(Cite as: 57 FR 22570, *22598)
allege road building and maintenance in the private forest, when required, is limited to secondary and tertiary roads.
By contrast, according to Respondents, access to Quebec's remote public forests requires the construction and maintenance of
primary roads to connect the public forests to commercial centers, as well as secondary and tertiary roads that connect the
primary roads to the actual harvesting sites. Primary roads built and maintained by TSFMA holders must comply with primary
road specifications established by Quebec because those primary roads, as well as any secondary and tertiary roads, become part
of Quebec's public road system and are open to public use. By contrast, secondary and tertiary roads built in private forests are
the property of the landowner and need *22599
(Cite as: 57 FR 22570, *22599)
only satisfy the requirements of the landowner.
Respondents further argue that, regarding secondary and tertiary roads, the conditions that exist in the public forests impose far
higher operating costs than do the conditions prevailing in the private forests. The verified record of this investigation, according
to Respondents, now contains a detailed break-out of the different road construction and maintenance costs imposed on TSFMA
holders in contrast to harvesters operating in the private forests. Since the information the Department deemed missing from the
record at the time of the Preliminary Determination has been provided and verified, Respondents argue that the Department
should adjust the TSFMA rate by an the incremental cost of
(Cite as: 57 FR 22570, *22599)
primary, secondary, and tertiary road construction and maintenance imposed on TSFMA holders.
The Coalition argues that like private harvesters, Quebec tenure holders pay for secondary roads and that responsibility for main
roads has recently been passed to the tenure holders. Citing the Quebec Supplemental Questionnaire Response (page 61), the
Coalition asserts that since the responsibility for road building was passed to TSFMA holders, Quebec no longer requires that the
roads meet any building or maintenance standards, thereby reducing any possible road costs. Further, the Coalition argues, again
citing the Supplemental Response, even so, and even assuming that licensees in Quebec incur significant costs on primary roads,
road building expenditures are used for roads that will be used for many harvests. According to the Coalition, any cost of primary
road building must be amortized over the harvests likely to be associated with a given road. In addition, the Coalition states that
no adjustment should be made for the costs of maintaining tertiary and secondary roads because these are borne by all harvesters
regardless of land ownership.
At verification, it became clear to the Department that in conducting the survey of private forests for use in the Parity Technique,
Quebec merely assumed that primary roads were not built on private lands and never explicitly requested specific information on
these costs. In fact, footnote one of Verification Exhibit No. 3 states: "Primary roads in private forests are
(Cite as: 57 FR 22570, *22599)
absorbed into the Quebec road network because the private forests are located in populated areas. Consequently, there are no
private costs for their construction and maintenance." However, Respondents have noted in their questionnaire response dated
January 8, 1992, that primary roads built by TSFMA holders also become the property of Quebec. In addition, these roads
themselves do not need to meet any standards except those of the individual TSFMA holders.
At verification, the Department visited tariffing zone 14 in northern Quebec which has a significant amount of private forests and
saw nothing to suggest that the primary road requirements for private forests in this zone would be any different than for
provincial lands. Because of the lack of information pertaining to private land primary road costs and because the reasoning used
by Respondents for not reporting these costs could equally be applied to primary roads built in provincial forests, we have made
no adjustment for primary road costs.
We have, however, made an adjustment for the differential between the costs associated with secondary and tertiary roads on
private and public lands since we consider the data provided by Respondents to be reasonable. This data was carefully examined
at verification as were maps showing the geographic position of the private and public forests relative to conditions that affect
timber harvesting. As was done for the claimed harvesting cost differential,
(Cite as: 57 FR 22570, *22599)
we adjusted the data for inflation and the fact that we are allowing no cost differential in zones that contain significant amounts of
both private and public forests in a similar fashion. To avoid double-counting, we deducted the amount of the per cubic meter
silviculture road maintenance adjustment (described below) from the provincial secondary and tertiary road cost before
calculating the differential.
Silviculture
Under the TSFMA tenure arrangements, companies must perform all silviculture treatments in order to achieve sustained yield.
Most of the cost of this silviculture is credited toward a company's stumpage fees, but some costs, such as planning and
transportation of seedlings are not credited. The responses report the total noncredited silviculture expenses under all TSFMAs.
