[Federal Register: April 4, 1996 (Volume 61, Number 66)] [Notices] [Page 15041-15044] From the Federal Register Online via GPO Access [wais.access.gpo.gov] ----------------------------------------------------------------------- DEPARTMENT OF COMMERCE [C-122-825] Notice of Initiation of Countervailing Duty Investigation: Certain Laminated Hardwood Flooring from Canada AGENCY: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: April 4, 1996. FOR FURTHER INFORMATION CONTACT: Sue Strumbel or David Boyland, Office of Countervailing Duty Investigations, U.S. Department of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W., Washington, DC 20230; telephone [[Page 15042]] (202) 482-1442, (202) 482-4198, respectively. Initiation of Investigation The Applicable Statute Unless otherwise indicated, all citations to the statute are references to the provisions of the Tariff Act of 1930, as amended by the Uruguay Round Agreements Act effective January 1, 1995 (the Act). The Petition On March 7, 1996, the Department of Commerce (the Department) received a petition filed from the Ad Hoc Committee on Laminated Hardwood Trailer Flooring Imports (the petitioners). The Ad Hoc Committee is made up of five U.S. producers of laminated hardwood flooring (LHF): Anderson-Tully, Havco Wood Products, Inc., Industrial Hardwood Products Inc. (IHP), Lewisohn Sales Company Inc., and Cloud Corporation/Cloud Oak Corporation. On March 15, March 22, and March 26, 1996, petitioners amended the petition by providing additional information, as well as revising the manner in which certain information in the petition was presented to the Department. In accordance with section 701(a) of the Act, petitioners allege that manufacturers, producers, or exporters of the subject merchandise in Canada receive countervailable subsidies. The petitioners have standing to file the petition because they are interested parties, as defined under section 771(9)(C) of the Act. On March 21 and 22, 1996, the Department held consultations with representatives of the Government of Canada (GOC) and the Government of Quebec (GOQ) pursuant to 702(b)(4)(ii) (see March 26, 1996 memos to the file regarding these consultations). On March 26, 1996, the GOC and the GOQ submitted certain information with respect to certain programs alleged in the petition. Determination of Industry Support for the Petition Section 702(c)(4)(A) of the Act requires the Department to determine, prior to the initiation of an investigation, that a minimum percentage of the domestic industry supports a countervailing duty petition. A petition meets these minimum requirements if the domestic producers or workers who support the petition account for (1) at least 25 percent of the total production of the domestic like product; and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition. The Department has been notified that two domestic producers of LHF oppose the petition. A review of the production data provided in the petition and other information readily available to the Department indicates that the petitioner accounts for more than 50 percent of the total production of the domestic like products thus meeting the standard of 702(c)(4)(A) and requiring no further action by the Department pursuant to 702(c)(4)(D). Accordingly, the Department determines that this petition is supported by the domestic industry. Injury Test Because Canada is a ``Subsidies Agreement Country'' within the meaning of section 701(b) of the Act, Title VII of the Act applies to this investigation. Accordingly, the ITC must determine whether imports of the subject merchandise from Canada materially injure, or threaten material injury to, a U.S. industry. Scope of the Investigation The scope of this investigation consists of certain laminated hardwood flooring which is made of oak, maple or other hardwood lumber. Laminated hardwood flooring is customized for specific dimensions, but generally ranges in size from 8' x 48'' x 1'' to 8' x 6'' x 57'' x 1\1/2\'' for trailer flooring, and to 8' x 16'' x 1(\1/ 8\)'' to 8' x 26' x 1(\1/2\)'' for trailer flooring and van and truck bodies, respectively. The merchandise under investigation is currently classified, in addition to various other hardwood products, under subheading 4421.90.98.40 and 9905.44.50.15 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and Customs purposes, our written description of the scope of this proceeding is dispositive. Allegation of Subsidies Section 702(b) of the Act requires the Department to initiate a countervailing duty proceeding whenever an interested party files a petition, on behalf of an industry, that (1) alleges the elements necessary for an imposition of a duty under section 701(a), and (2) is accompanied by information reasonably available to petitioners supporting the allegations. Initiation of Countervailing Duty Investigations The Department has examined the petition on LHF from Canada and found that it complies with the requirements of section 702(b) of the Act. Therefore, in accordance with section 702(b) of the Act, we are initiating a countervailing duty investigation to determine whether manufacturers, producers, or exporters of LHF from Canada receive subsidies. We are including in our investigation the following programs alleged in the petition to have provided subsidies to producers of the subject merchandise in Canada: 1. Capital Gains Exemptions 2. Investment Tax Credits (ITCs) 3. Export