except Timminco): |
. . . . . . 7.34% ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 1.00% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 6.34% ad valorem |
Third Administrative Review
| Review Period: |
January 1, 1994–December 31, 1994 |
|
| Preliminary Determination (October 7, 1996) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 4.01% ad valorem |
| Final Determination (April 17, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 4.48% ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 0.65% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 3.83% ad valorem |
Fourth Administrative Review
| Review Period: |
January 1, 1995–December 31, 1995 |
|
| Preliminary Determination (May 12, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 3.18% ad valorem |
| Final Determination (September 17, 1997) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 3.18%ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 0.50% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 2.68%ad valorem |
Fifth Administrative Review
| Review Period: |
January 1, 1996–December 31, 1996 |
|
| Preliminary Determination (April 30, 1998) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 2.78% ad valorem |
| Final Determination (August 24, 1998) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 2.78% ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 0.46% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 2.32% ad valorem |
Sixth Administrative Review
| Review Period: |
January 1, 1997–December 31, 1997 |
|
| Preliminary Determination (May 7, 1999) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 2.02% ad valorem |
| Final Determination (September 8, 1999) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 2.02% ad valorem |
| Programs Found Countervailable |
| Exemption from payment of water bills |
. . . . . . 0.18% ad valorem |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 1.84% ad valorem |
Seventh Administrative Review
| Review Period: |
January 1, 1998–December 31, 1998 |
|
| Preliminary Determination (May 4, 2000) |
| Net Subsidy: |
NHCI and all other
producers/exporters |
. . . . . . 1.38% ad valorem |
| Programs Found Countervailable |
Article 7 Grants from the Quebec
Industrial Development Corporation (SDI) |
. . . . . . 1.38% ad valorem |
On August 2, 1999, Commerce and the ITC initiated a sunset review of the antidumping
and countervailing duty orders on pure and alloy magnesium from
Canada. Both Commerce and the ITC determined that they would conduct a full
review. On July 5, 2000, Commerce made a final determination that revocation
of the countervailing and anti-dumping duty orders would be likely to lead to the
continuation or recurrence of subsidization and dumping. With respect to the
countervailing duty, Commerce reported rates of 1.84% for Norsk Hydro and
7.34%173
for all other exporters. The rate of 1.84% was based on the results of the
most recent administrative review for Norsk, and was based entirely on the
benefit calculation for the only remaining subsidy—the SDI grant, with a so-called
benefit stream to last until 2004. The rate of 7.34% was based on the “all others”
rate as established on September 16, 1997, for the administrative review for the
1993 period. Commerce reasoned that since the SDI grant program continued to
exist and an allocated benefit stream continued past the end of the sunset review
period, it was appropriate to report the most recent rates for both Norsk Hydro
and “all others.”174
On July 26, 2000, by a vote of 5 to 1, the ITC made an affirmative determination
that revocation of the orders would be likely to lead to a continuation or recurrence
of injury to the U.S. industry by reason of dumped and subsidized imports.
The order was therefore continued.
Net subsidy: NHCI, 0.10% ad valorem (original investigation)
Under this agreement, the federal and Quebec governments established a
program to provide financial assistance to companies in order to cover the cost of
feasibility studies related to major industrial projects.
The program was implemented under the 1984 Canada–Quebec Economic and
Regional Development Agreement. The agreement was signed on January 23,
1985, and was terminated on March 31, 1992. Commerce determined that the
federal funding was countervailable because it was limited to a particular region
of Canada (i.e. Quebec). However, the provincial funding was not found to be
countervailable because it was not specific to an enterprise or industry within the
province. Commerce treated the reimbursable grant as an interest-free shortterm
loan rolled over from year to year.
Pursuant to a December 15, 1988, agreement between NHCI and the Société du
parc industriel et portuaire de Bécancour, NHCI was exempt from payment of its
water bills except for the taxes associated with such bills. No other company
received such an exemption. Commerce determined this program to be countervailable
since benefits were limited to a specific enterprise. The net subsidy was
1.43% for Norsk Hydro (original investigation).
The Quebec Industrial Development Corporation (SDI), a Crown corporation, acted
as an investment corporation administering development programs on behalf of the
Government of Quebec. The SDI provided assistance in the form of loans, loan
guarantees, grants, assumption of costs on loans, and equity investments.
This assistance was offered for projects capable of having a major impact on
Quebec’s economy. In 1988, NHCI was awarded a grant under Article 7 of the
SDI Act to cover a large percentage of the cost of certain environmental protection
equipment. Commerce determined that NHCI received a disproportionately
large share of assistance under Article 7, thus rendering Article 7 grants
specific to an enterprise or industry. The net subsidy was 6.18% for Norsk Hydro
(original investigation).
The Risk and Profit Sharing Program was administered by the provincially owned
power company Hydro-Québec. Under this program, long-term contracts were
signed between Hydro-Québec and industrial customers meeting certain criteria.
A portion of the rate to be charged under the contracts was based either on the
price of the customer’s products or the customer’s profitability. The price paid by
a customer may therefore have varied from year to year as a result of fluctuations
in the customer’s prices or profits.
Contracts were negotiated with the expectation that over the term of a particular
contract, Hydro-Québec would earn the full projected revenue that would have
been generated under its general rates and programs.
During the period of investigation, NHCI’s electricity rate did not vary as per the
terms of the Risk and Profit Sharing Program. However, NHCI did receive a
discount on its electricity rate beyond that received by other industrial customers
in Quebec. Commerce found that this preferential electricity rate was limited to
a specific enterprise and was therefore countervailable. However, as discussed
above, a subsequent changed circumstances review determined that the revised
electricity rates did not constitute a subsidy. The net subsidy was 6.18% (original
investigation).
The IMT was incorporated in 1989 as a private, non-profit company dedicated to
the promotion of the magnesium industry. The creation of the IMT was a joint
effort of the federal and Quebec governments and the magnesium industry. The
IMT provided magnesium processors with the expertise and equipment necessary
for development work, as well as for the improvement of products and processes.
Initial funding was provided by the federal and Quebec governments under the
Canada–Quebec Subsidiary Agreement on Scientific and Technological Development.
However, the IMT aimed to be a self-sustaining body through membership
fees and research contracts.
Commerce’s practice with regard to the countervailability of research and development
assistance is that when the results of the research are made available to
the public, including competitors in the United States, the assistance does not
confer a countervailable benefit. The IMT had 30 members throughout the world,
including in the United States. Commerce concluded that IMT’s research was not
countervailable because membership in the Institute was open to all parties, and
these parties could obtain research performed by the IMT on equal terms.
This program was administered by the Quebec Ministry for Manpower and
Income Security, and was offered to individuals for training and retraining. NHCI
received payments for teaching materials and teacher services used in the
training of employees and non-employees of the company. Commerce did not
countervail this program since there were no de jure or de facto limitations
pertaining to the eligible enterprises, and since the program was offered and
provided to individuals employed or seeking employment and to companies
providing such training within a large number and broad range of industrial
sectors in Quebec.
