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Code · REGISTER · 2005-06-07 · Import Administration, International Trade Administration, Department of Commerce · Notices

Notices. Notice of 12-month petition finding

63,045 words·~287 min read·/register/2005/06/07/05-11210·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 3410-16-P DEPARTMENT OF COMMERCE International Trade Administration [A-122-838] Notice of Preliminary Results of Antidumping Duty Administrative Review and Partial Rescission: Certain Softwood Lumber Products From Canada AGENCY: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: June 7, 2005. SUMMARY: The Department of Commerce (the Department) is conducting an administrative review of the antidumping duty order on Certain Softwood Lumber Products from Canada for the period May 1, 2003, to April 30, 2004 (the POR).
We preliminarily determine that sales of subject merchandise made by Abitibi-Consolidated Inc. (Abitibi), Buchanan Lumber Sales Inc. (Buchanan), Canfor Corporation (Canfor), Tembec Inc. (Tembec), Tolko Industries Ltd. (Tolko), Weldwood of Canada Limited (Weldwood), West Fraser Mills Ltd. (West Fraser), and Weyerhaeuser Company (Weyerhaeuser), have been made below normal value. In addition, based on the preliminary results for these respondents selected for individual review, we have preliminarily determined a weighted-average margin for those companies that requested, but were not selected for, individual review.
If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection
(CBP)to assess antidumping duties on appropriate entries based on the difference between the export price and constructed export price, and the normal value. Furthermore, requests for review of the antidumping order for the following thirteen companies were withdrawn: Age Cedar Products, Anderson Wholesale, Inc., Bay Forest Products Ltd., Coast Forest & Lumber Assoc., Coast Lumber, Inc., Duluth Timber Company, Les Produits Forestiers Latierre, North Pacific, Usine Sartigan Inc., Council of Forest Industries, Specialites G.D.S. Inc., BC Veneer Products Ltd., and Edge Grain Forest Products. Because the withdrawal requests were timely and there were no other requests for review of the companies, we are rescinding the review for these companies. See 19 CFR 351.213(d)(i). Interested parties are invited to comment on these preliminary results and partial rescission. FOR FURTHER INFORMATION CONTACT: Daniel O'Brien or Constance Handley, AD/CVD Operations, Office 1, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230; telephone:
(202)482-1376 or
(202)482-0631, respectively. SUPPLEMENTARY INFORMATION: Background On May 3, 2004, the Department published a notice of opportunity to request an administrative review of this order. *See Notice of Opportunity to Request Administrative Review of Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation* , 69 FR 24117, (May 3, 2004). On May 28, 2004, in accordance with section 751(a) of the Tariff Act of 1930 (the Act) and 19 CFR 351.213(b), the Coalition for Fair Lumber Imports (the Coalition), a domestic interested party in this case, requested a review of producers/exporters of certain softwood lumber products. Also, between May 3, and June 2, 2004, Canadian producers requested a review on their own behalf or had a review of their company requested by a U.S. importer. On June 30, 2004, the Department published a notice of initiation of administrative review of the antidumping duty order on certain softwood lumber products from Canada, covering the POR. *See Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part* , 69 FR 39409 (June 30, 2004).1 1 1 This notice was further amended. See Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 69 FR 45010 (July 28, 2004); see also Notice of Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part, 69 FR 52857 (August 30, 2004). The Department received requests for review from more than 400 companies. Accordingly, in July 2004, in advance of issuing antidumping questionnaires, the Department issued to all companies pursuing an administrative review, a letter requesting total quantity and value of subject merchandise exported to the United States during the POR. Companies were required to submit their responses to the Department by July 22, 2004. In addition, we received comments from interested parties on the respondent selection process, which included proposed methodologies. Upon consideration of the information received with respect to respondent selection, on August 23, 2004, the Department selected as mandatory respondents the eight largest exporters/producers of subject merchandise during the POR: Abitibi, Buchanan, Canfor, Tembec, Tolko, Weldwood, West Fraser, and Weyerhaeuser. *See Memorandum from James Kemp, International Trade Compliance Analyst, to Jeffrey May, Deputy Assistant Secretary, regarding Selection of Respondents* (August 23, 2004) *(Selection of Respondents Memorandum). See also* *Selection of Respondents* section below. On August 24, 2004, the Department issued sections A, B, C, D, and E of the antidumping duty questionnaire to the selected respondents. The respondents submitted their initial responses to the antidumping questionnaire from September through December of 2004. After analyzing these responses, we issued supplemental questionnaires to the respondents to clarify or correct the initial questionnaire responses. We received timely responses to these questionnaires. Partial Rescission On July 22, 2004, Specialites G.D.S. Inc. withdrew its request for administrative review and on September 9, 2004, BC Veneer Products Ltd., and Edge Grain Forest Products withdrew their requests for administrative review of the antidumping duty order. On July 7, 2004, the Coalition, with respect to Age Cedar Products, Anderson Wholesale, Inc., Bay Forest Products Ltd., Coast Forest & Lumber Assoc., Coast Lumber, Inc., Duluth Timber Company, Les Produits Forestiers Latierre, North Pacific, Usine Sartigan Inc., and Council of Forest Industries, also withdrew its request for administrative reviews of the antidumping duty order. Because the requests were timely filed, *i.e.* , within 90 days of publication of the Initiation Notice, and because there were no other requests for review of the above-mentioned companies, we are rescinding the review with respect these companies in accordance with 19 CFR 351.213(d)(1). The Coalition also withdrew its request with regard to Buchanan Distribution Inc., Les Produits Forestiers Temrex, and Usine St. Alphonse, Inc. Les Produits Forestiers Temrex Usine St. Alphonse, Inc. is, in fact, a single entity, although it appeared as two entities in the June 30, 2004, initiation notice pursuant to the Coalition's request. Buchanan Distribution Inc. and Les Produits Forestiers Temrex Usine St. Alphonse, Inc. are, respectively, affiliated and collapsed with Buchanan and Tembec, and, therefore they continue to be covered by the review. Scope of the Order The products covered by this order are softwood lumber, flooring and siding (softwood lumber products). Softwood lumber products include all products classified under headings 4407.1000, 4409.1010, 4409.1090, and 4409.1020, respectively, of the Harmonized Tariff Schedule of the United States (HTSUS), and any softwood lumber, flooring and siding described below. These softwood lumber products include:
(1)coniferous wood, sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or finger-jointed, of a thickness exceeding six millimeters;
(2)coniferous wood siding (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed;-2
(3)other coniferous wood (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces (other than wood moldings and wood dowel rods) whether or not planed, sanded or finger-jointed; and
(4)coniferous wood flooring (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise under review is dispositive. Softwood lumber products excluded from the scope: • trusses and truss kits, properly classified under HTSUS 4418.90 • I-joist beams • assembled box spring frames • pallets and pallet kits, properly classified under HTSUS 4415.20 • edge-glued wood, properly classified under HTSUS 4421.90.97.40 (formerly HTSUS 4421.90.98.40). • properly classified complete door frames. • properly classified complete window frames • properly classified furniture Softwood lumber products excluded from the scope only if they meet certain requirements: • *Stringers* (pallet components used for runners): if they have at least two notches on the side, positioned at equal distance from the center, to properly accommodate forklift blades, properly classified under HTSUS 4421.90.97.40 (formerly HTSUS 4421.90.98.40). • *Box-spring frame kits* : if they contain the following wooden pieces—two side rails, two end (or top) rails and varying numbers of slats. The side rails and the end rails should be radius-cut at both ends. The kits should be individually packaged, they should contain the exact number of wooden components needed to make a particular box-spring frame, with no further processing required. None of the components exceeds 1” in actual thickness or 83” in length. • *Radius-cut box-spring-frame components* , not exceeding 1” in actual thickness or 83” in length, ready for assembly without further processing. The radius cuts must be present on both ends of the boards and must be substantial cuts so as to completely round one corner. • *Fence pickets* requiring no further processing and properly classified under HTSUS 4421.90.70, 1” or less in actual thickness, up to 8” wide, 6' or less in length, and have finials or decorative cuttings that clearly identify them as fence pickets. In the case of dog-eared fence pickets, the corners of the boards should be cut off so as to remove pieces of wood in the shape of isosceles right angle triangles with sides measuring 3/4 inch or more. • *U.S. origin lumber* shipped to Canada for minor processing and imported into the United States, is excluded from the scope of this order if the following conditions are met: 1) the processing occurring in Canada is limited to kiln-drying, planing to create smooth-to-size board, and sanding; and 2) if the importer establishes to CBP's satisfaction that the lumber is of U.S. origin. • *Softwood lumber products contained in single family home packages or kits* , 2 regardless of tariff classification, are excluded from the scope of the orders if the following criteria are met: 2 To ensure administrability, we clarified the language of this exclusion to require an importer certification and to permit single or multiple entries on multiple days. We also instructed importers to retain and make available for inspection specific documentation in support of each entry.