The Respondents reported the following "non-credited silviculture" costs for TSFMA holders: transportation of seedlings,
silviculture roads, and control and planning costs. We have accepted Respondents' claimed adjustments.
The Coalition's comments concerning silviculture focus primarily on credited silviculture costs. The Coalition states that Quebec's
claim at verification that with respect to silviculture credits towards TSFMA stumpage fees, it "significantly undercompensates"
tenure holders is unsupportable and that it
(Cite as: 57 FR 22570, *22599)
seems likely Quebec overreimburses for silviculture treatments. The Coalition cites four reasons in support of its claim. First,
Quebec's assertion that it undercompensates TSFMA holders for silviculture is based on the Mallette report which was widely
discredited during the 1990 MOU renegotiations. For example, individual cost estimates were found to be far above actual costs
incurred in the United States. Second, Quebec sets most of its silviculture reimbursement levels based on the cost to the
government. Work ordinarily is performed at a lower cost by private sector firms because of, inter alia, lower costs and increased
efficiency. Third, the incentives in tenure systems such as the TSFMAs are to treat "mandatory silviculture expenditures on Crown
land as operating costs to be minimized." Fourth, for treatments not yet performed by the government, Quebec estimates the cost
based on "available data." The Coalition states that "available data," as the Department found at verification, essentially include
anything the Ministry chooses to use and whatever arbitrary adjustments to the data the Ministry adopts.
We disagree with the Coalition's assertions concerning overcompensation of silviculture. At verification, the Department
thoroughly examined all aspects of the Mallette Report and was satisfied with its results. There is nothing on the administrative
record of this investigation to suggest that the Mallette Report was "widely discredited." At verification, the Department learned
that like Quebec, most TSFMA holders contract out for silviculture work. In
(Cite as: 57 FR 22570, *22599)
addition, at verification, we carefully examined contracts between Quebec and a private silviculture contractor and compared the
costs listed in the contracts to the Mallette Report results and saw no major discrepancies. Finally, we compared the silviculture
reimbursement amounts under Quebec's Private Forest Development Program (PFDP) to the silviculture credits for TSFMA
holders and found that the TSFMA silviculture credits were significantly less than the PFDP reimbursements.
With regard to the Coalition's comments on Quebec's estimation of silviculture costs for treatments not yet performed by the
government, we note that these treatments account for an insignificant amount of the silviculture performed by tenure holders.
In *22600
(Cite as: 57 FR 22570, *22600)
addition, as noted in the verification report, Quebec's calculation of the cost of the examined treatment was far below that of a
contractor that performs the noted treatment for TSFMA holders.
For non-credited silviculture treatments we have made the following adjustments:
Transportation of Seedlings
Replanting is a silviculture requirement of TSFMA holders and although seedlings are provided to TSFMA holders by Quebec,
tenure holders are required
(Cite as: 57 FR 22570, *22600)
to transport them from government nurseries to harvest sites. Since private forest harvesters are not required by Quebec to
replant, we have adjusted the TSFMA stumpage rate to reflect the cost for transportation for seedlings borne by TSFMA holders.
Road Maintenance
TSFMA holders, in addition to building roads to facilitate the harvest of standing timber, must maintain and repair those roads so
as to permit mandatory silviculture to be performed. In order to calculate the appropriate adjustment, we divided the total cost
for this activity, which was checked at verification, by the total harvest under TSFMAs to get a per cubic meter adjustment.
Because this maintenance expense is included in the Provincial Secondary and Tertiary Road cost as reported by CERFO, the per
cubic meter amount of this cost was deducted from that cost when calculating the Secondary and Tertiary Road Cost Differential
adjustment described above to eliminate double counting. We have made the silviculture road cost adjustment based on the total
TSFMA harvest because silviculture obligations for TSFMA holders apply throughout the province.
Control and Planning
(Cite as: 57 FR 22570, *22600)
Silviculture credits for TSFMA holders are calculated by Quebec based on the execution costs of certain silviculture treatments.
Control and planning costs associated with silviculture treatments performed by TSFMA holders are not credited towards
stumpage fees under the TSFMAs. Therefore, to make the adjustment we divided the total cost incurred by TSFMA holders by the
total harvest under the TSFMAs to derive the per unit adjustment.