- St. Lawrence River Environmental 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
- Financial Assistance Program for Research, Formation and the
Improvement of Recycling Industry
- Transportation Research and Development Assistance Program
On March 7, 1996, Commerce and the ITC accepted a petition filed by the Ad Hoc
Committee on Laminated Hardwood Trailer Flooring Imports (Anderson-Tully,
Havco Wood Products, Inc., Industrial Hardwood Products Inc., Lewisohn Sales
Company Inc., and Cloud Corporation / Cloud Oak Corporation) alleging injury
to U.S. industry by reason of allegedly subsidized imports of laminated hardwood
flooring from Canada. The petition also alleged that critical circumstances existed
with respect to imports of the subject merchandise. The scope of the investigation
consisted of certain laminated hardwood flooring made of oak, maple or other
hardwood lumber.
On May 9, 1996, the ITC released an affirmative preliminary determination,
finding a reasonable indication that the domestic industry was threatened with
material injury by reason of allegedly subsidized imports from Canada. Based on
the combination of declining U.S. demand, the rise in available capacity in the
United States and Canada, the rise in subject import volumes and market share,
and the evidence of intensifying downward price pressure from subject imports,
the ITC found that subject imports were likely to have a significant adverse
impact on the condition of the domestic industry, and that these factors provided
a reasonable indication of a real and imminent threat of material injury.
On June 7, 1996, Commerce extended the deadline for its preliminary determination
in order to investigate the petitioner’s allegations that the Canadian respondent,
Nilus Leclerc Inc. and Industries Leclerc Inc. (Leclerc), received upstream
subsidies through its purchase of lumber from suppliers who had harvested
stumpage from Quebec’s public forests. The allegation provided reasonable grounds
for Commerce to believe that stumpage subsidies provided by the Government of
Quebec were being passed through to Leclerc pursuant to the purchase of hardwood
lumber from suppliers. However, Commerce found that Leclerc purchased lumber
from both allegedly subsidized and unsubsidized suppliers, and that the price paid
for the allegedly subsidized lumber was generally equal to or more expensive than
that for the unsubsidized lumber. Accordingly, Commerce made a preliminary
determination that Leclerc did not receive an upstream subsidy.
On November 20, 1996, Commerce released a preliminary negative countervailing
duty determination. The total estimated preliminary net countervailable
subsidy rate for Leclerc was 0.31%, which was de minimus. Erie Flooring & Wood
Products (Erie) and Milner received zero subsidies during the period of investigation
(calendar year 1995). The only subsidy received by Industrial Hardwood
Products Ltd., located in Ontario, was for consulting services pursuant to the
Industrial Research Assistance Program.
Commerce determined without further calculation that even if this assistance
constituted a countervailable subsidy, the rate would be de minimis. Hence, Erie,
Milner and Industrial Hardwood Products were excluded from the investigation.
Accordingly, the total estimated preliminary net countervailable subsidy rate for
Leclerc, the one remaining firm, was 0.31%, a de minimis rate. Nilus Leclerc Inc.
was part of a consolidated group, Groupe Bois Leclerc. Nilus Leclerc Inc. and
Industries Leclerc Inc. were the only companies in the group directly engaged in
the production of LHF. Because of the extent of common ownership, Commerce
treated these two LHF producers as a single company.
On February 4, 1997, Commerce released a final negative determination and final
negative critical circumstances determination. Based on the four countervailable
programs described, the aggregate ad valorem rate set for Leclerc was 0.57%. This
rate was de minimis. On February 26, 1997, the investigation was formally terminated
by the ITC.
Petitioners claimed that Nilus Leclerc Inc. (Leclerc) became partners with the
Government of Quebec, with the sole objective of taking over the U.S. laminated
hardwood flooring market, and that all programs provided to Leclerc should be
considered specific because they were provided under a plan that gave Leclerc
special treatment. However, evidence of “special treatment” was never provided
by the petitioners and so Commerce never considered this argument.
There was also a question of upstream subsidies. Commerce compared the prices
paid by Leclerc to its “allegedly subsidized” suppliers with the prices paid to
unsubsidized suppliers on a product-by-product and aggregate basis. Commerce
found that the price of allegedly subsidized lumber was generally equal to or
higher than the price of unsubsidized lumber. Leclerc therefore did not receive a
competitive benefit, precluding a finding of an upstream subsidy.
Under this agreement, the federal and Quebec governments established a
program to improve the competitiveness of the Quebec economy by providing
financial assistance to companies for major industrial projects.
The long-term interest-free loan received by Leclerc was found to constitute a
countervailable subsidy. It was a direct transfer of funds providing a benefit in the
amount of the difference between the benchmark interest rate and the zero
interest rate paid by Leclerc. Funds paid out under this program were limited
to companies in a particular region of Canada (i.e. Quebec), and hence were
regionally specific. The net rate found was 0.29%.
IRDP was created to promote economic development in Canada, especially in
regions where opportunities for productive employment were exceptionally inadequate.
The program was terminated on June 30, 1988. Under IRDP, each of
Canada’s 260 census districts was classified into one of four tiers on the basis of
the economic development of the region.
The grants received by Leclerc, which was located in a Tier III district, were determined
to constitute a countervailable subsidy as they were a direct transfer of
funds from the Government of Canada and conferred a benefit in the amount of
the portion of the grant that was in excess of the most favourable, non-specific
level of benefits (i.e. Tier I). IRDP grants were also found regionally specific
because the preferential levels of benefits were limited to companies in particular
regions of Canada. These grants were treated as “non-recurring” subsidies. The
net rate found was 0.04%.
Quebec firms could receive funding under this program for projects aimed at
markets outside Quebec, or where the target Quebec market was inadequately
served by businesses in Quebec and the supported production was expected to
replace goods imported into Quebec.
Based on the eligibility criteria, Commerce determined that the program was not
de jure specific but was rather de facto specific. In 1993 and 1994, a disproportionate
share of assistance was provided to the wood industry in general and to
Leclerc in particular. The loans were determined to be a direct transfer of funds
providing a benefit in the amount of the difference between the benchmark
interest rate and the interest rate paid by Leclerc. In order to account for the
value of the subsidy, Commerce estimated a repayment schedule for the SDI loan
and compared the amount Leclerc would repay under that schedule with the
amount repayable under a comparable commercial loan.
Commerce determined that Leclerc was uncreditworthy in 1995. Although
Leclerc received loans through the SDI program, Commerce determined that SDI
assumed more risk than commercial banks would have, and that there were
significant differences with respect to the extent to which commercial and SDI
loans could be recovered in the event of default. Because of these differences,
Commerce chose a benchmark interest rate that generally reflected the level of
security exhibited by the government loans. Commerce determined that Leclerc
had been creditworthy in 1993–1994 as the company had received comparable
commercial loans.
With regard to the SDI loans received by Leclerc, Commerce performed a “disproportionality”
test on the level of an industry as opposed to an enterprise. In the
final determination, Commerce justified this deviation from its normal practice
by explaining that it was provided the relevant information on an industry basis
and that the statute conferred discretion to determine the appropriate level of
aggregation. Commerce also asserted that it had no obligation to take into account
the economic factors that might have resulted in disproportionate use of a
program by a particular industry. The net rate was 0.24%.
Under the APEX program, Quebec shared certain costs incurred by a Quebec
company in the penetration of new foreign markets. Such costs included missions
to develop new markets, participation in foreign trade fairs, adaptation of products
to new export markets, preparation of bids with the assistance of consultants,
preparation of marketing studies and strategies to enter foreign markets, and the
hiring of international marketing experts.