(A)The imported home package or kit constitutes a full package of the number of wooden pieces specified in the plan, design or blueprint necessary to produce a home of at least 700 square feet produced to a specified plan, design or blueprint;
(B)The package or kit must contain all necessary internal and external doors and windows, nails, screws, glue, subfloor, sheathing, beams, posts, connectors and if included in purchase contract decking, trim, drywall and roof shingles specified in the plan, design or blueprint;
(C)Prior to importation, the package or kit must be sold to a retailer of complete home packages or kits pursuant to a valid purchase contract referencing the particular home design plan or blueprint, and signed by a customer not affiliated with the importer;
(D)The whole package must be imported under a single consolidated entry when permitted by CBP, whether or not on a single or multiple trucks, rail cars or other vehicles, which shall be on the same day except when the home is over 2,000 square feet;
(E)The following documentation must be included with the entry documents: • a copy of the appropriate home design, plan, or blueprint matching the entry; • a purchase contract from a retailer of home kits or packages signed by a customer not affiliated with the importer; • a listing of inventory of all parts of the package or kit being entered that conforms to the home design package being entered; • in the case of multiple shipments on the same contract, all items listed immediately above which are included in the present shipment shall be identified as well. We have determined that the excluded products listed above are outside the scope of this order provided the specified conditions are met. Lumber products that CBP may classify as stringers, radius cut box-spring-frame components, and fence pickets, not conforming to the above requirements, as well as truss components, pallet components, and door and window frame parts, are covered under the scope of this order and may be classified under HTSUS subheadings 4418.90.40.90, 4421.90.70.40, and 4421.90.98.40. Due to changes in the 2002 HTSUS whereby subheading 4418.90.40.90 and 4421.90.98.40 were changed to 4418.90.45.90 and 4421.90.97.40, respectively, we are adding these subheadings as well. In addition, this scope language has been further clarified to now specify that all softwood lumber products entered from Canada claiming non-subject status based on U.S. country of origin will be treated as non-subject U.S.-origin merchandise under the countervailing duty order, provided that these softwood lumber products meet the following condition: upon entry, the importer, exporter, Canadian processor and/or original U.S. producer establish to CBP's satisfaction that the softwood lumber entered and documented as U.S.-origin softwood lumber was first produced in the United States as a lumber product satisfying the physical parameters of the softwood lumber scope. 3 The presumption of non-subject status can, however, be rebutted by evidence demonstrating that the merchandise was substantially transformed in Canada. 3 *See* the scope clarification message (3034202), dated February 3, 2003, to CBP, regarding treatment of U.S.-origin lumber on file in the Central Records Unit, Room B-099 of the main Commerce Building. Selection of Respondents Section 777A(c)(1) of the Act directs the Department to calculate individual dumping margins for each known exporter and producer of the subject merchandise. However, section 777A(c)(2) of the Act gives the Department the discretion, when faced with a large number of exporters/producers, to limit its examination to a reasonable number of such companies if it is not practicable to examine all companies. Where it is not practicable to examine all known exporters/producers of subject merchandise, this provision permits the Department to review either:
(1)a sample of exporters, producers, or types of products that is statistically valid based on the information available at the time of selection, or
(2)exporters and producers accounting for the largest volume of the subject merchandise that can reasonably be examined. Responses to the Department's information request were received July 13 through July 27, 2004. After consideration of the data submitted, and the complexities unique to this proceeding, as well as the resources available to the Department, we determined that it was not practicable in this review to examine all known exporters/producers of subject merchandise. We found that given our resources, we would be able to review the eight exporters/producers with the greatest export volume, as identified above. For a more detailed discussion of respondent selection in this review, *See Selection of Respondents Memorandum* . We received a written request from one company 4 to be included as a voluntary respondent in this review. 4 In this proceeding, we received a written request from Riverside Forest Products (June 24, 2004) to be a voluntary respondent. As all the mandatory respondents participated, we were unable to accommodate this request. Collapsing Determinations The Department's regulations provide for the treatment of affiliated producers as a single entity where:
(1)those producers have production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities; and
(2)the Department concludes that there is a significant potential for the manipulation of price or production. 5 In identifying a significant potential for the manipulation of price or production, the Department may consider such factors as:
(i)the level of common ownership;
(ii)the extent to which managerial employees or board members of one firm sit on the board of directors of an affiliated firm; and
(iii)whether operations are intertwined, such as through the sharing of sales information, involvement in production and pricing decisions, the sharing of facilities or employees, or significant transactions between the affiliated producers. 6 These factors are illustrative, and not exhaustive. 5 See 19 CFR 351.401(f)(1). 6 See 19 CFR 351.401(f)(2). Canfor and Slocan merged operations on April 1, 2004. On December 20, 2004, the Department determined that the post-merger Canfor is the successor-in-interest to both the pre-merger Canfor and Slocan. *See Notice of Final Results of Antidumping Duty Administrative Review and Notice of Final Results of Antidumping Duty Changed Circumstances Review: Certain Softwood Lumber Products from Canada* , 67 FR 75921 (December 20, 2004). For the purposes of these preliminary results, we have calculated three separate margins: one each for Canfor and Slocan individually for the eleven months of the POR prior to April 1, 2004, and a third margin for the post-merger Canfor for April 2004. The resulting cash deposit rate is a weighted average of the three calculated margins. In addition, Canfor purchased Daaquam Lumber Inc. (Daaquam) on May 27, 2003. Daaquam functions as an independent subsidiary within Canfor Corporation. Canfor reported all sales of lumber produced by the former Daaquam facilities during the POR. For purposes of this review, we considered only those sales made after the date of purchase. Finally, Canfor reported the sales of its affiliates Lakeland Mills Ltd. and The Pas Lumber Company Ltd. 7 7 Canfor continues to be collapsed with its affiliate Skeena Cellulose. However, Canfor was excused from reporting sales of its affiliates because of their low volume. We note that in the last review Canfor was collapsed with its affiliates Howe Sound Pulp and Paper Limited Partnership (Howe Sound). In the current review, Canfor reported that Howe Sound had sold all of its lumber-producing equipment. Therefore, we have removed Howe Sound from the Canfor Group. In addition, respondents reported, in their questionnaire responses, the sales of certain affiliated companies. Abitibi reported the sales of subject merchandise produced by its affiliates Produits Forestiers Petit Paris, Inc., Produits Forestiers La Tuque, Inc., and Societe en Commandite Scierie Opticiwan. Buchanan reported the sales of its affiliates Atikokan Forest Products Ltd., Long Lake Forest Products Inc., Nakina Forest Products Limited, Buchanan Distribution Inc., Buchanan Forest Products Ltd., Great West Timber Ltd., Dubreuil Forest Products Ltd., Northern Sawmills Inc., and McKenzie Forest Products Inc. Buchanan was excused from reporting the sales of the subject merchandise produced by its affiliate, Solid Wood Products Inc. Tembec reported the sales of Les Industries Davidson, Inc. 8 as well as Tembec affiliates Marks Lumber Ltd., Temrex Limited Partnership, and 791615 Ontario Limited (Excel Forest Products). Tolko was excused from reporting the sales of Gilbert Smith Forest Products, Ltd., although (Gilbert Smith) continues to be collapsed with Tolko. 9 Weldwood reported the sales of its affiliated reseller Weldwood Sales Incorporated
(WSI)in its questionnaire response. In addition, Weldwood reported sales from joint venture mills that it operates. These operations are Babine Forest Products Company, Decker Lake Forest Products Limited, and Houston Forest Products Company. Weldwood also reported sales of subject merchandise from Sunpine Forest Products Limited, a subsidiary of Sunpine Incorporated, which is a subsidiary of Weldwood. West Fraser reported the sales of its affiliates West Fraser Forest Products Inc.