Development Corporation (EDC) 4. Performance Security Services through EDC 5. Program for Export Market Development (PEMD) 6. Venture Loans Through the Business Development Bank of Canada (BDBC) 7. Working Capital for Growth from BDBC 8. Programs Provided by the Industrial Development Corporation (SDI) <SUP>1 \1\ The Department is not including in the investigation other SDI programs. Article 7 Assistance Export Assistance Program Business Investment Assistance Program Business Financing Program Research and Innovation Activities Program 9. Export Promotion Assistance Program (APEX) 10. St. Lawrence River Environmental Technology Development Program 11. Industrial Research Assistance Program (IRAP) 12. Canada-Quebec Subsidiary Agreement on the Economic Development of Quebec 13. Private Forest Development Program (PFDP) 14. Quebec Stumpage Program The Department has reviewed information submitted by the GOQ which has raised a question whether Leclerc is a tenure holder; i.e., whether it received benefits under this program. Therefore, the Department has included this program in its investigation to investigate use of this program. Petitioners have argued that Nilus Leclerc Inc. (Leclerc) ``became partners with the government * * * with the sole objective of taking over the U.S. [LHF] market'' and that all programs provided to Leclerc should be considered specific because they were given pursuant to ``an overall endeavor that gave Leclerc special treatment.'' However, petitioners were unable to provide any evidence that the GOC or [[Page 15043]] the GOQ have provided any ``special treatment'' to Leclerc. Accordingly, the Department did not consider petitioners' ``special specificity'' argument when determining whether a program should be included in the investigation. We are not including in our investigation the following programs alleged to be benefiting producers of the subject merchandise in Canada: National Programs 1. Canadian Forest Services Research Subsidies The Canadian Forest Service (CFS) maintains a series of programs that support basic research and development in forestry. Petitioners have provided no information to support the allegation that LHF producers would conduct research under these programs. Therefore, we are not including this program in our investigation. 2. Cooperative Industrial and Market Development Partnership (CIMDP) The CIMDP provides information concerning export enhancement, export market penetration, and productivity enhancement to members of the British Columbia (BC) Wood Specialties Group, an association of BC companies involved in secondary wood manufacturing. Petitioners have provided no information to support the allegation that any producer of subject merchandise is eligible to receive benefits under this program. The Canadian producers of LHF identified in the petition are located in Quebec and Ontario. Because the Canadian producers of LHF identified by the petitioners are not located in BC, and no BC producer of LHF has been identified, we are not including this program in our investigation. 3. Term Loans Through BDBC Small and medium-sized businesses are eligible to receive BDBC term loans for the purchase of land, buildings, equipment, major plant overhauls, working capital, refinancing, and changes of ownership. Because the amortization of BDBC term loans is apparently flexible, petitioners have argued that the program provides a benefit. Because petitioners have provided no basis to believe that this program is specific pursuant to section 771(5)(A), either as a domestic or export subsidy, we are not including this program in our investigation. 4. Venture Capital Division of BDBC Under this program BDBC provides small and medium-sized companies with equity financing in the form of straight equity, options, warrants, or convertible or other forms of debentures. Because petitioners have provided no basis to believe that this program is specific pursuant to section 771(5)(A), either as a domestic or export subsidy, we are not including this program in our investigation. Quebec Provincial Programs 5. Industrial Feasibility Study Assistance Program Under this program the GOQ provides financial assistance to cover up to 50 percent of the eligible expenditures for feasibility studies of industrial projects to be carried out in Quebec. Petitioners believe that Leclerc may have received benefits under this program in order to develop its LHF business. Because petitioners have provided no basis to believe that this program is specific pursuant to section 771(5)(A), either as a domestic or export subsidy, we are not including this program in our investigation. 6. Development Assistance Program Under SDI According to petitioners, SDI provides venture capital for up to 90 percent of eligible expenditures which is repayable through royalties on sales or minority interest in the capital stock of the company. Petitioners have not alleged that Leclerc was unequityworthy or that any financing provided was preferential. Therefore, we are not including this program in our investigation. 