Because receipt of benefits under this program was contingent upon export
performance, Commerce determined that it was an export subsidy. It was also
determined that the grants received by Leclerc constituted a countervailable
subsidy because they were direct transfers of funds, conferring a benefit to
Leclerc in the amount of the face value of the grant. The grant was treated as a
non-recurring subsidy and the benefit was allocated over the average useful life of
Leclerc’s non-renewable physical assets. The net rate was 0.00%.
One of EDC’s services was the provision of insurance intended to protect
exporters against losses resulting from non-payment relating to commercial and
political risks.
During the period of investigation, Leclerc purchased export credit insurance
from EDC that covered sales of the subject merchandise. No claims were made or
pay-outs received by Leclerc during this period.
Commerce’s standard methodology for examining government export credit
insurance programs was to determine whether the premium charged by the
government entity was adequate to cover the long-term operating costs and losses
of the program. According to EDC annual reports, the Corporation’s insurance
program reported profits from 1991 to 1995. Given that the premium rates
charged by EDC had been more than adequate to cover the operating costs and
losses of its export insurance program, Commerce determined that the program
did not confer a benefit and therefore was not a subsidy.
Commerce concluded that this program was neither de facto nor de jure specific,
and had not conferred a countervailable subsidy on Leclerc. The program was
available to all commercial enterprises, workers’ unions, other worker’s groups
and non-profit organizations located in Quebec. Assistance under the program
was distributed over a large number and wide variety of users representing virtually
every industry in Quebec. Neither Leclerc nor the wood products industry
was found to have received a disproportionate share of the benefits.
This program was administered by Hydro-Québec, a public utility wholly owned by
the Government of Quebec. The program was designed to reduce dependence on
fossil fuels by increasing the consumption of hydro-electric power and promoting
research and development on more efficient uses of energy. The program was
found not to be de jure specific. With regard to de facto specificity, from 1985 to
1992 assistance under the program was distributed over a large number and wide
variety of users, representing a wide cross-section of the Quebec economy. Neither
Leclerc nor the wood products industry received a disproportionate share of the
program’s benefits. Commerce therefore determined that the program was not
specific and had not conferred countervailable subsidies on Leclerc.
This program was created by an agency of the Government of Quebec in 1994 for
the purpose of increasing employment and reducing public expenditures for the
unemployed.
By providing a one-time cash grant to qualifying enterprises, the program aimed
to induce private enterprises to develop projects to hire the unemployed. The
program was found not to be de jure specific. With regard to de factospecificity,
from February 1994 to March 1996 assistance under the program was distributed
to many sectors representing virtually every industry and commercial sector
found in Quebec. Neither Leclerc nor the wood products industry received a
disproportionate share of the program’s benefits. Commerce therefore determined
that the program was not specific and had not conferred countervailable
subsidies on Leclerc.
The SPEQ program provided a tax incentive for owners of business investment
companies to make equity investments in eligible small to medium-sized Quebec
companies. This program was not found to be de jure specific. With regard to
de facto specificity, from 1988 to 1993 assistance under the program was distributed
over a large number and wide variety of users, representing a wide crosssection
of the Quebec economy. Neither Leclerc nor the wood products industry
was a dominant or disproportionate user of the program. Commerce therefore
determined that the program was not specific and had not conferred countervailable
subsidies on Leclerc.
PREP was a temporary program under which SDI provided guarantees on
commercial bank loans. The program was active between 1992 and 1995, and was
designed to assist small to medium-sized firms in Quebec experiencing liquidity
problems as a result of the recession of the early 1990s.
The program was found not to be de jure specific. With regard to de facto specificity,
the companies that obtained loan guarantees under PREP represented a
large number of different industries. Neither Leclerc nor the wood products
industry was a disproportionate user of the program. Commerce therefore determined
that the program was not specific and had not conferred countervailable
subsidies on Leclerc.
- Capital Gains Exemptions
- Regional Investment Tax Credits
- Performance Security Services through Export Development
Corporation
- Working Capital for Growth from the Business Development
Bank of Canada
- St. Lawrence Environmental Technology Development Program
- Program for Export Market Development
- Canada–Quebec Subsidiary Agreement on the Economic Development
of Quebec
- Quebec Stumpage Program
- Programs provided by the Quebec Industrial Development
Corporation (SDI)
- Article 7 Assistance
- Export Assistance Program
- Business Financing Program
- Research and Innovation Activities Program
- Private Forest Development Program
On February 26, 1997, Commerce and the ITC accepted a petition filed by the
following companies: Steel Corp.; Co-Steel Raritan; GS Industries, Inc.; Keystone
Steel & Wire Co.; and North Star Steel Texas Inc. The petitioners alleged that
subsidized imports of steel wire rod from Canada, Germany, Trinidad and Tobago,
and Venezuela were injuring the U.S. industry.
On April 30, 1997, the ITC published an affirmative preliminary determination,
finding a reasonable indication that the domestic industry was threatened with
material injury by reason of allegedly subsidized imports from Canada, Germany,
Trinidad and Tobago, and Venezuela.
On August 4, 1998, Commerce released an affirmative preliminary determination,
in which it estimated the following preliminary countervailing duty rates:
| Manufacturer/Exporter |
CVD rate |
|
| |
Sidbec-Dosco (Ispat) Inc. |
. . . . . . . . . . . . . . . . . . . 9.55% |
| |
Ivaco, Inc. |
. . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% |
| |
Stelco, Inc. |
. . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% |
| |
All Others |
. . . . . . . . . . . . . . . . . . . 9.55% |
On October 22, 1997, Commerce released an affirmative final determination,
finding that countervailable subsidies were provided to Sidbec-Dosco (Ispat) Inc.
| Manufacturer/Exporter |
CVD rate |
|
| |
Sidbec-Dosco (Ispat) Inc. |
. . . . . . . . . . . . . . . . . . . 8.95% |
| |
Ivaco, Inc. |
. . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% |
| |
Stelco, Inc. |
. . . . . . . . . . . . . . . . . . . . . . . . . . 0.00% |
| |
All Others |
. . . . . . . . . . . . . . . . . . . 8.95% |
On November 21, 1997, Ispat Sidbec Inc. filed a request for a Chapter 19 Binational
Panel Review with the NAFTA Secretariat. A second request was filed on
November 21, 1997, on behalf of the Quebec government. A Panel Review was
requested of the final countervailing duty determination made by Commerce.
Given the ITC’s negative final determination, these requests were subsequently
withdrawn.
On December 3, 1997, the ITC made a negative final determination and the investigation
was terminated.
In the ITC determination, Canadian imports were cumulated with subsidized and
dumped imports from Venezuela and Trinidad and Tobago, and dumped imports
from Germany. In light of the lack of significant volume of subject imports and
significant price effects, the consistently high level of investments by the
domestic industry, and the improving trend in the industry’s financial condition
(which began well before the petition was filed), the ITC did not find that the
subject imports had an adverse impact on the domestic industry. Although the
domestic industry had lost over 3.0 percentage points of market share from 1994
to 1995, the subject imports’ market share remained constant during that period.