Fire Protection and Extinction
According to Quebec's Forest Act, TSFMA holders are required to prevent and extinguish forest fires within timber limits. In
order to fulfill this requirement, each TSFMA holder must belong to a forest protection agency. The government assumes 50
percent of the cost of fire protection and extinction while the forest protection agency assumes the other 50 percent. At
verification, we learned that certain private land owners (i.e., those owning 800 or more hectares) are also obligated by the
government to belong to the same forest protection agencies that TSFMA holders belong and to assume similar financial
obligations. Therefore, to make the appropriate adjustment, we divided the total amount of the cost of the fire protection and
extinction incurred by TSFMA holders through the forest protection agency by total harvest
(Cite as: 57 FR 22570, *22600)
under TSFMAs and subtracted from this figure the total amount of the cost of fire protection and extinction incurred by private
land owners divided by the total private forest harvest during the POI.
Insect and Disease Protection
TSFMA holders are also required to belong to an organization for the protection of the forest against insects and diseases
(SOPFIM). As with fire protection, the government assumes 50 percent of the cost. At verification, we learned that private land
owners belong to SOPFIM on a strictly voluntary basis. Therefore, we did not adjust what TSFMA holders paid by costs for private
forest owners. To calculate the adjustment we divided the total amount of the cost of the insect and disease protection incurred by
TSFMA holders through SOPFIM by the total harvest under TSFMAs.
Adjustments Claimed by Respondents but Not Allowed
Environmental Compliance
Respondents claim that environmental compliance generally increases costs for TSFMA holders because restrictions in cutting
require more territory to be
(Cite as: 57 FR 22570, *22600)
harvested to obtain the same number of trees than would be possible if harvesting were more indiscriminate. Work on more
territory requires more roads, bridges, and transportation costs. Respondents admit that there has been no systematic
quantification of these costs since environmental rules became stricter under the Forest Act.
Respondents claim the Department has received and verified detailed environmental compliance cost data provided by the
largest TSFMA holder in Quebec, showing the expenses directly attributable to complying with environmental standards imposed
on TSFMA holders under the Forest Act. In addition, Respondents claim the Department's verifiers received and reviewed
information explaining the environmental obligations imposed on TSFMA holders, contrasting the obligations imposed on TSFMA
holders with those imposed on harvesters operating in the private forests.
As noted in the Verification Report, Respondents calculated their reported cost for environmental compliance by multiplying the
per unit costs of a single company by the total harvest under TSFMAs. In checking the calculation for this company at
verification, the Department was unable to verify a major component of the company's reported cost for environmental
compliance, road costs. It also became clear at verification that the are certain environmental obligations, either at the provincial
or municipal level, associated with harvesting in private forests, which Respondents did not systematically
(Cite as: 57 FR 22570, *22600)
quantify across private forests province wide. Therefore, we did not make the claimed adjustment for environmental compliance.
Control of Utilization
The Coalition states that no adjustment should be made for "control of utilization" costs as was done in the Preliminary
Determination since these apparently are scaling costs. They further argue that there is no indication that the responsibilities of
non-TFSMA holders differ from those of TSFMA holders.
We agree with the Coalition. Respondents did not make clear in any of its questionnaire responses that its reported "control of
utilization" costs for TSFMA holders were in fact simply scaling costs. The Department discovered this fact at verification.
Respondents did not systematically quantify scaling costs for private forests nor did they quantify how scaling costs for TSFMA
holders differ from scaling costs for timber harvesters on private lands. Therefore, although we adjusted for this expense in the
Preliminary Determination, we are not making this adjustment in our final calculation.
Forest Camps
(Cite as: 57 FR 22570, *22600)
Respondents claim that an adjustment should be made to the provincial stumpage rate for forest camps in provincial forests.
Respondents claim there are no similar costs in private forests because they are close to population centers. As noted in the
Verification report, when collecting data on private forests for use in the parity technique, Quebec merely assumed there were no
logging camps built on private lands.
At verification, the Department saw no evidence that Quebec actually *22601
(Cite as: 57 FR 22570, *22601)
attempted to quantify the logging camp costs on private lands on a province wide basis. Furthermore, despite their claim that
logging camps do not exist on private forest land in the southern zones due to the close proximity of population centers,
Respondents report logging camp costs for provincial forests in exactly the same zones. Anecdotal evidence to the contrary, it is
clear that Respondents' absolute dismissal of private logging camp costs based on tariffing zone location is without merit.