(WFFP)and Seehta Forest Products Ltd. Weyerhaeuser reported the sales of its affiliate Weyerhaeuser Saskatchewan Ltd. Upon review of the questionnaire responses, we determined that the affiliates discussed above were properly collapsed with the respective respondent companies for the purposes of this review. 8 Tembec purchased the shares of Davidson on November 5, 2001, and as of December 27, 2003, Davidson became a division of Tembec. The Davidson Division's financial results have been fully consolidated in Tembec's financial statements for the entirety of the POR. Therefore, we are no longer listing Davidson separately as part of the Tembec Group. 9 We note that in the first administrative review, Tolko's affiliate Compwood Products Ltd. (Compwood) was listed as part of the Tolko Group. Tolko has not been collapsed with Compwood, a laminated beam producer. Rather Tolko has reported sales to Compwood as sales to an affiliated party. The Department excused individual respondents from reporting the sales of specific merchandise or sales by certain affiliates during this review. These specific reporting exemptions were granted to the companies because the sales were determined to be a relatively small percentage of total U.S. sales, burdensome to the company to report and for the Department to review, and would not materially affect the results of this review. 10 10 *See Memorandum from James Kemp, David Neubacher, and Ashleigh Batton to Susan Kuhbach, regarding Individual Reporting Exemption Requests of Certain Respondent Companies* (October 7, 2004); *see also Memorandum from James Kemp, David Neubacher, and Ashleigh Batton to Susan Kuhbach, regarding Individual Reporting Exemption Requests of Buchanan Lumber Sales Ltd., West Fraser Mills Ltd., and Weyerhaeuser Company* (October 19, 2004); *see also Memorandum from Ashleigh Batton and Shane Subler to Susan Kuhbach regarding Buchanan Lumber Sales Ltd. and Weldwood of Canada Limited Individual Reporting Exemption Requests* (November 1, 2004); *see also Memorandum from Ashleigh Batton to Susan Kuhbach regarding Individual Reporting Exemption Request for Buchanan Lumber Sales Ltd.* (December 13, 2004). Treatment of Sales Made on a Random-Lengths Basis All of the respondents made a portion of their sales during the POR on a random-length 11 (also referred to as a mixed-tally) basis. Information on the record indicates that the respondents negotiate a single per-unit price for the whole tally with the customer, but that they take the composition of lengths in the tally into account when quoting this price. The price on the invoice is the blended ( *i.e.* , average) price for the tally. Therefore, the line-item price on the invoice to the customer does not reflect the value of the particular product, but rather the average value of the combination of products. 11 For the purposes of this review, we are defining a random-length sale as any sale which contains multiple lengths, for which a blended ( *i.e.* , average) price has been reported. Sections 772(a) and
(b)and 773(a)(1)(B)(i) of the Act direct the Department to use the price at which the product was sold in determining export price (EP), constructed export price (CEP), and normal value (NV). In this case, the price at which the products were sold is the total amount on the invoice. The respondents' choice to divide that price evenly over all products on the invoice represents an arbitrary allocation which is not reflective of the underlying value of the individual products within the tally. However, with the exception of Weldwood and West Fraser, the respondents do not keep track of any underlying single-length prices in such a way that they can “deconstruct” or reallocate the prices on the invoice to more properly reflect the relative differences in the market value of each unique product that were taken into account in determining the total invoice price. For all companies except Weldwood and West Fraser, for purposes of these preliminary results, we reallocated the total invoice price of sales made on a random-lengths basis, where possible, using the average relative values of company-specific, market-specific single-length sales made within a two-week period ( *i.e.* , one week on either side) of the tally whose price is being reallocated. If no such sales were found, we looked in a four-week period ( *i.e.* , two weeks on either side of the sale). We note that a single-length-sale match must be available for each line item in the tally in order to perform a reallocation based on relative price. If there were not single-length sales for all items in the tally within a four-week period, we continued to use the reported price as neutral facts available, pursuant to section 776(a)(1) of the Act. For Weldwood and West Fraser, we used the reported length-specific prices. This methodology was fully described in detail during the last administrative review. *See Notice of Final Results of Antidumping Duty Administrative Review and Notice of Final Results of Antidumping Duty Changed Circumstances Review: Certain Softwood Lumber Products from Canada,* 69 FR 75921 (December 20, 2004) and accompanying Issues and Decision Memorandum at comment 5. Fair Value Comparisons We compared the EP or the CEP, as applicable, to the NV, as described in the *Export Price and Constructed Export Price* and *Normal Value* sections of this notice. We first attempted to compare contemporaneous sales in the U.S. and comparison markets of products that were identical with respect to the following characteristics: product type, species, grade group, grade, dryness, thickness, width, length, surface, trim and processing type. Where we were unable to compare sales of identical merchandise, we compared products sold in the United States with the most similar merchandise sold in the comparison markets based on the characteristics of grade, dryness, thickness, width, length, surface, trim and processing type, 12 in this order of priority. Consistent with prior segments of this proceeding, we did not match across product type, species or grade group. Where there were no appropriate comparison-market sales of comparable merchandise, we compared the merchandise sold in the United States to constructed value (CV), in accordance with section 773(a)(4) of the Act. We generally relied on the date of invoice as the date of sale. Consistent with the Department's practice, where the invoice was issued after the date of shipment, we relied on the date of shipment as the date of sale. 12 We note that Tembec requested that the Department revise the model match criteria to include a new length category for nine-foot lumber. While Tembec submitted some information on stud prices, it did not address all categories of nine-foot lumber for which it was requesting a change. Further, none of the other interested parties requested that nine-foot lumber be treated differently than that size of lumber had been treated in the investigation or first review, nor did they break out sales of nine-foot lumber. While Tembec argued that its sales of nine-foot lumber were unique and deserved distinctive treatment, we note that published prices also exist for seven-foot six-inch studs, which continue to be grouped with other studs of similar length. Therefore, for purposes of the current review we have continued to use the length categories established in the underlying investigation. Export Price and Constructed Export Price In accordance with section 772 of the Act, we calculated either an EP or a CEP, depending on the nature of each sale. Section 772(a) of the Act defines EP as the price at which the subject merchandise is first sold before the date of importation by the exporter or producer outside the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States. Section 772(b) of the Act defines CEP as the price at which the subject merchandise is first sold in the United States before or after the date of importation, by or for the account of the producer or exporter of the merchandise, or by a seller affiliated with the producer or exporter, to an unaffiliated purchaser, as adjusted under sections 772(c) and
(d)of the Act. For all respondents, we calculated EP and CEP, as appropriate, based on prices charged to the first unaffiliated customer in the United States. We found that all of the respondents made a number of EP sales during the POR. These sales are properly classified as EP sales because they were made outside the United States by the exporter or producer to unaffiliated customers in the United States prior to the date of importation. We also found that each respondent made CEP sales during the POR. Some of these sales involved softwood lumber sold from U.S. reload or through vendor-managed inventory
(VMI)locations. Because such sales were made by the respondent after the date of importation, the sales are properly classified as CEP sales. In addition, Weldwood, West Fraser, and Weyerhaeuser made sales to the United States through U.S. affiliates. We made company-specific adjustments as follows:
(A)*Abitibi* Abitibi made both EP and CEP transactions. We calculated an EP for sales where the merchandise was sold directly by Abitibi to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of the record. We calculated a CEP for sales made by Abitibi to the U.S. customer through VMI or reload centers after importation into the United States. EP and CEP were based on the packed, delivered, ex-mill, and free-on-board
(FOB)reload center prices, as applicable. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to reload and VMI centers, as well as freight to the U.S. customer, warehousing, brokerage and handling, and inland insurance. We also deducted any billing adjustments, discounts, and rebates. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses ( *e.g.* , credit expenses) and imputed inventory carrying costs. Abitibi did not report any other indirect selling expenses incurred in the United States. In accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. *See Memorandum from Saliha Loucif to the File, regarding Abitibi's Analysis for the Preliminary Results* (May 31, 2005) ( *Abitibi's Preliminary Calculation Memorandum* ).
(B)*Buchanan* Buchanan made both EP and CEP transactions during the POR. We calculated an EP for sales where the merchandise was sold directly by Buchanan to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts on the record. We calculated a CEP for sales made by Buchanan to the U.S. customer through reload centers after importation into the United States. EP and CEP were based on the packed, delivered, ex-mill, FOB mill, and FOB reload center prices, as applicable. We made deductions from starting prices for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to reload centers, freight to the U.S. customer, warehousing, brokerage, and a movement variance. We also deducted any discounts from the starting price, and added any billing adjustments and other miscellaneous charges/credits. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses, ( *e.g.* , credit expenses) and imputed inventory carrying costs. In accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. *See Memorandum from Ashleigh Batton to the File, regarding Buchanan's Analysis for the Preliminary Results* (May 31, 2005) *(Buchanan's Preliminary Calculation Memorandum)* .