From 1995 to 1996, when subject imports made their greatest gains in volume,
the domestic industry’s market share remained virtually the same. The subject
imports captured sales and market share at the expense of other imports, rather
than the domestic like product. Moreover, the domestic industry was not able to
satisfy all of the domestic demand for steel wire rod during this period.
With respect to price issues, in light of the absence of evidence supporting a correlation
between subject import volumes or prices and declines in domestic steel
wire rod prices, the ITC decided it could not conclude that subject import prices
prevented, to a significant degree, domestic price increases that would otherwise
have occurred.
With regard to threat of material injury, the interim 1997 data and the full year
1996 data led the ITC to conclude that a substantially increased volume of subject
imports was not imminent and that no material injury would occur by reason of
subject imports. Subject imports decreased throughout 1997 according to the
interim data, and were at lower levels during that period than during either the
first or second half of 1996. Foreign producers of the subject merchandise had
generally been operating at or near full capacity throughout the period of investigation,
with no plans for expansion. There was no basis for concluding that
imports were likely to have a significant adverse effect on prices for the U.S.
domestic like product in the imminent future.
The Government of Quebec owned 100% of Sidbec’s stock, and Sidbec owned
100% of Sidbec-Dosco, Inc.’s stock, until privatization in 1994. On August 17,
1994, Sidbec-Dosco, Inc. was sold to Beheer-en Beleggingsmaatschappij Brohenco
B.V. (Brohenco), which is wholly owned by Ispat-Mexicana, S.A. de C.V. (Ispat
Mexicana). It became known as Sidbec-Dosco (Ispat) Inc. Sidbec, the holding
company, continued to be 100% owned by the Government of Quebec.
It was Commerce’s practice to allocate subsidies received by a parent over the
sales of its entire group of companies in certain situations. Therefore, Commerce
treated any untied subsidy received by the parent, Sidbec, during the period of
investigation as benefiting all of the companies in the Sidbec group, including
Sidbec-Dosco, Inc. and Sidbec-Normines.
Commerce determined that while grants provided in 1983 and 1984 were tied to
Sidbec-Normines’ iron ore production, these subsidies became attributable to the
Sidbec group’s remaining production once the iron ore operations were shut
down. Furthermore, because Commerce considered Sidbec-Normines to be a part
of the Sidbec group, the grants were considered to be provided directly to Sidbec.
Accordingly, Commerce found that grants provided both before and after the
closure of Sidbec-Normines’ mining operations in 1984 benefited the Sidbec
group’s remaining production as of 1985 onward, including the production of the
subject merchandise (steel wire rod).
Commerce allocated the subsidies at issue to the remaining production of the
consolidated group given that the closed mining operations had been operated by
a subsidiary (Sidbec-Normines) whose only production came from the closed
plant. The parent of the consolidated group (Sidbec) was the group’s shareholder
in the subsidiary, and had financed and was obligated to pay the debts of the
subsidiary. Thus Sidbec was being relieved of the costs it would have incurred in
closing down the plant, so that its remaining production, including steel wire rod,
undeniably benefited from the subsidies it received.
Commerce found that the 1983–1992 grants to cover Sidbec-Normines debt were
non-recurring in nature. Commerce considers grants to be non-recurring when
the benefits are exceptional, the recipient cannot expect to receive benefits on an
ongoing basis, and/or the provision of funds by the government must be approved
every year. Based upon the multi-layered process necessary to obtain budgetary
authority, Commerce concluded that government approval was necessary prior to
the receipt of each individual grant. Whereas non-recurring grants are allocated
over the average useful life of assets in the industry, recurring grants are expensed
in the year of receipt.
Commerce determined that Sidbec was uncreditworthy for the years from 1983
to 1992, based on certain liquidity and debt ratios. The Quebec Industrial Development
Corporation (SDI) asserted that Commerce’s finding was not supported
by evidence on the record as the company had received long-term commercial
financing. SDI asserted that the result of this error was that Commerce added a
risk premium to the discount rate. Commerce stated that its credit analysis was
consistent with the decision to analyze the subsidies as benefiting the consolidated
group of the parent company, Sidbec. Furthermore, Commerce did not
consider Sidbec’s long-term capital lease as comparable to long-term commercial
financing. The lease in question was a capital lease, secured by a first-rank
specific charge, which is not unlike a typical mortgage.
On this basis, Commerce distinguished the capital lease from a typical long-term
commercial loan, which was not secured in this way.
SDI asserted that any possible countervailable subsidies were extinguished by the
privatization of Sidbec-Dosco. The Government of Canada expressed concerns
with Commerce’s privatization methodology as it was advised that the sale of
Sidbec-Dosco was an arm’s-length transaction and fully reflected the market value
of the company’s assets. According to Commerce’s practice, the sale of a “business”
or “productive unit” does not alter the effect of previously bestowed subsidies.
A calculation is performed to measure the portion of the subsidies passed
through, taking into account the sale price and previously bestowed subsidies.
This approach was consistent with the Federal Circuit’s decision in Saarstahl AG
v. United States, 78 F.3d 1539 (Fed. Cir. 1996).
Sidbec-Dosco received a debt-to-equity conversion from the Government of
Quebec in 1988. The Quebec Industrial Development Corporation reported that
a portion of Sidbec’s debt was converted into Sidbec capital stock in 1988. The
debt consisted of four loans provided to Sidbec during the period from 1982 to
1985, plus accrued interest. Every two years, Quebec extended the maturity date
for these loans for another two years. Quebec converted four of Sidbec’s debt
instruments into Sidbec equity in 1988 in order to improve Sidbec-Dosco, Inc.’s
economic profile. Sidbec was authorized to acquire an equivalent amount in
shares of Sidbec-Dosco, Inc.
Commerce concluded that benefits to Sidbec occurred at the point when the debt
instruments (i.e. loans) were converted to capital stock, given that Sidbec was not
equityworthy in 1988. The conversion of debt to capital stock was considered to
constitute an equity infusion inconsistent with the usual investment practice of
private investors. Commerce determined the 1988 debt-to-equity conversion to
be specific, because it was provided to only one enterprise, Sidbec, and was not
part of a broader program. The net rate found was 0.92%.
Sidbec received grants from the Quebec government as compensation for
expenses it incurred to finance Sidbec-Normines and its discontinued operations.
Some of these grants were provided by Quebec to Sidbec with regard to the
payment of interest and principal on six different loans made in the period from
1984 to 1992.
The Government of Quebec was the guarantor of these loans. Commerce determined
that the grants constituted countervailable subsidies and were non-recurring
in nature. They were specific because they were provided to only one enterprise,
Sidbec, and were not part of a broader program. The net rate found was 8.03%.
The federal Department of Human Resources Development (HRDC) and provincial
governments provided financial support to private sector-led human resource
projects through the Sectoral Partnerships Initiative. With regard to worker
adjustment assistance, funds flowing from HRDC went not to the companies but
rather to unemployed workers in the form of assistance for retraining costs or
income support. The funds were therefore not countervailable because the
companies were not relieved of any obligations. Furthermore, the funds received
by SDI, Stelco and Ivaco from CSTEC for training purposes did not provide countervailable
benefits during the period of investigation because they were not
specific to the Canadian steel industry.