Therefore, given their failure to provide the private logging camp cost needed for a cost differential calculation, we have made no
adjustment for logging camp costs to the administratively set stumpage rate.
Subsidy Calculation
We added the adjustments described above in the section entitled "Adjustments
(Cite as: 57 FR 22570, *22601)
to Noncompetitive Provincial Rate" to the administratively-set stumpage rate to obtain the total, per unit rate paid by TSFMA
holders harvesting softwood sawlogs. To calculate the benefit, we subtracted the administratively-set per unit rate from the
private per unit benchmark rate. We multiplied the differential between the benchmark rate and the administratively-set rate by
the total softwood sawlog harvest during the POI to obtain the aggregate benefit from the administratively-set stumpage program.
The calculation of the country-wide ad valorem subsidy rate is discussed in the "Country-Wide Rate Calculation" section of this
notice.
Ontario
According to the questionnaire responses verified by the Department, the Government of Ontario charges two rates for stumpage
harvested from provincial lands: the integrated rate and the nonintegrated rate. Both of these rates are administratively set.
Generally, the integrated rate is paid by pulp producers, and the nonintegrated rate is paid by lumber producers. The integrated
rate is charged to integrated licensees which, under Regulation 234 of the Crown Timber Act, are defined as companies that own
or operate a pulp mill. Pulp is manufactured either from whole logs or from the chips produced as a by-product of lumber.
(Cite as: 57 FR 22570, *22601)
However, if the stumpage harvested by an integrated licensee is destined for a sawmill, the nonintegrated rate is charged. The
nonintegrated rate is also charged to nonintegrated licensees (i.e., licensees which do not own or operate a pulpmill). Over 99
percent of the Crown softwood stumpage harvested in Ontario is paid for on the basis of one or the other of these rates.
The nonintegrated rate is lower than the integrated rate. In setting these rates, however, the Government of Ontario has not made
a distinction in physical characteristics (e.g., grade, species, or size) between the log charged the integrated rate and the log
charged the nonintegrated rate. A pulplog is simply defined as the log that enters a pulpmill, and a sawlog is defined as the log that
enters a sawmill. Because of technological advances that enable sawmills to obtain lumber from smaller diameter logs, which
comprise the overwhelming majority of the Ontario harvest, there is little difference in the timber consumed by pulpmills and
sawmills. Thus, the sole factor affecting the price that a licensee will pay is whether the log is processed in a pulpmill or in another
type of mill (e.g., a sawmill). Since the government provides stumpage to some companies (i.e., nonintegrated licensees, or, most
commonly, sawmills) at a price that is lower than the price the government charges to other companies (i.e., integrated licensees),
we determine that the Government of Ontario is providing stumpage to lumber producers at a preferential rate.
(Cite as: 57 FR 22570, *22601)
Having determined that stumpage is provided to a specific group of industries that includes pulp mills, we must examine whether
the higher integrated rate paid by pulp producers for stumpage is itself nonpreferential. The Government of Ontario provided
survey information on private prices for stumpage in Ontario. Although the survey information is not comprehensive, and is not
used by the Government of Ontario to establish stumpage rates, these private prices do provide us with an indication that the rate
paid by integrated licensees for pulp is nonpreferential. Comparing private stumpage prices from the survey with the provincial
integrated stumpage price, we have observed that the integrated rate is on average higher. Therefore, we determine that the
integrated rate is nonpreferential and have used it as the benchmark price.
The Coalition argues that the Department should make an upward adjustment to the integrated rate because pulpwood is an
inferior good. We have declined to make an adjustment for the reasons discussed above in the "General Calculation Issues" section
of this notice.
Adjustments
Respondents, for their part, argue that the Department must make an adjustment for all logs purchased at arm's length. We have
declined to make an adjustment for the reasons discussed in the "General Calculation Issues" section of this
(Cite as: 57 FR 22570, *22601)
notice.
The integrated and nonintegrated stumpage rates are a combination of Crown dues, area charges, and bonus charges. Crown dues
are the major portion of the integrated and nonintegrated stumpage rates and are administratively set every quarter. To calculate
the Crown dues rate for the POI, we took a simple average of the different quarterly Crown dues rates because the Government of
Ontario did not provide the appropriate volume information to calculate the weighted average. Different Crown dues apply for
integrated and nonintegrated companies, with the administratively-set base rate being adjusted according to pulp and paper and
lumber indices. Both the integrated and nonintegrated stumpage rates are double-indexed to make the rate especially sensitive to
price fluctuations in the indices. The base rate, however, was originally set to meet revenue goals of Ontario and bears no relation
to the market value of stumpage.