(C)*Canfor* Canfor made both EP and CEP transactions. We calculated an EP for sales where the merchandise was sold directly by Canfor to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of the record. We calculated a CEP for sales made by Canfor to the U.S. customer through VMI or reload centers after importation into the United States. EP and CEP were based on the packed, delivered, ex-mill, FOB mill, and FOB reload center prices, as applicable. From its sales locations in the United States and Canada, Canfor made sales of Canfor-produced merchandise that had been commingled with lumber from other producers. Canfor provided a weighting factor to determine the quantity of Canfor-produced Canadian merchandise for all sales. We are using the weighting factors to estimate the volume of Canfor-produced merchandise included in each sale. In some cases, the other producers knew or had reason to know that the merchandise purchased by Canfor was destined for the United States. For example, Canfor occasionally purchased merchandise from another producer and had the producer arrange freight from the producer's mill in Canada to the customer in the United States. We did not include such sales in our margin calculations. In other situations, Canfor purchased merchandise and the producer shipped it to U.S. reload centers, VMI locations, or to Canfor USA where it was commingled with lumber produced by Canfor. While the producer had knowledge that these sales were destined for the United States, Canfor was unable to link the purchases of lumber with a specific sale to the unaffiliated customer. Therefore, Canfor developed the weighting factor to determine, based on inventory location and control-number and the percentage of lumber at the specific inventory location and control-number, the percentage of lumber at the inventory location that was produced by Canfor. We are multiplying the weighting factor by the quantity of lumber in each sale to estimate the volume of Canfor-produced merchandise in each sale in the United States and home market, and to eliminate the estimated non-Canfor produced merchandise. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to reload centers or VMI locations, as well as freight to the U.S. customer, warehousing, brokerage and handling, and miscellaneous movement charges. We also deducted any discounts and rebates from the starting price. In addition to these adjustments, for CEP sales, in accordance with section 772(d)(1) of the Act, we adjusted the starting price by the amount of direct selling expenses and revenues ( *e.g.* , credit expenses and interest revenue). We further reduced the starting price by the amount of indirect selling expenses incurred in the United States. Additionally, in accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. Canfor reported a limited number of sales of purchased lumber for which the producer did not have knowledge that the lumber was destined for the United States. Because the lumber was very small in quantity and separately identifiable, we removed it from our calculation. Finally, we made additional corrections to the U.S. sales data based upon our findings at verification. *See Memorandum from Daniel O'Brien and David Neubacher to the File, regarding Canfor's Analysis for the Preliminary Results* (May 31, 2005) *(Canfor's Preliminary Calculation Memorandum).*
(D)*Tembec* Tembec made both EP and CEP transactions during the POR. We calculated an EP for sales where the merchandise was sold directly by Tembec to the first unaffiliated purchaser in the United States prior to importation. We calculated a CEP for sales made by Tembec to the U.S. customer through U.S. reload facilities or through VMI facilities. EP and CEP were based on the packed, delivered, FOB mill, FOB reload/VMI center and FOB destination prices, as applicable. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to Canadian reload centers and Canadian warehousing expenses, as well as freight to the U.S. customer or reload facility, U.S. warehousing expenses, and U.S. brokerage. We also deducted from the starting price any discounts and rebates. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses ( *e.g.* , credit expenses) and indirect selling expenses. Finally, in accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. *See Memorandum from Saliha Loucif to the File, regarding Tembec's Analysis for the Preliminary Results* (May 31, 2005) *(Tembec's Preliminary Calculation Memorandum).*
(E)*Tolko* Tolko made both EP and CEP transactions. We calculated EP for sales where the merchandise was sold directly by Tolko to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of the record. We calculated CEP for sales made by Tolko to the U.S. customer through VMI or reload centers after importation into the United States. EP and CEP were based on the packed, delivered, ex-mill, FOB mill, and FOB reload center prices, as applicable. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to reload centers or VMI locations, as well as freight to the U.S. customer, warehousing, brokerage and handling, and miscellaneous movement charges. We also deducted any discounts and rebates from the starting price. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses ( *e.g.* , credit expenses, warranty expenses) and imputed inventory carrying costs. Finally, in accordance with section 772(d)(3) of the Act, we deducted an amount for profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. * See Memorandum from Daniel Alexy to the File, regarding Tolko's Analysis for the Preliminary Results * (May 31, 2005) *(Tolko's Preliminary Calculation Memorandum).*
(D)*Weldwood* Weldwood made both EP and CEP transactions. We calculated an EP for sales in which the merchandise was sold directly by Weldwood to the first unaffiliated purchaser in the United States prior to importation, and in which CEP was not otherwise warranted based on the facts of the record. We calculated a CEP for sales made by WSI to the U.S. customer through reload centers after importation into the United States. EP and CEP were based on the ex-mill, carriage paid to reload (CPT reload), and delivered prices, as applicable. In accordance with section 772(c)(2)(A) of the Act, we reduced the starting price to account for movement expenses. These included the net freight expenses incurred in transporting merchandise to reload centers, net freight to the U.S. customer, and U.S. brokerage. We also deducted early payment discounts, credit or debit adjustments, and other relevant price adjustments from the starting price. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses ( *e.g.* , credit expenses) and imputed inventory carrying costs. In accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. Finally, we made additional corrections to the U.S. sales data based upon our findings at verification. *See Memorandum from Shane Subler to the File, regarding Weldwood's Analysis for the Preliminary Results* (May 31, 2005) *(Weldwood's Preliminary Results Calculation Memorandum).*
(E)*West Fraser* West Fraser made both EP and CEP transactions. We calculated an EP for sales where the merchandise was sold directly by West Fraser to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of the record. We calculated a CEP for sales made by WFFP to the U.S. customer through VMI or reload centers after importation into the United States. EP and CEP were based on the packed, delivered, ex-mill, and FOB reload center prices, as applicable. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight incurred in transporting merchandise to reload centers and to VMI customers, freight to the U.S. customer, warehousing, and U.S. and Canadian brokerage. We also deducted any discounts and rebates from the starting price. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including direct selling expenses, ( *e.g.* , credit expenses) and imputed inventory carrying costs. Finally, in accordance with section 772(d)(3) of the Act, we deducted an amount of profit allocated to the expenses deducted under sections 772(d)(1) and
(2)of the Act. *See Memorandum from David Neubacher to the File, regarding West Fraser's Analysis for the Preliminary Results* (May 31, 2005) *(West Fraser's Preliminary Calculation Memorandum)* .
(F)*Weyerhaeuser* Weyerhaeuser made both EP and CEP transactions. We calculated an EP for sales where the merchandise was sold directly by Weyerhaeuser to the first unaffiliated purchaser in the United States prior to importation, and CEP was not otherwise warranted based on the facts of the record. We calculated a CEP for sales made by Weyerhaeuser to the U.S. customer through reload centers, VMIs, and Weyerhaeuser's affiliated reseller Weyerhaeuser Building Materials
(WBM)after importation into the United States. EP and CEP were based on the packed, delivered, or FOB prices. From its sales locations in the United States and Canada, Weyerhaeuser made sales of merchandise which had been commingled with that of other producers. Weyerhaeuser provided a weighting factor to determine the quantity of Weyerhaeuser-produced Canadian merchandise for these sales. We are multiplying the weighting factor by the quantity of lumber in each U.S. and home market sale to estimate the volume of Weyerhaeuser-produced merchandise in each transaction and to eliminate the estimated non-Weyerhaeuser-produced merchandise from our margin calculation. In some cases, the other producers knew or had reason to know that the merchandise purchased by Weyerhaeuser was destined for the United States. For example, Weyerhaeuser routinely purchased merchandise and arranged freight from the producer's mill in Canada to the customer in the United States. We did not include such sales in our margin calculations. In other situations, Weyerhaeuser purchased merchandise and shipped it to U.S. warehouses where it was commingled with lumber produced by Weyerhaeuser. While the producer had knowledge that these sales were destined for the United States, Weyerhaeuser was unable to link the purchases with the specific sale to the unaffiliated customer. Therefore, Weyerhaeuser developed a second weighting factor to determine the quantity of the sale for which the third-party producer did not know, or have reason to know, that the merchandise was destined for the United States. We are multiplying the weighting factor by the quantity of lumber in each U.S. sale to estimate the volume of merchandise for which the producer did not have knowledge of destination in each transaction. We included this quantity in our margin calculation and excluded the estimated volume for which the producer did have knowledge of U.S. destination. We made deductions from the starting price for movement expenses in accordance with section 772(c)(2)(A) of the Act. These include freight to U.S. and Canadian warehouses or reload centers, warehousing expense in Canada and the United States, brokerage and handling, and freight to the final customer. We also deducted from the starting price any discounts, billing adjustments, and rebates. In accordance with section 772(d)(1) of the Act, for CEP sales, we deducted from the starting price those selling expenses that were incurred in selling the subject merchandise in the United States, including indirect selling expenses and direct selling expenses ( *e.g.* , credit expenses). Additionally, in accordance with section 772(d)(3) of the Act, we deducted an amount for CEP profit. *See Memorandum from Constance Handley to the File, regarding Weyerhaeuser's Analysis for the Preliminary Results* (May 31, 2005) *(Weyerhaeuser's Preliminary Calculation Memorandum)* . Normal Value A. *Selection of Comparison Markets* Section 773(a)(1) of the Act directs that NV be based on the price at which the foreign like product is sold in the home market, provided that the merchandise is sold in sufficient quantities (or value, if quantity is inappropriate) and that there is no particular market situation that prevents a proper comparison with the EP or CEP. The Act contemplates that quantities (or value) will normally be considered insufficient if they are less than five percent of the aggregate quantity (or value) of sales of the subject merchandise to the United States. We found that all eight respondents had viable home markets for lumber. To derive NV, we made the adjustments detailed in the Calculation of Normal Value Based on Home-Market Prices and Calculation of Normal Value Based on Constructed Value, sections below. B. *Cost of Production Analysis* Because the Department found in the most recently completed segment of the proceeding at the time the questionnaire was sent ( *i.e.* , the investigation), that five 13 of the respondents made sales in the home market at prices below the cost of producing the merchandise and excluded such sales from NV, the Department determined that there were reasonable grounds to believe or suspect that softwood lumber sales were made in Canada at prices below the cost of production
(COP)in this administrative review for those five respondents. See section 773(b)(2)(A)(ii) of the Act. As a result, the Department initiated a COP inquiry for such respondents. 13 Abitibi, Tembec, West Fraser, Weyerhaeuser, and Canfor. As discussed above, during the investigation, Canfor and Slocan merged as of April 1, 2004. Both companies had sales which were disregarded because they were below the cost of production. On December 21, 2004, the Coalition made an allegation of sales below the cost of production
(COP)with respect to Weldwood. We found that the Coalition's allegation provided the Department with a reasonable basis to believe or suspect that sales in the home market have been made at prices below the COP by Weldwood. Accordingly, we initiated an investigation to determine whether Weldwood's home market sales of certain softwood lumber products were made at prices below the COP during the POR. *See Memorandum from Shane Subler to Susan Kuhbach, regarding Allegation of Sales Below Cost of Production for Weldwood* (January 26, 2005). Furthermore, during the first administrative review, we determined to disregard sales made by Buchanan and Tolko that were below the cost of production. In accordance with section 773(b)(2)(A)(i) of the Act, the Department initiated a COP inquiry to determine whether Buchanan and Tolko made home-market sales at prices below their respective COPs during this POR. 1. Calculation of COP In accordance with section 773(b)(3) of the Act, we calculated a weighted-average COP based on the sum of the cost of materials and fabrication for the foreign like product, plus amounts for general and administrative (G&A) expenses, selling expenses, packing expenses and interest expenses. 2. Cost Methodology In our section D questionnaire, we solicited information from the respondents that allows for a value-based cost allocation methodology for wood and sawmill costs ( *i.e.* , those costs presumed to be joint costs), including by-product revenue. We allowed for the value allocation to cover species, grade, and dimension ( *i.e.* , thickness, width and length). For production costs that are separately identifiable to specific products ( *e.g.* , drying or planing costs), we directed parties to allocate such costs only to the associated products using an appropriate allocation basis ( *e.g.* , MBF). In allocating wood and sawmill costs (including by-product revenue) based on value, costs associated with a particular group of co-products were to be allocated only to those products ( *i.e.* , wood costs of a particular species should only be allocated to that species). Further, we directed the parties to use weighted-average world-wide prices in deriving the net realizable values
(NRV)used for the allocation. We used world-wide prices to ensure that all products common to the joint production process, not just those sold in a particular market, are allocated their fair share of the total joint costs. Finally, we directed the parties to perform the value allocation on the mill/facility level, using the company-wide weighted-average world-wide NRV for the specific products produced at the mill, along with the mill-specific production quantities. Consistent with our methodology in the first administrative review, we requested that the respondents break out the random-length sales separately from length-specific sales and to develop a two-tiered allocation method. First, we directed the respondents to perform the price-based cost allocation (including the random-length-tally sales) without regard to length. Second, we directed them to allocate the resulting product costs into length-specific costs. In performing the second step, we set out a hierarchy when looking for surrogate sales as allocation factors: 1) length-specific sales of the identical product; 2) length-specific sales of products that are identical to the product except for width; and 3) length-specific sales of products identical to the product except for NLGA grade equivalent. For purposes of these preliminary results, we have used the programs and calculations provided by respondents except in the case of West Fraser and Weldwood. For West Fraser and Weldwood, this step was not necessary due to their ability to provide length-specific sales data. *See* *Treatment of Sales Made on a Random-Lengths Basis* section above. In addition, we excluded the price of purchased and resold lumber from our calculation of the respondent's per unit product costs. 14 14 W knowledge that the product was for export to the United States. e note that the vast majority of purchased lumber was excluded from our sales analyses as the producer had. 3. Individual Company Adjustments We relied on the COP data submitted by each respondent in its cost questionnaire response, except in specific instances where based on our review of the submissions and our verification findings, we believe that an adjustment is required, as discussed below. For the calculation of general and administrative (G&A) expenses for all companies, we did not include the legal fees which were paid directly by the company to its legal counsel and consultants associated with the AD and CVD proceedings. However, we included the fees paid to the provincial associations because none of the companies was able to substantiate that these payments were for legal representation associated with the AD and CVD proceedings. In accordance with section 773(f)(1) of the Act, for companies that had inter-divisional byproduct transactions where the transfer price was significantly higher than an arm's-length market price, we adjusted the transfer price to the market price. For companies that had byproduct transactions with affiliates where the transfer price was higher than the market price, we adjusted the transfer price to the market price in accordance with section 773(f)(2) of the Act.