Commerce found no evidence that Quebec provided a grant to Sidbec-Dosco, Inc.
in 1987, as alleged by the petitioners.
Commerce found no evidence at verification that Quebec had provided an infusion
of equity, either through a debt-to-equity conversion or otherwise, to Sidbec-
Dosco, Inc. in 1987.
The petitioners alleged that C$51.7 million in contributed surplus constituted a
countervailable subsidy. Commerce determined that Sidbec had received this
contributed surplus prior to the Average Useful Life (AUL) period. These funds
therefore did not provide countervailable benefits during the period of investigation.
Commerce determined that all Quebec payments made to Sidbec between 1983
and 1993 were accounted for by the 1983–1992 grants that went to the discontinued
mining operations, discussed above, and that no additional countervailable
benefits were provided.
Commerce determined that the Quebec government did not provide any governmental
assistance to either Sidbec or Sidbec-Dosco, Inc. in 1982.
Commerce determined that Quebec did not provide any grants to Sidbec in 1980
or 1981.
This program was administered by the Quebec Industrial Development Corporation,
a Quebec agency that funded a wide range of industrial development projects
in many sectors. Ivaco received grants in 1984 and 1985 that had been authorized
prior to the program’s rescission in 1982. Commerce determined that the benefits
Ivaco received for each year constituted a de minimis portion (i.e. less than 0.5%)
of total sales value, and therefore should be expensed in each year that they were
received. Therefore, because the grants provided under this program were
expensed in the year of receipt, Commerce determined that no countervailable
benefits were bestowed on Ivaco during the period of investigation.
Countervailing duty and anti-dumping investigations were initiated by Commerce
and the ITC on November 19, 1998, and on December 30, 1998, respectively. The
investigations were in response to a petition filed by the Ranchers-Cattlemen
Action Legal Foundation (R-Calf), supporting trade associations and individual
cattle producers. The products under investigation were live cattle and calves for
slaughter, as well as feeder cattle and calves. Excluded from the investigations
were dairy and breeding cattle. The period under investigation was the fiscal year
of April 1, 1997, through March 31, 1998.
Two petitions were filed for this investigation. R-Calf had previously filed a petition
but withdrew it on November 10, 1998. The petition was subsequently refiled
on November 12, 1998, and R-Calf asked Commerce to incorporate all submissions
contained in the previous petition. Both the federal and Quebec governments
contested the refiling, but there was no statutory bar to refiling a petition.
On January 20, 1999, the ITC released a preliminary affirmative determination of
injury, finding a reasonable indication that the domestic industry was threatened
with material injury by reason of allegedly subsidized imports from Canada. On
May 11, 1999, Commerce released a postponed negative countervailing duty
determination, in which estimated net subsidy rates were found to be de minimis.
The total estimated preliminary net countervailable subsidy rate for all
producers/exporters of live cattle was 0.38%.
On October 22, 1999, Commerce released a final negative countervailing duty
determination of 0.77% ad valorem. Again, the estimated net subsidy rate for the
investigated product was found to be de minimis. The ITC released its final determination
on November 24, 1999, stating that the industry in the United States
was not materially injured or threatened with material injury by reason of imports
of live cattle from Canada sold in the United States. The investigation was therefore
terminated.
Commerce considered whether the industry alleging injury had standing—that is,
whether a minimum percentage of the domestic industry supported the countervailing
duty petition.
To meet this requirement, the domestic producers or workers supporting the petition
were required to account for: (1) at least 25% of the total production of the
domestic like product; and (2) more than 50% of the production of the domestic
like product produced by that portion of the industry expressing support for or
opposition to the petition.
In evaluating industry support, Commerce must consider what constitutes a
domestic like product in order to define the industry producing domestic like
products. The Tariff Act of 1930175
defines domestic like product as “a product
that is like, or in the absence of like, most similar in characteristics and uses with,
the article subject to investigation.” In this case, the petition defined domestic
like product as live cattle, feeder steers and heifers, slaughter steers and heifers,
and cull cows and bulls, which are all fed for the purpose of beef production.
176
Since no party commented on the petition’s definition of domestic like product,
and since there was nothing in the record to indicate that the definition was inaccurate,
Commerce accepted the petition’s definition of domestic like product.
Commerce’s initial review of production data indicated that the petitioner did not
account for 50% of the production of total domestic like product. Pursuant to the
Tariff Act of 1930,177
Commerce found it necessary to poll or otherwise determine
support for the petition. The deadline for initiation was extended to December 22,
1998. In Commerce’s view, the large number of cattle producers and the lack of a
comprehensive listing thereof made it unfeasible to conduct a traditional
sampling of producers. Instead Commerce contacted over 150 cattle and related
associations, requesting that the associations report the views of their members.
Commerce also included the views of individual producers who had contacted
Commerce directly. Commerce concluded that domestic producers or workers
supporting the petition did meet the threshold level indicated above, and that
there was therefore sufficient industry support for the petition.
Canada held consultations with Commerce on three occasions between
October 15 and November 20, 1998.178
Regarding the issue of whether the
domestic industry supporting the petition had standing, during these consultations
Canada raised concerns, contesting the methodology and results of the
Commerce polling.
The petitioners suggested that Commerce should use several pricing statistics for
determining export price benchmarks, such as Canadian export statistics, U.S.
Portland and Pacific Northwest (PNW) prices, Producer Direct Sales (PDS) prices
and U.S. import statistics. Commerce had in fact made several price comparisons
using prices from several sources (including Portland prices) and making appropriate
adjustments for freight when necessary. Commerce determined that the
Canadian Wheat Board (CWB) export sale transactions to the United States were
reliable prices. Commerce was also called on to explain the specificity analysis
regarding the Farm Improvement and Marketing Cooperative Loans Act
(FIMCLA). Commerce agreed with Canada that the disproportionality analysis
should focus on the level of benefits provided rather than on the number of subsidies
given to different industries. However, Commerce confirmed the preliminary
analysis that the FIMCLA program was de facto specific. Commerce also
attempted to ensure that the prices charged for public pasture services and those
charged by private providers were comparable when services were nearly identical.
Finally, regarding the Alberta Crown Lands Basic Grazing Program,
Commerce disagreed with the contention that the compensation system for
lessees of public and private land should be stricken from the record. Other issues
related to CWB control, and market distortions, cross-border comparisons and
various provincial programs.
While the following programs were determined to be subsidies and were therefore
countervailable under U.S. trade law, the total estimated net subsidy for each
product under investigation was found to be de minimis.
| Product |
Total Estimated Net Subsidy |
|
| |
Live cattle |
. . . . . . . . . . . . . . . . . 0.04% ad valorem |
The Government of Canada provided guarantees on loans extended by private
commercial banks and other lending institutions to farmers across Canada. The
purpose of this program was to increase the availability of loans for the improvement
and development of farms, and for the marketing, processing and distribution
of farm products by cooperative associations. Any individual engaged in
farming in Canada and any farmer-owned cooperative was eligible to receive loan
guarantees covering 95% of the debt outstanding for projects related to farm
improvement or increased farm production.