An area charge is a yearly charge based on the total area of a tenure arrangement. To calculate the area charge on the unharvested
and harvested area of all tenure arrangements for all tenure holders, we allocated the area charge paid during the POI to the total
volume of timber purchased by pulpmills and sawmills.
The bonus charge was calculated for integrated and nonintegrated companies from the Timber Scaling and Billing System. The
bonus charge varies with the
(Cite as: 57 FR 22570, *22601)
harvest in a given year, and is supposed to reflect the desirability of a tenure tract (e.g., accessibility).
It is not necessary to make any adjustments to the integrated and nonintegrated stumpage rates because licensees paying the
integrated rate and licensees paying the nonintegrated rate share the same obligations (such as road building and silviculture) on
their respective tenure arrangements.
Ontario collects information on stumpage through two systems: the Timber Scaling and Billing System (TSBS) and through mill
license returns. Ontario bills purchasers of stumpage through the TSBS. The TSBS is on the fiscal year and contains harvest
information on Crown land and the rates charged for stumpage. Mill license returns provide actual roundwood consumption by
mills and are on the calendar year.
*22602
(Cite as: 57 FR 22570, *22602)
Calculation of the Benefit
To calculate the benefit, Respondents argue that the Department should use mill license return data, which provide the amount of
timber used by Ontario sawmills, and then adjust that number for roundwood for which the integrated or a competitively-bid or
salvage rate has been paid, which would be provided from the TSBS. Ontario mill license return data are for the calendar year
1990, and not the POI. As such, the figure for the POI would have to be estimated.
(Cite as: 57 FR 22570, *22602)
Instead of using estimated figures to calculate the benefit, as Respondents suggest, the Department has used the actual figures for
stumpage purchased by sawmills at the nonintegrated rate during the POI. These figures were verified from the TSBS.
To calculate the benefit, we have deducted the per cubic meter nonintegrated stumpage rate from the per cubic meter integrated
stumpage rate and multiplied the difference by the volume of stumpage sold at the nonintegrated rate to sawmills. The calculation
of the country-wide ad valorem subsidy rate is discussed in the "Country-Wide Rate Calculation" section of this notice.
Alberta
The Alberta Forest Service provides stumpage under three types of tenure arrangements: (1) Forest Management Agreements
(FMAs); (2) Timber Quota Certificates (quotas); and (3) Commercial Timber Permits (CTPs). FMAs are provided to companies that
require a long-term tenure; as a result, FMAs last 20 years and are renewable. In addition to paying stumpage fees, or "Crown
dues," FMA holders are responsible for a number of in-kind services including construction and maintenance of roads,
reforestation of all areas harvested, and other forest management obligations required by the Forest Service, such as operational
planning and forest inventory. The Crown dues paid by FMA holders
(Cite as: 57 FR 22570, *22602)
are either administratively set by the Alberta Forest Service in its schedule of General Rates of Crown Dues, or they are negotiated
between the Forest Service and the FMA holder.
Quotas are also long-term tenure arrangements. Quota holders obtain the right to harvest a percentage of the annual allowable cut
established by the Forest Service for a particular forest management unit. Like FMA holders, quota holders are responsible for
road construction and maintenance, reforestation of all areas harvested, and certain other obligations. While some quotas are
sold by a competitive bid, all quota holders pay an administratively-set stumpage fee. Together, FMA and quota holders
accounted for approximately 94 percent of the softwood sawlog harvest on provincial forest lands in fiscal year 1990/91.
The third form of tenure arrangement, CTPs, provides for a fixed volume of timber to be harvested on a short-term basis, usually
for two to three years. The CTP holder pays a reforestation levy to the Alberta Forest Service, which then carries out the majority
of reforestation activities. The CTP holder is responsible, however, for the construction and maintenance of certain roads. While
some holders purchase CTPs through a competitive bid, other CTP holders pay an administratively-set stumpage fee.