(A)*Abitibi* 1) We adjusted Abitibi's byproduct offset for wood chip revenue in British Columbia to reflect the average market price it obtained from unaffiliated parties. 2) We included in Abitibi's G&A expense rate calculation the goodwill impairment that was written of in its normal books and records. Additionally, we excluded the plant closure costs. 3) Because Abitibi reported net financing income, we included zero financing costs. *See Memorandum from Michael Harrison to Neal M. Halper regarding Abitibi's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(B)*Canfor* 1) We adjusted the Pas' byproduct offset for wood chip revenue in British Columbia to reflect the average market price it obtained from unaffiliated parties. 2) We increased Canfor's reported cost of manufacturing
(COM)to reflect arm's length prices of contract logging performed by affiliated parties in accordance with section 773(f)(2) of the Act. 3) For the Lakeland entity, we reclassified the “other income” items from financial expenses to G&A expenses. 4) For the Canfor entity, we excluded the gain on sales of land from the G&A expense rate calculation. We also included in G&A certain wood paneling division costs which related to the general operations of the company. In addition, we included costs associated with maintenance and downtime that had been excluded. 5) For the Slocan entity, we identified a startup adjustment related to the Mackenzie Mill in the first administrative review. We included the adjustment in our cost calculations for this review. 6) Because Canfor reported net financing income, we included zero financing costs. *See Memorandum from Gina K. Lee to Neal M. Halper regarding Canfor's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(C)*Tembec* 1) We used Tembec's unconsolidated financial statements of the lumber-producing entities to calculate the G&A expense rate. We included the impairment of goodwill and write down of fixed assets in the G&A expenses. 2) Because Tembec reported net financing income, we included zero financing costs. 3) We adjusted Tembec's province specific byproduct offset for wood chip revenue to reflect the average market price it obtained from unaffiliated parties. 4) We excluded Tembec's claimed byproduct offset for the whole log chip revenues because whole log chipping is not a byproduct of lumber production. 5) We adjusted the reported variable wood costs to reflect the cost of external log sales. *See Cost Memorandum from Sheikh Hannan to Neal Halper regarding Tembec's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(D)*Tolko* 1) We increased Tolko's reported wood costs to reflect arm's length prices of logs purchased from affiliated parties in accordance with section 773(f)(2) of the Act. 2) We revised Tolko's financial expense calculation. Due to the claimed proprietary nature of the adjustment, we discuss this more fully in the calculation memo cited below. *See Memorandum from Nancy M. Decker to Neal M. Halper regarding Tolko's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(E)*Weldwood* 1) We used Weldwood's submitted cost file that allocates the timberland units' log costs to the sawmills based on the average log cost from each timberland. 2) We revised the planer cost of one mill to account for trim loss on rough lumber inter-company sales and to reclassify certain planer costs. 3) We revised the variable drying cost of three mills to account for drying expenses related to inter-company sales of dried rough lumber. 4) We revised the variable planing costs of two mills to include freight expenses incurred on inter-company sales. 5) Weldwood allocated certain wood chip revenue to one location. We reallocated this revenue to the sawmills that produced the wood chips. *See Memorandum from Mark Todd to Neal Halper regarding Weldwood's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(G)*West Fraser* 1) Because West Fraser reported net financing income, we included zero financing costs. 2) We excluded the gain on the sale of a sawmill unit from the G&A expense rate calculation. *See Memorandum from James Balog to Neal Halper regarding West Fraser's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005).
(H)*Weyerhaeuser* 1) We revised the Weyerhaeuser's reported wood costs for the British Columbia Coastal timberland units to reflect a value-based cost allocation for logs transferred to the sawmills. We used the cost database which Weyerhaeuser provided at our request that reflects the alternative value-based log costing methodology. 2) We adjusted Weyerhaeuser's byproduct offset for wood chip revenue in British Columbia to reflect the average market price it obtained from unaffiliated purchasers. 3) We excluded from the G&A expense rate calculation the costs related to closure of the company's production facilities. 4) We disallowed certain offsets to G&A expenses, the identity of which is proprietary. We discuss these items more fully in the calculation memo cited below. *See Memorandum from Ernest Gziryan to Neal Halper regarding Weyerhaeuser's Cost of Production and Constructed Value Calculation Adjustments for the Preliminary Results* (May 31, 2005). 4. Test of Home-Market Sales Prices We compared the adjusted weighted-average COP for each respondent to its home-market sales of the foreign like product, as required under section 773(b) of the Act, to determine whether these sales had been made at prices below the COP within an extended period of time ( *i.e.* , a period of one year) in substantial quantities and whether such prices were sufficient to permit the recovery of all costs within a reasonable period of time. On a model-specific basis, we compared the revised COP to the home-market prices, less any applicable movement charges, export taxes, discounts and rebates. 5. Results of the COP Test Pursuant to section 773(b)(2)(C) of the Act, where less than 20 percent of a respondent's sales of a given product were at prices less than the COP, we did not disregard any below-cost sales of that product because we determined that the below-cost sales were not made in substantial quantities. Where 20 percent or more of a respondent's sales of a given product during the POR were at prices less than the COP, we determined such sales to have been made in substantial quantities within an extended period of time in accordance with section 773(b)(2)(B) of the Act. Because we compared prices to the POR average COP, we also determined that such sales were not made at prices which would permit recovery of all costs within a reasonable period of time, in accordance with section 773(b)(2)(D) of the Act. Therefore, we disregarded the below-cost sales. For all respondents, we found that more than 20 percent of the home-market sales of certain softwood lumber products within an extended period of time were made at prices less than the COP. Further, the prices did not provide for the recovery of costs within a reasonable period of time. We therefore disregarded the below-cost sales and used the remaining sales as the basis for determining normal value, in accordance with section 773(b)(1) of the Act. For those U.S. sales of softwood lumber for which there were no useable home-market sales in the ordinary course of trade, we compared EPs or CEPs to the CV in accordance with section 773(a)(4) of the Act. *See Calculation of Normal Value Based on Constructed Value* section below. C. *Calculation of Normal Value Based on Home-Market Prices* We determined price-based NVs for each company as follows. For all respondents, we made adjustments for differences in packing in accordance with sections 773(a)(6)(A) and 773(a)(6)(B)(i) of the Act, and we deducted movement expenses consistent with section 773(a)(6)(B)(ii) of the Act. In addition, where applicable, we made adjustments for differences in cost attributable to differences in physical characteristics of the merchandise pursuant to section 773(a)(6)(C)(ii) of the Act, as well as for differences in circumstances of sale
(COS)in accordance with section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410. We also made adjustments, in accordance with section 351.410(e), for indirect selling expenses incurred on comparison-market or U.S. sales where commissions were granted on sales in one market but not in the other (the “commission offset”). Specifically, where commissions were granted in the U.S. market but not in the comparison market, we made a downward adjustment to NV for the lesser of
(1)the amount of the commission paid in the U.S. market, or
(2)the amount of indirect selling expenses incurred in the comparison market. If commissions were granted in the comparison market but not in the U.S. market, we made an upward adjustment to NV following the same methodology. Company-specific adjustments are described below.