The maximum amount of money that an individual could borrow under this
program was $250,000. For marketing cooperatives, the maximum amount was
$3 million. Beef and hog farmers received approximately 18% to 27% of all guarantees
between 1994 and 1998, while poultry, fruit-and-vegetable and dairy
producers received less than 10% of the guarantees. The specificity analysis examined
disproportionality by reference to actual users of the program. The share of
the subsidy received by producers of the subject merchandise was compared to
the shares received by other agricultural producers. The disproportionality
analysis focused on the level of benefits provided rather than on the number of
subsidies given to different industries. Commerce concluded that the beef and hog
industries received a disproportionate amount of assistance under the FIMCLA
program during the period of investigation. FIMCLA was therefore found de facto
specific to the beef and hog sectors.
Established in 1938 to encourage banks to lend to cattle producers, this program
was administered by the Alberta Department of Agriculture, Food and Rural
Development. Under the program, up to 15% of the principal amount of commercial
loans taken out by feeder associations for the acquisition of cattle was guaranteed.
Eligibility for the guarantees was limited to feeder associations located in
Alberta. Sixty-two associations received guarantees on loans that were
outstanding during the period of investigation. Because eligibility was limited to
feeder associations, Commerce determined that the program was specific. It was
determined that the loan guarantees were countervailable subsidies to the extent
that they lowered the cost of borrowing. Commerce calculated Alberta’s benchmark
rate by averaging the verified range of lending rates that the associations
could obtain in the market absent the government guarantee. On this basis, the
program was found to be countervailable at a rate of 0.01%.
The Manitoba Cattle Feeder Associations Loan Guarantee Program was established
in 1991 to assist in the diversification of Manitoba farm operations. The
program was administered by the Manitoba Agricultural Credit Corporation
(MACC). Through MACC, the provincial government guaranteed 25% of the principal
amount of loans for the acquisition of livestock by feeder associations. Eligibility
for the guarantees was limited to feeder associations located in Manitoba.
Associations had to be incorporated under the Cooperatives Act of Manitoba, and
had to have a minimum of 15 members, an elected board of directors and a registered
brand for use on association cattle.
Because eligibility was limited to feeder associations, Commerce determined that
the program was specific. On this basis, it was found that the total subsidy from
the program was less than 0.01%.
The Ontario Feeder Cattle Loan Guarantee Program was established in 1990 to
help secure financing for cattle producers. The program was administered by the
Ontario Ministry of Agriculture, Food and Rural Affairs. The Ministry provided a
start-up grant of $10,000 to new feeder associations, and government guarantees
covering 25% of the amount borrowed by associations for the purchase and sale
of cattle. Eligibility for the guarantees was limited to feeder associations
composed of at least 20 individuals who owned or rented land in Ontario and were
not members of other feeder associations. Eighteen associations received guarantees
on loans that were outstanding during the period of investigation. The
program was found to be countervailable on the grounds that it was limited to
feeder associations and that it lowered the cost of borrowing. The total subsidy
from the program was found to be 0.01%.
The Saskatchewan Feeder Associations Loan Guarantee Program was established
in 1984 to facilitate the establishment of cattle feeder associations in order to
promote cattle feeding in Saskatchewan. The program was administered by the
Livestock and Veterinary Operations Branch of the Saskatchewan Agriculture and
Food Department. This agency provided a government guarantee covering 25% of
the principal amount on loans to feeder associations for the purchase of feeder
heifers and steers. Eligibility for the guarantees was limited to feeder associations
with at least 20 members over the age of 18 who were not active in other feeder
associations. One hundred and sixteen associations received guarantees on loans
that were outstanding during the period of investigation. Because eligibility was
limited to feeder associations, the program was found to be specific. The total
subsidy from the program was found to be 0.01%.
The Prairie Farm Rehabilitation Administration was created in the 1930s to rehabilitate
drought and soil-drifting areas in the provinces of Manitoba,
Saskatchewan and Alberta. The PFRA established the Community Pasture
Program to facilitate improved land use through rehabilitation, conservation and
management. The goal of the Community Pasture Program was to utilize the
resource primarily for the summer grazing of cattle to encourage long-term
production of high-quality cattle.
In pursuit of its objectives, the PFRA operated 87 separate pastures covering
approximately 2.2 million acres. At these pastures, the PFRA offered grazing privileges
and optional breeding services for fees established by it. The fees were
based upon recovery of the costs associated with the grazing and breeding services.
Because use of Community Pastures was limited to Canadian farmers
involved in grazing livestock, Commerce determined that the program was
specific. As a result, the provision of public pasture services was a countervailable
subsidy at 0.02%.
Agricultural crown land managed by Saskatchewan Agriculture and Food (SAF)
was made available to all Saskatchewan agricultural producers for lease. Activities
carried out on the land included grazing, cultivation, community pastures and
additional multiple-use activities. Leases ranged from 1- to 33-year terms. Beginning
in 1997, SAF set rental rates using a formula that took account of the average
price of cattle marketed in the previous years. Lessees were responsible for paying
taxes, developing and maintaining water facilities and fences, and providing for
public access to the land. Because the cattle industry was a predominant user of
the Saskatchewan Crown Lands Program, it was found to be specific and thus, to
provide a countervailable subsidy at the rate 0.02%.
Agricultural crown land was managed by Manitoba Agriculture Crown Lands
(MACL), whose primary objective was to administer the disposition of crown
lands and to improve the lands’ productivity. Crown agricultural land was made
available to farmers through cultivation and grazing leases. Leases for grazing
dispositions ranged from 1- to 50-year terms. Leaseholders were required to pay
an amount in lieu of municipal taxes, as well as to construct and maintain fences
and watering facilities. The public had access to crown lands at all times without
prior permission of the lessee for the period of such activities as wildlife hunting,
forestry, winter sports, hiking and berry picking. During the period of investigation,
MACL administered 1.6 million acres of grazing leases. Although Commerce
agreed with the Government of Manitoba that most of the crown land was located
in fringe areas, it was determined that the lease rate for public grazing land should
be compared solely to the rate for private fringe area leases. Commerce determined
that it was necessary to adjust the lease rate for private land downward to
account for differences between the leases on private and public land. This adjustment
was undertaken to reflect costs associated with the paying of taxes, and the
construction of fences and water dugouts.
Because livestock (including cattle) industries were predominant users of the
Manitoba Crown Lands Program, Commerce determined that the program was
specific and thus that the provision of public grazing rights was a countervailable
subsidy. On this basis, the countervailable subsidy was set at 0.01%.
Grazing rights were first issued on public lands in the early 1930s. Over 10.5
million acres of land were managed by the Alberta government, including a
grazing component of approximately 2 million acres. Leases ranged from 1- to 20-
year terms. Annual rent was equal to a percentage of the forage value of the leased
land. When determining the forage value, consideration was given to the grazing
capacity of the land, the average gain in weight of cattle on grass, and the average
price per pound of cattle sold in the principal livestock markets in Alberta during
the preceding year. Beyond paying the lease fee, lessees were also required to
construct and maintain capital improvements necessary for livestock in order to
comply with all multiple-use and conservation restrictions imposed by the
government on the land. Lastly, lessees had to pay school and municipal taxes
charged on the land being leased.
Commerce found that public lessees appeared to receive more compensation
from oil and gas companies for use and access to the land than they would if
leasing the same land from a private provider. Accordingly, public land was more
valuable to a lessee than private land. The government was not found to be
adequately remunerated for the provision of the land.