For purposes of the Preliminary Determination, we compared the indexed, negotiated rate paid under pulplog FMAs to a
weighted-average rate for the
(Cite as: 57 FR 22570, *22602)
remaining tenure arrangements, which we had preliminarily determined were administratively set. Based on our verification and
on certain arguments presented in case and rebuttal briefs, we have revised our calculation methodology for purposes of this final
determination.
- FMAs
We confirmed at verification that under pulplog FMAs, prices charged for timber used in pulp production are higher than the
prices charged for timber used for other types of production. At verification, we reviewed documentation indicating that the
distinction between pulplogs and sawlogs relates exclusively to their ultimate mill destination, and not to differences in qualities
or other physical properties of the logs.
In the FMAs for pulplogs, the stumpage price for pulplogs is negotiated between the tenure holder and the Forest Service. We
confirmed at our verification of a pulplog FMA holder that the pulplog rate is, in fact, negotiated, and that the negotiated rate is
then indexed. Under these pulplog FMAs, there is a provision that the negotiated pulp price will be adjusted annually according to
a price published in Pulp & Paper Week, an independent trade journal.
The prices paid for stumpage other than pulplogs are the rate of Crown dues established in the schedule of General Rate of Crown
Dues. This stumpage rate is paid by sawlog FMA holders and by pulplog FMA holders, on those logs not
(Cite as: 57 FR 22570, *22602)
destined for pulpmills. The prices paid for both pulplogs and sawlogs under sawlog FMAs are also established by the schedule of
General Rates of Crown Dues. The rates established by the schedule are not indexed by any market price.
Respondents argue that the Department's verification results indicate that every clause in an FMA, including the sawlog rate, is
the result of a competitive negotiation. However, we note that the sawlog rate included in every FMA is set according to the
General Rates of Crown Dues and is not indexed. Further, at verification, we received no indication that the separate sawlog
provision, which is at the same rate in every FMA, is the subject of negotiation. For these reasons, we conclude that the price paid
for sawlogs in FMAs is administratively set and, therefore, does not represent a nonpreferential price.
Because the price paid by pulplog FMA holders for pulplogs is originally negotiated and subsequently indexed based on published
pulp and paper prices rather than set administratively, we determine that the pulplog price is nonpreferential and, therefore, can
be used as a benchmark for sawlog prices. Because no physical distinction is made by Alberta between pulplogs and sawlogs in
selling stumpage, we do not need to make any adjustments for differences in the grade, species, size, or quality of the timber.
For these reasons, we determine that stumpage is provided at preferential
(Cite as: 57 FR 22570, *22602)
rates to softwood lumber producers because the Government of Alberta provides softwood sawlogs under FMAs at a price that is
lower than the nonpreferential price the government charges to certain other FMA holders.
Quotas
No quota holder can access coniferous timber without having a coniferous timber license, the rates for which are administratively
set, plus an appraisal factor. At verification we determined that some quota holders receive their quotas through a competitive
bid, while other quotas were granted, for various reasons, on an administratively-set basis. Those quota holders who bid, pay a
one-time competitive bonus bid at the time of acquiring the quota, which is amortized over varying lengths of time.
We do not consider all of the quotas claimed by Alberta as competitive to be bona fide competitive bids. Alberta claims that all
quotas for which a bidding process was held are "competitive," including those sold originally as far back as 1966, or earlier, and
renewed in 1986 without additional payment. However, because Alberta provided information on the quantities *22603
(Cite as: 57 FR 22570, *22603)
sold and amounts bid only for those quotas auctioned in 1982 and after, we are unable to evaluate their claims regarding whether
the pre-1982 bids were actually competitive. Accordingly, for purposes of this final determination, we have not
(Cite as: 57 FR 22570, *22603)
considered the quotas sold before 1982 to be competitively sold and, therefore, non-preferential. Because we were unable to
evaluate the competitiveness of the quotas bid before 1982, we cannot reach the issue of whether or not quota sales conducted by
the Alberta Forest Service beginning in 1966 through 1982, and renewed in 1986 without additional payment, constitute bona fide
competitive bids.
At verification, we examined and reviewed several examples of competitive bids conducted for quotas. In addition, we received a
document listing, for quotas sold starting in 1982, the amounts bid and the annual allowable cut for which the bid was held. We
therefore accept Alberta's claim that at least those quotas bid in and after 1982 represent bona fide competitive bids, and are,
therefore, non-preferential.