(A)*Abitibi* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price for inland freight, warehousing expenses, insurance, discounts, rebates, and billing adjustments. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales ( *e.g.* , credit expenses) and adding U.S. direct selling expenses ( *e.g.* , credit expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. *See Abitibi's Preliminary Calculation Memorandum* .
(B)*Buchanan* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price by the amount of billing adjustments, early payment discounts, and movement expenses including inland freight, warehousing, miscellaneous movement charges, and a movement variance. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales ( *e.g.* , credit expenses). For comparisons to CEP sales, we deducted home market selling expenses.
(C)*Canfor* Canfor commingled self-produced with purchased lumber in home-market sales in the same manner as it did in U.S. sales, as described in the previous section. We used Canfor's weighting factor to determine the percentage of lumber in the commingled sales that was supplied by other producers. We did not include these quantities when calculating the weight-averaged home-market prices for comparison to EP or CEP. We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price by the amount of billing adjustments, early payment discounts, rebates, interest revenue, and movement expenses (including inland freight, warehousing, and miscellaneous movement charges). For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales ( *e.g.* , credit and warranty expenses) and adding U.S. direct selling expenses ( *e.g.* , credit, advertising, and warranty expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses and revenue. In addition, we made adjustments to the home-market prices based upon our findings at verification. *See Canfor's Preliminary Calculation Memorandum* .
(D)*Tembec* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price for billing adjustments, early payment discounts, rebates, interest revenue, freight from the mill to the reload center or VMI, reload center expenses and freight to the final customer. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses for home-market sales ( *e.g.* , credit expenses) and adding U.S. direct selling expenses ( *e.g.* , credit expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. *See Tembec's Preliminary Calculation Memorandum* .
(E)*Tolko* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price by the amount of billing adjustments, and movement expenses including inland freight, warehousing, and miscellaneous movement charges. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales ( *e.g.* , credit and warranty expenses) and adding U.S. direct selling expenses ( *e.g.* , credit and warranty expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. *See Tolko's Preliminary Calculation Memorandum* .
(F)*Weldwood* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price for credit and debit adjustments, early payment discounts, net inland freight to the reload, and net inland freight to customers. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales and adding U.S. direct selling expenses ( *e.g.* , credit expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. In addition, we made adjustments to the home-market prices based upon our findings at verification. *See Weldwood's Preliminary Calculation Memorandum* .
(G)*West Fraser* We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price for early payment discounts, inland freight to the warehouse, warehousing expenses, special charges, inland freight to customers, freight rebates, and fuel surcharges. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales and adding U.S. direct selling expenses ( *e.g.* , credit expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. *See West Fraser's Preliminary Calculation Memorandum* .
(H)*Weyerhaeuser* Weyerhaeuser commingled self-produced with purchased lumber in home-market sales in the same manner as it did in U.S. sales, as described in the previous section. We used Weyerhaeuser's weighting factor to determine the percentage of lumber in the commingled sales that was supplied by other producers. We did not include these quantities when calculating the weight-averaged home-market prices for comparison to EP or CEP. We based home-market prices on the packed prices to unaffiliated purchasers in Canada. We adjusted the starting price for discounts, rebates, billing adjustments, freight to the warehouse/reload center, warehousing expenses, freight to the final customer, and direct selling expenses including minor remanufacturing performed at Softwood Lumber Business
(SWL)reloads and WBM locations. For comparisons made to EP sales, we made COS adjustments by deducting direct selling expenses incurred for home-market sales ( *e.g.* , credit expenses) and adding U.S. direct selling expenses ( *e.g.* , credit expenses). For comparisons made to CEP sales, we deducted home-market direct selling expenses. D. *Calculation of Normal Value Based on Constructed Value* Section 773(a)(4) of the Act provides that where NV cannot be based on comparison-market sales, NV may be based on CV. Accordingly, for those models of softwood lumber products for which we could not determine the NV based on comparison-market sales, either because there were no useable sales of a comparable product or all sales of the comparable products failed the COP test, we based NV on the CV. Section 773(e) of the Act provides that the CV shall be based on the sum of the cost of materials and fabrication for the imported merchandise, plus amounts for SG&A expenses, profit, and U.S. packing costs. For each respondent, we calculated the cost of materials and fabrication based on the methodology described in the *Cost of Production Analysis* section, above. We based SG&A expenses and profit for each respondent on the actual amounts incurred and realized by the respondents in connection with the production and sale of the foreign like product in the ordinary course of trade for consumption in the comparison market, in accordance with section 773(e)(2)(A) of the Act. We used U.S. packing costs as described in the *Export Price* section, above. We made adjustments to CV for differences in COS in accordance with section 773(a)(8) of the Act and 19 CFR 351.410. For comparisons to EP, we made COS adjustments by deducting direct selling expenses incurred on home-market sales from, and adding U.S. direct selling expenses to, CV. For comparisons to CEP, we made COS adjustments by deducting from CV direct selling expenses incurred on home-market sales. E. *Level of Trade/CEP Offset* In accordance with section 773(a)(1)(B) of the Act, to the extent practicable, we determine NV based on sales in the comparison market at the same level of trade
(LOT)as the EP or CEP transaction. The NV LOT is that of the starting-price sales in the comparison market or, when NV is based on CV, that of the sales from which we derive SG&A expenses and profit. For EP, the U.S. LOT is also the level of the starting-price sale, which is usually from exporter to importer. For CEP, it is the level of the constructed sale from the exporter to the importer. To determine whether NV sales are at a different LOT than EP or CEP, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT, and the difference affects price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make an LOT adjustment under section 773(a)(7)(A) of the Act. Finally, for CEP sales, if the NV level is more remote from the factory than the CEP level and there is no basis for determining whether the difference in the levels between NV and CEP affects price comparability, we adjust NV under section 773(a)(7)(B) of the Act (the CEP offset provision). *See Notice of Final Determination of Sales at Less Than Fair Value: Certain Cut-to-Length Carbon Steel Plate from South Africa* , 62 FR 61731 (November 19, 1997). In implementing these principles in this review, we obtained information from each respondent about the marketing stages involved in the reported U.S. and comparison-market sales, including a description of the selling activities performed by the respondents for each channel of distribution. In identifying LOTs for EP and comparison-market sales, we considered the selling functions reflected in the starting price before any adjustments. For CEP sales, we considered only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. We expect that, if claimed LOTs are the same, the functions and activities of the seller should be similar. Conversely, if a party claims that LOTs are different for different groups of sales, the functions and activities of the seller should be dissimilar. In this review, we determined the following, with respect to the LOT and CEP offset, for each respondent.
(A)*Abitibi* Abitibi reported three channels of distribution. The first channel of distribution (channel 1) included direct sales from Canadian mills or reload centers to customers. The second channel of distribution (channel 2) consisted of direct sales from Canadian reload centers to customers. The third channel of distribution (channel 3) consisted of VMI/consignment sales made to large retailers, distributors, building materials manufacturers and other large lumber producers. We compared selling functions in each of these three channels of distribution and found that the sales process, freight services and inventory maintenance activities were similar. Accordingly, we preliminarily determine that home-market sales in these three channels of distribution constitute a single LOT. In the U.S. market, Abitibi had both EP and CEP sales. Abitibi reported EP sales to end-users and distributors through two channels of distribution for its direct sales from Canadian mills (channel 1) or from Canadian reload centers to customers (channel 2). Abitibi reported the same selling functions for these two channels of distribution. Therefore, we consider that channels of distribution for EP sales during the review constitute a single LOT. Moreover, we preliminary determine that this EP LOT is identical to the home-market LOT. With respect to CEP sales, Abitibi reported sales through two channels of distribution. The first (channel 3) included direct sales from U.S. reload centers to customers. The second (channel 4) consisted of VMI/consignment sales made to large retailers, distributors, building materials manufacturers and other large lumber producers. The selling functions related to freight arrangements and inventory maintenance for these two channels of distribution were not significantly different and, therefore, we preliminary determine there is only one CEP LOT. Abitibi's sales to end-users and distributors in the home-market and in the U.S. market do not involve significantly different selling functions. Abitibi's Canadian-based services for CEP sales were similar to the single home-market LOT with respect to sales process and warehouse/inventory maintenance. Because we are finding the LOT for CEP sales to be similar to the home-market LOT, we are making no LOT adjustment or CEP offset. See section 773(a)(7)(A) of the Act.
(B)*Buchanan* Buchanan reported multiple channels of distribution in the home market, with six categories of unaffiliated customers. Buchanan made sales to customers in Canada via the affiliated sales agent, Buchanan Lumber Sales, Inc. (BLS), direct from the mill, through a reload yard, or it made use of resellers in certain instances. We compared selling functions in each of these channels of distribution and found that the sales process and freight services were similar. Accordingly, we preliminarily determine that home-market sales in these channels of distribution constitute a single LOT. In the U.S. market, Buchanan had both EP and CEP sales. Buchanan reported EP sales to end-users and distributors, via the affiliated sales agent BLS, through multiple channels of distribution, including mill-direct sales, sales that traveled through reload facilities, and sales made via resellers. These EP channels of distribution do not significantly differ from the channels of distribution in the home market. Because the sales process and freight services were similar, we preliminarily determine that EP sales in these five channels of distribution constitute a single LOT, and therefore that this EP LOT is identical to the home-market LOT. With respect to CEP sales, Buchanan reported those sales that traveled through a U.S. reload yard. Consequently, we preliminary find a single CEP LOT. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Buchanan's sales in the home and U.S. markets do not involve significantly different selling functions. Buchanan's Canadian-based services for its CEP sales were similar to the single home-market LOT with respect to sales process and freight arrangements. Because we are finding the LOT for CEP to be similar to the home-market LOT, we are making no LOT adjustment or CEP offset. *See* section 773(a)(7)(A) of the Act.