To measure the benefits received under the Alberta Crown Lands Basic Grazing
Program, Commerce combined the difference calculated by comparing the
grazing fees paid for public and private land with the difference in compensation
received. The resulting amount became a recurring benefit, which was then
divided by the province’s total sales during the period of investigation. On this
basis, Commerce determined the countervailable subsidy to be 0.65%.
The Northern Ontario Heritage Fund Corporation (NOHFC), a Crown corporation,
was established in 1988. Its purpose was to promote and stimulate economic
development in Northern Ontario. Assistance for eligible projects was available
through forgivable performance loans, incentive term loans and loan guarantees.
With respect to agricultural projects, all assistance provided by NOHFC was in the
form of forgivable performance loans. The types of agricultural projects funded
included capital projects, marketing projects, and research and development projects.
The loans made available for the projects were interest-free and normally
forgiven after two to three years. The extent of debt forgiveness was dependent on
whether the project met its target of increasing the value of farm production by
an amount equal to the NOHFC contribution.
Because benefits under this program were available only in Northern Ontario,
it was determined that the program was regionally specific. To calculate the
total benefit to cattle producers under the program, Commerce summed the
benefit calculated for the forgiven debt and the interest-free loans. On this
basis, Commerce determined the total subsidy from the program to be less
than 0.01%.
This program, administered by the Ontario Ministry of Agriculture, Food and
Rural Affairs, provided compensation to livestock producers whose animals were
injured or killed by wolves or coyotes. Producers applied for, and received,
compensation through the local municipal government. The Ministry reimbursed
the municipality. Beef cattle producers were believed to derive most of the benefits
from the program. Because the program was limited by law to livestock
producers, poultry farmers and beekeepers, Commerce determined that it was
specific. The program was found to be countervailable at a rate of 0.01%.
This program was administered by the Farm Assistance Branch of the Ontario
Ministry of Agriculture, Food and Rural Affairs. It was designed to encourage
farmers to report cases of rabies in livestock by compensating livestock producers
for damage caused by rabies. Of the grants, 60% were funded by Ontario and 40%
by the federal government. The program was found to be specific because the
legislation establishing it expressly limited the grants to livestock producers.
Commerce determined the countervailable subsidy to be less than 0.01%.
The purpose of this program was to promote the diversification of Saskatchewan’s
rural economy by encouraging investment in livestock and horticultural facilities.
The program allowed for an annual rebate of education and health taxes paid on
building materials and stationary equipment used in livestock operations, as well
as greenhouses, and vegetable and raw fruit storage facilities. In examining the
legislation and regulations governing both the program and the Education and
Health Tax, Commerce determined that even if the two programs were found to
be integrally linked under the regulations governing this case, the program would
still be specific and thus countervailable. This determination was based in part on
the fact that legislation administering these programs made them available only
to certain industries. On this basis, Commerce determined the countervailable
subsidy to be less than 0.01%.
The Canadian Wheat Board had the exclusive authority to market Canadian feed
and malting barley in domestic and export markets. It was alleged that the CWB
pooling system sent distorted market signals to Canadian farmers and that the
system of marketing feed barley in Canada imposed excessive costs on farmers,
resulting in a decrease in barley exports. Consequently, more feed barley was
available on the domestic market, thus artificially lowering prices paid by Canadian
cattle producers.
Commerce preliminarily found that Canadian domestic prices were comparable
to U.S. prices. In the final determination, it found that although the CWB had
extensive control over the feed barley export market and its operations in that
market could, and did, have a major impact on the domestic feed barley market,
CWB operations did not provide a benefit to producers of live cattle. Commerce
had to address many concerns relating to the actions of the Canadian Wheat
Board and its effects on the price of barley. There were allegations by the petitioners
that the CWB, through policies such as export restraints, caused the price
of barley to decrease and consequently provided a benefit to cattle farmers.
Commerce determined that although some actions of the CWB did create market
distortions, the CWB did not provide a benefit to the producers of live cattle, thus
not satisfying the specificity criteria.
A second issue was the reliance on certain methods for the analysis of barley
prices. First, Commerce explained that cross-border comparison was a valid
method of determining whether Canadian barley and wheat prices were artificially
low. Also, after adjusting for freight in the comparisons, there were no
consistent price differentials. Export price benchmarks, actual versus bid or offer
prices, using Lethbridge as domestic pricing points—all these were valid instruments
in determining whether in fact Canadian barley prices were artificially low.
Based on price comparisons, Commerce determined that CWB operations did not
provide a benefit to producers of live cattle and thus did not provide an indirect
countervailable subsidy.
The Saskatchewan Pasture Program had been in place since 1922. It was designed
to provide supplemental grazing to Saskatchewan livestock producers, and to
maintain grazing and other fragile lands in permanent cover in order to promote
soil stability. Saskatchewan Agriculture and Food offered grazing, breeding and
health services for fees that it established. Fees were based upon recovery of the
costs associated with the grazing and breeding services of each pasture.
Commerce found no subsidy.
Alberta developed community pastures (reserves) on which multiple ranchers’
herds could graze. Grazing reserves also provided multiple-use opportunities to
other users. As of April 1, 1999, Alberta ceased to perform management activities
on 32 of its 37 grazing reserves as a result of a privatization initiative. Under the
initiative, livestock management responsibilities were shifted to grazing associations
and new fees were negotiated.
However, during the period of investigation, the Alberta government operated 20
reserves. Commerce determined that the government was adequately remunerated
for its provision of land to the privatized reserves. As for the petitioners’
request to calculate five separate full-service public pasture rates, it was rejected
on the basis that rates for public pastures were all lower than the private pasturing
rate provided by Alberta. Thus no countervailable subsidy existed.
Established by the federal and Alberta governments in April 1997, CABIDF
supported research, development and related activities connected to the beef
industry in Alberta. To receive funding through this program, applicants had to
submit a series of research proposals, which were evaluated on the basis of the
project’s relationship to the Fund’s research priorities, its scientific merits, and
the direct or indirect usefulness of the results to the beef industry. Final proposals
were evaluated for technical merit by a scientific committee consisting of industry
experts and scientists, and were then approved or rejected based on the evaluations
by CABIDF’s governing committee. After verification, Commerce determined
that programs funded by CABIDF were related to scientific research activities
for the beef industry and the agriculture industry in general. All of the
approved projects were grants, not revenue forgone, and none were paid directly
to producers or processors. Based on this analysis, Commerce found that CABIDF
was eligible for “green box” treatment under section 771(5B)(F) of the Tariff Act
of 1930 and thus was not countervailable.
SBDF supported the development and diversification of Saskatchewan’s beef
industry through the funding of various projects related to production research,
technology transfer, and development and promotion of new products. Priority
was given to public research institutions conducting research, development and
promotion activities that were to be generally available to the industry. All of the
approved projects consisted of grants, not revenue forgone, and none were paid
directly to producers or processors. Based on this analysis, Commerce found that
SBDF was eligible for green box treatment under section 771(5B)(F) of the Tariff
Act of 1930 and thus was not countervailable.