In these circumstances, where a government provides a good at both an administratively-set price and a competitively-bid price,
we determine the administratively-set price is preferential to the extent that it is less than the competitively-bid price.
CTPs
Some CTP holders bid competitively for their tenure, while others receive their tenure on terms which are administratively-set. In
our Preliminary
(Cite as: 57 FR 22570, *22603)
Determination, we indicated that because we lacked the necessary information, we were unable to determine the extent to which
CTPs were competitively bid. Alberta had previously indicated, however, that a certain volume of CTPs have been granted on an
administratively-set basis. At verification, we examined and reviewed several examples of competitive bids conducted for CTPs.
As a result, we determine that certain CTPs in effect during the period of investigation were in fact competitively-bid, and
therefore, nonpreferential. In these circumstances, where a government provides a good at both an administratively-set price
and a competitively-bid price, we determine that the administratively-set price is preferential to the extent that it is less than the
competitively-bid price.
Calculation of the Benefit
Respondents contend that contrary to our Preliminary Determination, the pulplog FMA rate should not be used as a benchmark
rate against all other tenure arrangements because: (1) Significant forest management responsibilities are incurred by FMA
holders, as opposed to other tenures, thereby rendering an analysis based on only one element of the FMA invalid; (2) quotas and
CTPs cannot be considered administratively-set because they are allocated according to competitive bid in most instances; and
(3) in any case, CTPs, because they
(Cite as: 57 FR 22570, *22603)
are short-term tenures, should not be compared to FMAs at all.
Because we were able to gather sufficient information at verification, we have conducted a tenure-by-tenure analysis for the
purposes of the final determination. Because we could make comparisons within each tenure, with identical obligations being
incurred, no adjustments for differing obligations were necessary. Based on the comparisons detailed below, we determine that
stumpage is being provided to lumber producers at preferential rates.
To calculate the benefit for FMAs, we multiplied the difference between the negotiated stumpage dues paid on a cubic meter basis
by FMA holders who harvest pulplogs and the administratively-set per cubic meter sawlog rate by the volume of softwood
sawlogs harvested.
For quotas, based on the information provided at verification, we calculated the sum of the competitive quota bonus bids for
which we had sufficient information, and the per cubic meter stumpage dues paid by those competitive quota holders. We
allocated the bonus bids over the number of years for which we had information, and converted them to a per cubic meter
amount. From this total, we subtracted the per cubic meter stumpage dues paid by quota holders who pay only the
administratively-set rate for sawlogs. We then multiplied this difference by the softwood sawlog harvest volume for quota holders
who paid only the administratively-set stumpage rate to arrive at the final benefit for quotas.
(Cite as: 57 FR 22570, *22603)
For CTP holders, we subtracted an adjusted amount paid for administratively-set CTPs from the amount paid for competitively bid
CTPs. We multiplied this difference by the softwood sawlog volume harvested under the administratively-set CTPs to arrive at the
benefit. We then summed each of the individual benefits calculated for FMAs, quotas, and CTPs to arrive at a total benefit.
Respondents contend that the Department should base its calculation of the benefits on the amount of sawlogs going to sawmills,
rather than on the volume of the sawlog harvest. To support their position, they reiterate their explanation that "sawlog," as a
catch-all term, of necessity includes logs used for purposes other than the production of lumber in a sawmill. They propose a
methodology by which the Department could estimate the volume of sawlogs entering sawmills.
We cannot accept Respondents' proposed methodology to estimate the volume of sawlogs entering sawmills. It is based on the use
of two variables, a nominal volume to actual volume conversion factor, and a logs to lumber recovery rate. The methodology
assumes that the nominal to actual recovery factor calculated for 2x6s is applicable across all the dimensions of lumber.
However, Respondents did not justify why the 2x6 nominal to actual recovery factor value should be considered as
representative. Because Alberta did not provide an adequate explanation for its use of the 2x6 value, and because the Department
(Cite as: 57 FR 22570, *22603)
has no other information on the record regarding this issue, we did not make their proposed adjustment.