(C)*Canfor* Canfor reported four channels of distribution in the home market in its September 28, 2004, section A response, with seven customer categories. However, in accordance with the Department's instructions, Canfor added a fifth channel of distribution to each market for sales of remanufactured lumber, thereby reporting five channels of distribution in the home market. The first channel of distribution (channel 1) includes sales where merchandise was shipped directly from one of Canfor's sawmills to a Canadian customer. The second channel of distribution (channel 2) consists of sales made through reload centers, where merchandise was shipped from the primary mill through one or more lumber-handling and inventory yards before delivery to the end customer. The third channel of distribution (channel 3) includes sales made pursuant to VMI programs. The fourth channel of distribution (channel 4) includes sales made by Lakeland without Sinclar's assistance to employees or local lumber yards in the Prince George, British Columbia, area. We compared the selling functions in these five channels of distribution and found that they differed only slightly in that certain services were provided for VMI customers that were not provided to other channels including: inventory management, education on environmental issues, and in-store training. Also, office wholesalers (wholesalers that do not hold inventory), one of Canfor's customer categories, only purchased lumber through channel 1. In addition, home centers requested custom packing, wrapping, and bar coding. With respect to the sales process, freight and delivery services, custom-packing services, providing technical information, inspecting quality claims, and participating in trade shows, the sales to all customer categories in all channels were similar in all respects. Accordingly, we preliminarily determine that home-market sales in these five channels of distribution constitute a single LOT. In the U.S. market, Canfor had both EP and CEP sales. Canfor reported the same first three channels of distribution for U.S. sales as it did for home market sales: The first channel of distribution (channel 1) includes sales where merchandise was shipped directly from one of Canfor's sawmills to a U.S. customer. The second channel of distribution (channel 2) consists of sales made through reload centers, where merchandise was shipped from the primary mill through one or more lumber-handling and inventory yards before delivery to the end customer. The third channel of distribution (channel 3) includes sales made pursuant to VMI programs. Canfor's fourth channel of distribution was for sales made through trading activity on the Chicago Mercantile Exchange. As noted above, in accordance with Department instructions, Canfor added a fifth channel of distribution to the each market for sales of remanufactured lumber. In addition, also in accordance with the Department's instructions, Canfor added a sixth U.S. channel of distribution for U.S. sales made out of Canadian reload locations. Canfor made EP sales, therefore, through channels 1, 4, 5, and 6. Moreover, these four EP channels of distribution do not significantly differ from the channels of distribution in the home market. Accordingly, we preliminarily determine that EP sales in these four channels of distribution constitute a single LOT and that this EP LOT is identical to the home-market LOT. With respect to CEP sales, Canfor reported that these sales were made through channels 2 (U.S. reload facilities), 3 (VMI customers), and 5 (sales made through remanufacturers). The selling functions performed for these three channels of distribution were not significantly different in terms of freight arrangements and inventory management; therefore, we preliminary determine there is only one CEP LOT. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Canfor's sales in the home and U.S. markets do not involve significantly different selling functions. Canfor's Canadian-based services for its CEP sales were similar to the single home-market LOT with respect to sales process and inventory management. Because we are finding the LOT for CEP sales to be similar to the home-market LOT, we are making no LOT adjustment or CEP offset. *See* section 773(a)(7)(A) of the Act.
(D)*Tembec* Tembec reported four channels of distribution applicable to both markets. The first channel of distribution (channel 1) included direct sales from the mill to customers which included sales to wholesalers who took title to but not physical possession of the lumber and resold it to end-users. The second channel of distribution (channel 2) consisted of sales which were shipped through a reload center en route to the customer. The third channel of distribution (channel 3) consisted of sales made through VMIs located in Canada or the United States. The fourth (channel 4), consisted of sales where the customer picked-up the merchandise. We found that the first three home-market channels of distribution were similar with respect to both the sales process and freight services. While channel 4 sales did not receive freight arrangement, it was the same as the other channels in terms of sales process. We do not consider arrangement of freight alone to rise to the level of a separate LOT. Accordingly, we preliminarily determine that home-market sales in these four channels of distribution constitute a single LOT. In the U.S. market, Tembec had both EP and CEP sales. Tembec reported EP sales to end-users and distributors through the channels 1, 2, and 4. These three channels of distribution, as they apply to EP sales, do not differ from the three channels of distribution in the home market. Because the sales process, freight services (for channels 1 and 2) and inventory maintenance were similar, we preliminarily determine that EP sales in these three channels of distribution constitute a single LOT and that this EP LOT is identical to the home-market LOT. With respect to CEP sales, Tembec reported that these sales were made through two channels of distribution (2 and 3), and consisted of U.S. sales that either pass through a U.S. reload center en route to the customer, or go to a VMI. The selling functions related to freight and delivery for these two channels of distribution were not significantly different and, therefore, we preliminary determine there is only one CEP LOT. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Tembec's sales to end-users and distributors in the home market and in the U.S. market do not involve significantly different selling functions. Tembec's Canadian-based services for CEP sales were similar to the single home-market LOT with respect to sales process and freight arrangements. Because we are finding that the LOT for CEP sales to be similar to the home-market LOT, we are making no LOT adjustment or CEP offset. *See* section 773(a)(7)(A) of the Act.
(E)*Tolko* Tolko reported two channels of distribution in the home market. The first channel of distribution (channel 1) included direct sales made by Tolko's North American Lumber Sales and Tolko Brokerage divisions from Tolko's Canadian mill production and may have been shipped either directly or through a reload center to customers. The second channel of distribution (channel 2) consisted of sales made principally by Tolko Brokerage and TDS divisions from inventory locations that contained softwood lumber produced by Tolko and various suppliers. We compared the sales process in each channel of distribution and found that the selling functions were similar for each channel. Accordingly, we preliminarily determine that home-market sales in these channels of distribution constitute a single LOT. In the U.S. market, Tolko had both EP and CEP sales. Tolko reported EP sales to U.S. customers through one channel of distribution. Similar to the home market, this channel included direct sales made by Tolko's North American Lumber sales and Tolko Brokerage divisions from Tolko's Canadian mill production and were shipped either directly or through a reload center to customers. Because the sales processes in this channel of distribution were similar, we preliminarily determine that there is a single EP LOT and that this EP LOT is identical to the home-market LOT. With respect to CEP sales, Tolko reported these sales through two channels of distribution. The first (channel 2), included sales by Tolko's North American Lumber Sales and Tolko Brokerage divisions from U.S. inventory reload centers to customers. The second (channel 3), consisted of sales made to U.S. companies pursuant to VMI contracts. The selling functions, including freight arrangements and order processing, for these two channels of distribution were not significantly different and, therefore, we preliminary determine there is only one CEP LOT. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Tolko's Canadian-based services for its CEP sales were similar to the single home-market LOT with respect to sales process and inventory management. Because we are finding the LOT for CEP sales to be similar to the home-market LOT, we are making no LOT adjustment or CEP offset. *See* section 773(a)(7)(A) of the Act.
(F)*Weldwood* Weldwood reported three channels of distribution and four customer categories in the home market. The first channel of distribution, channel 1, consists of sales from a mill directly to customers. The second channel of distribution, channel 2, comprises sales from a Canadian reload to customers. The third channel of distribution, channel 3, consists of sales through a VMI program. Although we found differences in the level of inventory maintenance and inventory management performed for the different channels, the three channels are similar with respect to the overall sales process, packing, freight services, invoicing, warranty claims, the granting of credit or debit adjustments, and the granting of early payment discounts. Accordingly, we preliminary determine that home market sales in these three channels of distribution constitute a single LOT. In the U.S. market, Weldwood made both EP and CEP sales. Weldwood reported EP sales to three customer categories through two channels of distribution, mill direct sales and sales through Canadian reloads. Although we found differences in the level of inventory maintenance performed for the different channels, the channels are similar with respect to the overall sales process, packing, freight services, invoicing, warranty claims, the granting of credit or debit adjustments, and the granting of early payment discounts. Therefore, we preliminarily determine that EP sales through the two channels of distribution constitute a single LOT. Further, we do not find that the selling functions for Weldwood's single home market LOT differ significantly from the selling functions for the LOT for EP sales. Therefore, we preliminarily determine that home market sales and EP sales are at an identical LOT. With respect to CEP sales, Weldwood's third channel of distribution, channel 3, comprises sales to customers through WSI, an affiliate of the International Paper Company (IP), Weldwood's parent company during the POR. WSI's only purpose was to hold inventory at U.S. reload locations. It had no facilities or employees in the United States. Weldwood made these sales from unaffiliated reload centers in the United States. All selling activities were performed by Weldwood sales personnel located in Canada. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. Weldwood reported that all selling expenses for CEP sales are incurred in Canada. Further, Weldwood claimed that its Canadian-based services for CEP sales are the same as the services it performs for home market sales through a Canadian reload. *See* Weldwood's January 14, 2005, section A questionnaire response at A-28 through A-31; 15 *see* also Weldwood's March 10, 2005, sections A, B, and C supplemental questionnaire response at Appendix SA-5. Because all selling functions performed for CEP sales are similar to the selling functions of the home market LOT, we are making no LOT adjustment or CEP offset. *See* section 773(a)(7)(A) of the Act. 15 The January 14, 2005, section A response refers to the rebracketed version of Weldwood's original section A response that was submitted on September 28, 2004.