7. Quebec Business Investment Companies Act administered by SDI The objective of the Business Investment Companies Act is to promote better capitalization of Quebec companies and to encourage investment by providing tax benefits to shareholders in special corporations which invest in Quebec companies. Although it is not clear, petitioners may view the benefit under this program to be an equity infusion into Leclerc which presumably would not have taken place absent the above-referenced tax benefits. Alternatively, petitioners may believe that Leclerc's financing costs are reduced pursuant to the tax deduction. Because petitioners have provided no basis to believe that this program is specific pursuant to section 771(5)(A), either as a domestic or export subsidy, we are not including this program in our investigation. 8. Financial Assistance for Research, Formation, and Improvement of Recycling Industry Under this program, the Quebec Ministry of Environment provides grants to the recycling industry in Quebec. Because petitioners have provided insufficient information to support the allegation that Leclerc is also part of the Quebec recycling industry, and is therefore eligible to participate in this program, we are not including this program in our investigation. 9. Preferential Rates under Hydro-Quebec Risk and Profit Sharing Under the Risk and Profit Sharing program, the provincially-owned power company, Hydro-Quebec, signs long-term contracts with its industrial customers for the provision of electricity. A portion of the rate to be charged under these contracts is based either on the price of the customer's products or the company's profit. Industrial customers which meet several criteria (e.g., at least a five megawatt power requirement and energy costs which represent 15 percent or more of production costs) are eligible to participate in the program. Because petitioners have not provided information which is sufficient to support the allegation that Leclerc would be eligible for this program, we are not including this program in our investigation. Ontario Provincial Program Ontario Stumpage 10. Petitioners have alleged that Leclerc may benefit from Ontario stumpage. Because petitioners have not provided either a benchmark stumpage rate or the public stumpage rate charged by the Government of Ontario, we are not including this program in our investigation. Creditworthiness Petitioners assert that the financial position of Leclerc was such that it was uncreditworthy when it allegedly obtained a ``large and speculative'' amount of government-sponsored financing. Petitioners indicate that they have provided the information which is reasonably available to them showing that Leclerc ``did not possess intrinsic worth'' to avail itself of such large amounts of capital. The Department does not consider the creditworthiness of a firm absent a specific allegation by the petitioner which is supported by information [[Page 15044]] establishing a reasonable basis to believe or suspect that the firm is uncreditworthy. While the information provided by petitioners does raise certain doubts as to Leclerc's ability to attract such financing, the financial information regarding Leclerc is incomplete. Therefore, at this time, the Department does not have a reasonable basis to believe or suspect that Leclerc is uncreditworthy. Critical Circumstances The petition contains an allegation that there is a reasonable basis to believe that critical circumstances exist with respect to imports of subject merchandise. Section 703(e)(1) of the Act provides that the Department will determine that there is a reasonable basis to believe or suspect that critical circumstances exist if: (A) The alleged countervailable subsidy is inconsistent with the Subsidies Agreement, and (B) There have been massive imports of the subject merchandise over a relatively short period of time. The petition contains information that satisfies these criteria. First, in accordance with section 771(5)(A)(B) of the Act, petitioners have alleged that several programs are export subsidies and, therefore, inconsistent with the Subsidies Agreement. With respect to the second statutory criterion, whether imports of the subject merchandise have been massive over a relatively short period of time, petitioners note that there has been significant import growth in recent years. Based on the above, we find a reasonable basis to believe or suspect that critical circumstances exist and will investigate this matter further. Distribution of Copies of the Petition In accordance with section 702(b)(4)(A)(i) of the Act, copies of the public version of the petition have been provided to representatives of GOC. We will attempt to provide copies of the public version of the petition to all the exporters named in the petition. ITC Notification Pursuant to section 702(d) of the Act, we have notified the ITC of these initiations. Preliminary Determination by the ITC The ITC will determine by April 21, 1996, whether there is a reasonable indication that an industry in the United States is being materially injured, or is threatened with material injury, by reason of imports from Canada of LHF. Any ITC determination which is negative will result in the investigation being terminated; otherwise, the investigation will proceed according to statutory and regulatory time limits. If the ITC determines that an industry in the United States is being materially injured, or is threatened with material injury, the Department will issue its preliminary determination in this investigation on May 31, 1996. This notice is published pursuant to 702(c)(2) of the Act. Dated: March 27, 1996. Paul L. Joffe, Deputy Assistant Secretary for Import Administration. [FR Doc. 96-8218 Filed 4-3-96; 8:45 am] BILLING CODE 3510-DS-P