Although Respondents argued that in calculating the subsidy rate, the Department should increase the figure it used for
coproducts/by-products in the Preliminary Determination to account for firms which did not participate in its survey. Because
attributing a value to coproducts according to Respondents' methodology would assume that coproducts are produced and sold
by the non- participating companies in the same ratios as those that responded to the survey, and because the values reported in
the survey were on an actual dollar amount rather than on a per cubic meter basis, we did not adjust the verified value of
coproducts we used in the Preliminary Determination. The calculation of the country-wide ad valorem subsidy rate is discussed in
the "Country-Wide Rate Calculation" section below.
Manitoba, Saskatchewan, the Northwest Territories, and the Yukon Territory
In the Preliminary Determination, the Department noted that, although it considers stumpage in Manitoba, Saskatchewan, and the
Territories to be specifically provided, it did not reach the issue of preferentiality because the softwood lumber export volumes
from these jurisdictions to the United States are so small that, even when the highest potential subsidy rates found
(Cite as: 57 FR 22570, *22603)
in the record are applied to them, the effect on the country-wide rate would be de minimis.
*22604
(Cite as: 57 FR 22570, *22604)
We received a comment from Respondents indicating that they agreed with the Department's characterization of the scale and
effect of potential subsidies from these jurisdictions. Respondents then concluded that the continued inclusion of these
jurisdictions clearly served no purpose, and requested that they be excluded from the investigation.
The Coalition contended that the Department's treatment of these jurisdictions in the Preliminary Determination serves to
encourage foreign governments to "subsidize a little a lot." (See Coalition Brief at II-62.) In addition, the Coalition contends that
the Department does not have the authority to ignore subsidies, and that the Department's action was contrary to its own
Antidumping and Countervailing Duties; De Minimis Dumping Margins and De Minimis Subsidies, 52 FR 30660 (August 17,
1987), which indicates that the countervailing duty de minimis rule applies only to aggregate net subsidies, not to those
programs that are examined in the calculation of the aggregate net subsidy. (See Coalition Brief at II-60-61.) Finally, the Coalition
states that if the Department were to continue to disregard the subsidies in these jurisdictions, it should at a minimum remove the
value of lumber and co- products for these jurisdictions from the denominator.
The Department is investigating the government provision of stumpage in
(Cite as: 57 FR 22570, *22604)
Canada. Our investigation covers exports of certain softwood lumber products from Canada. However, stumpage is
provided by different jurisdictions within Canada. The four largest jurisdictions, Alberta, British Columbia, Ontario, and
Quebec account for over 98 percent of exports and over 98 percent of total softwood lumber shipments in Canada. Thus, an
analysis of these four provinces covers virtually all exports to the United States.
A full investigation of the additional programs in Manitoba, Saskatchewan, and the Territories, which would have provided for
only marginal incremental coverage, is unnecessary and would have resulted in an inefficient use of scarce resources at the
expense of more significant aspects of this investigation. However, these provinces and territories cannot be excluded from the
investigation simply because they are so small. The fact that their production of softwood lumber products is small relative to that
of the other provinces simply means that their impact on the country-wide rate is insignificant, it does not mean that their
production and exports are not, or should not be, covered by the investigation.
Although the Coalition noted that the Department referred to the de minimis provision in its regulations for the Preliminary
Determination, we are not relying on the de minimis rule in the final determination. Because the calculation we conducted at the
Preliminary Determination demonstrated that had an exhaustive preferentiality analysis been performed, the resulting benefit,
(Cite as: 57 FR 22570, *22604)
using even the most adverse assumptions, would still be insignificant when compared to the total benefit calculated for the
remaining programs. Moreover, because these jurisdictions cooperated in the investigation, there is no basis for the Department
to apply adverse assumptions to them.
We therefore applied a zero rate in our calculation for these jurisdictions. However, because this investigation was on certain
softwood lumber products from Canada (with the exception of the Maritime Provinces), and because Manitoba,
Saskatchewan, and the Territories produce and export to the United States certain softwood lumber products, their export values
of softwood lumber products, have been included in our calculation of the country-wide rate.
Calculation of the Country-Wide Rate for Stumpage Programs
To calculate the country-wide rate, we divided the benefit for each province's program by the value of its lumber shipments plus
the value of all by-product shipments produced during the lumber production process. We weight averaged each rate by the
province's share of exports to the United States of the subject merchandise to calculate a rate of 2.91 percent ad valorem.
Respondents argue that the Department, when calculating the country-wide rate, must weight the various provincial rates by
lumber production. Further, Respondents argue that weighting by a province's percentage of exports to the