NISA was designed to stabilize an individual farm’s overall financial performance
through a voluntary savings plan. Participants enrolled all eligible commodities
grown on the farm. Farmers then deposited a portion of the proceeds from their
sales of eligible NISA commodities (up to 3% of net eligible sales) into individual
savings accounts, received matching government deposits, and made additional,
non-matchable deposits up to 20% of net sales. The matching deposits came from
both the federal and provincial governments.
NISA provided stabilization assistance on a “whole farm” basis. A farmer’s eligibility
to receive assistance depended on total farm profits, not on the profits
earned on individual commodities. A producer could withdraw funds from a NISA
account under a stabilization or minimum income trigger. The stabilization
trigger permitted withdrawal when the gross profit margin from the entire farming
operation fell below a historical average, based on the previous five years. If poor
market performance of some products was offset by increased revenues from
others, no withdrawal was triggered.
Commerce found NISA not to be de facto specific with respect to cattle producers.
There was no evidence that cattle producers were dominant users or received
disproportionate benefits from the NISA program. Commerce also found that
NISA was not limited to a particular region. It was therefore found not to be
countervailable.
Established in 1970 and terminated in 1995, this program provided a partial
credit toward the payment of rent on public grazing land if the lessee undertook
certain pre-approved range improvement projects. The leaseholder was required
to pay for all the costs incurred for these improvements, and was reimbursed for
25% to 50% of the costs through credits on the rental fees otherwise due annually.
All improvements belonged to the government and, once the improvements were
completed, lessees were required to maintain them at their own expense. On the
basis of its analysis, Commerce determined that the program did not provide a
financial contribution and therefore was not countervailable.
This policy was designed to provide rental adjustments when crown land leaseholders
made capital improvements to the land, such as clearing, bush removal,
or breaking and re-seeding. In return, Saskatchewan Agriculture and Food agreed
not to increase or even reduce the rental rate for a certain period of time,
depending on the length of the improvement project. All improvements belonged
to the Crown. In order for a financial contribution to exist under this program, the
government had to forgo rental fees. In this case, the reduction in the rental fees
corresponded to a reduction in the land’s carrying capacity while improvements
were undertaken. The increased value as a result of the improvements was
captured with the subsequent setting of rental fees. Commerce determined, therefore,
that the program did not provide a financial contribution and was not countervailable.
This program was established in 1991 to facilitate the establishment of cattle
breeder associations in an effort to promote cattle breeding in Saskatchewan. It
provided a guarantee on 25% of the principal amount of loans to breeder associations
for the purchase of certain breeding cattle. Eligibility was limited to breeder
associations composed of at least 20 individuals who were residents of
Saskatchewan. One hundred and seven associations received guarantees on loans
that were outstanding during the period of investigation.
Breeding livestock was not covered by the investigation. Commerce therefore
determined that the program did not provide a countervailable subsidy to the
subject merchandise.
Commerce determined that the producers of the subject merchandise under
investigation did not apply for or receive benefits under the following programs
during the period of investigation.
- Feed Freight Assistance Adjustment Fund
Only Ontario participated in the Feed Freight Assistance Adjustment
Fund program. Commerce verified that Ontario producers
did not receive benefits under the program.
- Canadian Adaptation and Rural Development (CARDS)
Program in Saskatchewan
- Western Diversification Program
- Ontario Export Sales Aid Program
Commerce did not consider it necessary to determine whether benefits conferred
under the following programs were countervailable because any benefit to the
subject merchandise was so small that there would be no impact on the overall
subsidy rate.
- Ontario Bear Damage to Livestock Compensation Program
- Ontario Livestock Programs for Purebred Dairy Cattle, Beef,
and Sheep Sales Assistance Policy / Swine Assistance Policy
- Ontario Artificial Insemination of Livestock Act
160 (Back)
160 § 775(B)(ii).
161 (Back)
Current law provides for a finding of “de facto” specificity if one or more of the following
factors is present: (1) actual recipients are limited in number when measured by
either enterprise or industry; (2) one enterprise or industry is a predominant user;
(3) an enterprise or industry receives a disproportionally large amount; or (4) the
authority providing the subsidy exercises discretion in granting the subsidy.
162 (Back)
On January 6, 1994, Commerce issued its second remand determination that stumpage
and log export restrictions were not countervailable.The panel accepted the remand
on February 23, 1994. On April 6, 1994, the U.S.Trade Representative requested the
establishment of an Extraordinary Challenge Committee.On August 3, 1994, the
committee affirmed the panel’s order. On August 16, 1994, Commerce revoked the
countervailing duty order.
163 (Back)
302(b)(1)(A) of the Trade Act of 1974, as amended.
164 (Back)
Article 1904 (3) of the FTA states that panels must apply the standard of review and
“general legal principle” that a U.S. court would apply in its review of a U.S. agency’s
determination.
165 (Back)
The following is based in part on analysis provided by Steptoe and Johnson, legal counsel
to the Canadian Forest Industries Council,May 29, 1992. Reproduced by permission of the
Council.
166 (Back)
Commerce noted that its Proposed Rulemaking of May 1989 identified four factors for
determining specificity: (a) the extent to which a government acts to limit the availability
of a program; (b) the number of users that actually use the program; (c) whether any
user receives benefits of the program in a dominant or disproportionate manner; and
(d) whether the government exercises discretion in awarding benefits under the program.
167 (Back)
See Carbon Black from Mexico (51 FR 13269) (April 18, 1986).
168 (Back)
The benchmarks are, in order of preference: (1) the prices charged by the government
for the identical good to others in the same political jurisdiction; (2) the price charged by
the government for a similar or related good, adjusted for quality differences; (3) the
price charged by private sellers in the same political jurisdiction for an identical good;
(4) the government’s cost of providing the good; and (5) the price paid for the identical
good outside the political jurisdiction.These benchmarks are known as the “Preferentiality
Appendix” and first appeared in Commerce’s preliminary determination of its Administrative
Review of Carbon Black from Mexico in 1986.
169 (Back)
To calculate the stumpage subsidies, Commerce followed the same general formula in
each province.The numerator in each province consisted of the calculated benefit per
cubic metre (i.e. the difference between administered rates and the benchmark),multiplied
by the softwood sawlog harvest.The denominator consisted of the value of softwood
lumber shipments plus the value of lumber co-products (e.g., chips and sawdust).
170 (Back)
Margolick and Uhler,“The Economic Impact of Removing Log Export Restrictions in British
Columbia,” April 1986 (Margolick).
171 (Back)
The original investigation is summarized here, even though it is outside the time period of
this study, because of the continued participation by the Government of Canada in the
many administrative reviews that were to follow.
172 (Back)
Alberta Pork Producers’ Marketing Board v. United States, 669 F.Supp. 445
(Court of International Trade 1987).
173 (Back)
The “all others” rate was originally found to be 4.48% but was amended by Commerce
on July 13, 2000.
174 (Back)
The “all others” rate for the 1993 review period also included an exemption from the
payment of water bills for Norsk Hydro.The rate as calculated was 6.34% for SDI grants
and 1.00% for the exemption from the payment of water bills.
175 (Back)
§ 771 (10).
176 (Back)
As domestic like products, Commerce considered neither purebred cattle used for
breeding (unless and until cattle are culled), nor dairy cows used to produce milk for
human consumption.
177 (Back)
§ 702 (c) (4) (D).
178 (Back)
Round of consultations held in April 1999.
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