(G)*West Fraser* West Fraser reported four channels of distribution in the home market. The first channel of distribution (channel 1) included sales made directly to end-users and distributors from a mill or origin reload. The second channel of distribution (channel 2) consisted of sales made to end-users and distributors through VMI programs. The third channel of distribution (channel 3) consisted of sales made to end-users and distributors through unaffiliated inventory locations. The fourth channel of distribution (channel 4) consisted of sales made to end-users and distributors from the Seehta mill through an origin reload. We compared these four channels of distribution and found that, while selling functions differed slightly with respect to the arrangement of freight and delivery for origin reload centers in channel 2 and the office handling sales in channel 3, all four channels were similar with respect to sales process, packing, freight services, inventory services, warranty services, and early payment discount services. Accordingly, we found that home-market sales in these three channels of distribution constitute a single LOT. In the U.S. market, West Fraser had both EP and CEP sales. For EP sales, West Fraser reported one channel of distribution. This channel of distribution only included sales made directly to end-users and distributors from a mill or origin reload. The channel of distribution for EP sales does not differ from the first channel of distribution within in the home market, except with respect to paper processing services in connection with brokerage and handling. Therefore, as both the above home and U.S. market channel of distribution are comparable in terms of selling functions, delivery and customer categories, the EP channel of distribution LOT is similar to the single home market LOT. With respect to CEP sales, West Fraser had two channels of distribution (channel 2 and 3). Both channels of distribution included sales to end-users and distributors through West Fraser's subsidiary, WFFP. The company WFFP is incorporated in the United States and was specifically created to act as the importer of record and hold title to lumber sold in the United States. It has no facilities or employees in the United States. The second channel of distribution (channel 2) does not differ from the second channel of distribution within the home market, except with respect to paper processing services in connection with brokerage and handling. For the third channel of distribution (channel 3), sales were made from unaffiliated destination reload centers in the United States by sales people located in Canada. In determining whether separate LOTs exist between U.S. CEP sales and home-market sales, we examined the selling functions in the distribution chains and customer categories reported in both markets. In our analysis of LOTs for CEP sales, we consider only the selling activities reflected in the price after the deduction of expenses and profit under section 772(d) of the Act. West Fraser's Canadian-based services for its CEP sales include order-taking, invoicing and inventory management. West Fraser's Canadian sales agents occasionally arrange for reload center excess storage and freight from U.S. destination reload centers to unaffiliated end users. Any services occurring in the United States are provided by the unaffiliated reload centers, which are paid a fee by West Fraser. These expenses have been deducted from the CEP starting price as movement expenses. West Fraser's sales to end-users and distributors in the home market and its CEP sales in the U.S. market do not involve significantly different selling functions. Specifically, the CEP LOT was similar to the single home-market LOT with respect to sales process and inventory maintenance. Therefore, we are making no LOT adjustment or CEP offset. See section 773(a)(7)(A) of the Act.
(H)*Weyerhaeuser* Weyerhaeuser reported seven channels of distribution in the home market, with seven customer categories. 16 The channels of distribution are: 1) mill-direct sales; 2) VMI sales; 3) mill-direct sales made through WBM; 4) sales made out of inventory by WBM; 5) SWL and B.C. Coastal Group's
(BCC)sales through Canadian reloads; 6) BCC's sales through processing facilities; and 7) WBM cross dock sales. 17 To determine whether separate LOTs exist in the home market, we examined the selling functions, the chain of distribution, and the customer categories reported in the home market. 16 Weyerhaeuser also reported a customer category for employee sales in the home market. However, we removed these sales from the margin calculation and LOT analysis. 17 Even though there are only seven channels of distribution in the home market, Weyerhaeuser designated cross dock sales as channel eight in the questionnaire response and accompanying database. For each of its channels of distribution, Weyerhaeuser's selling functions included invoicing, freight arrangement, product training, marketing and promotional activities, advanced shipping notices, and order status information. Weyerhaeuser's sales made out of inventory by WBM (channel 4) appear to involve substantially more selling functions, and to be made at a different point in the chain of distribution than mill-direct sales. WBM functions as a distributor for BCC and SWL, and operates as a reseller for unaffiliated parties. WBM operates a number of customer service centers
(CSC)throughout Canada where it provides local sales offices and just-in-time inventory
(JIT)service for its customers. Generally, BCC and SWL make the sale to WBM, after which the merchandise is sold to the final customer by WBM's local sales force. Freight must be arranged to the WBM inventory location and then to the final customer. CSCs will also engage in minor further manufacturing to fill a customer order, if the desired product is not in inventory. Additionally, WBM sells from inventory through its trading group locations (TGs). WBM also sells on a mill-direct basis (channel 3) but does not provide the JIT service for such transactions. Therefore, we do not consider mill-direct sales made through WBM to be at a separate LOT from mill-direct sales made by SWL and BCC. Additionally, we compared sales invoiced from Canadian reloads (channel 5) and sales made from BCC's processing mills (channel 6) to the mill direct sales and found that the selling activities did not differ to the degree necessary to warrant separate LOTs. Our analysis of cross dock sales (channel 7) indicates that they are most similar to WBM's warehouse sales. The specialized nature of these sales requires additional services that direct sales do not. Like WBM warehouse sales, cross dock merchandise is usually part of a JIT order and is shipped from a mill to an inventory location. Even though the merchandise may not be commingled or unpacked, it often enters the warehouse and requires additional services for two freight segments and loading and unloading. Therefore, we consider cross dock sales to be at the same LOT as WBM warehouse sales. Sales made through VMI arrangements (channel 2) also appear to involve significantly more selling activities than mill-direct sales. SWL has a designated sales team responsible for VMI sales which works with the customers to develop a sales volume plan, manages the flow of products and replenishing process, and aligns the sales volume plan with Weyerhaeuser's production plans. It also offers extra services such as bar coding, cut-in-two, half packing, and precision end trimming. We analyzed Weyerhaeuser's customer categories in relation to the channels of distribution and application of selling functions. Each channel services multiple customer categories with channels 1, 2, 3, 4, 5, and 7 serving at least six customer categories. We found there were not significant differences in the application of selling functions by customer and instead the activities depended on the channel of distribution. Therefore, customer category is not a useful indicator of LOT for Weyerhaeuser's home market sales. Because VMI, WBM inventory, and WBM cross dock sales involve significantly more selling functions than the mill-direct sales, we consider them to be at a more advanced LOT for purposes of the preliminary results. While the selling activities for VMI, WBM inventory, and cross dock sales are not identical, the principal selling activity for all three is JIT inventory maintenance. Thus, we consider them to be at the same LOT. Accordingly, we find that there are two LOTs in the home market, mill-direct
(HM1)(encompassing channels 1, 3, 5, and 6) and VMI, WBM sales out of inventory, and cross dock sales
(HM2)(encompassing channels 2, 4, and 7). Weyerhaeuser reported eight channels of distribution in the U.S. market, with eight customer categories. The channels of distribution are: 1) mill-direct sales; 2) VMI sales; 3) WBM direct sales; 4) WBM U.S. inventory sales; 5) SWL sales through U.S. reloads; 6) SWL and BCC sales through Canadian reloads; 7) sales from BCC's processing facilities; and 8) WBM cross dock sales. In determining whether separate LOTs existed between U.S. and home market sales, we examined the selling functions, the chain of distribution, and customer categories reported in the U.S. market. With regard to the mill-direct sales to the United States (channels 1 and 3), Weyerhaeuser has the same selling activities as it does for mill-direct sales in Canada. Likewise, we consider sales invoiced from Canadian reloads (channel 6) and sales made from BCC processing mills (channel 7) to be at the same LOT as the direct sales. Therefore, where possible, we matched the U.S. mill-direct sales (U.S.1) (encompassing channels 1, 3, 6, and 7) to the Canadian mill-direct sales (HM1). The other channels consist of CEP sales as addressed below. Weyerhaeuser's Canadian selling functions for VMI sales to the United States (channel 2) include the similar selling functions performed for home market VMI sales, as described above, except that the sales are managed by SWL Western in the United States. As a result, the selling functions, with the exception of arranging freight to the VMI locations, are performed in the United States. Therefore, after the deduction of U.S. expenses and profit, we find that the U.S. VMI sales (U.S.1) are made at the same LOT as home market direct sales (HM1), and we have matched them accordingly in the margin program. SWL's sales through U.S. reloads (channel 5) also appear to have selling functions performed in Canada and the United States. While Weyerhaeuser states that it maintains JIT inventory for its U.S. customers at these reloads, many of the selling functions are managed by SWL Western in the United States. After the deduction of U.S. expenses and profit, these sales do not appear to be at a different point in the chain of distribution than mill-direct sales in Canada. Therefore, for purposes of the preliminary results, we consider SWL's sales through U.S. reloads to be at the same LOT as its mill-direct sales (U.S.1 and HM1), and we have matched them accordingly. With regard to WBM's U.S. inventory sales (channel 4) significant selling activities occur in the United States, such as maintaining local sales offices and JIT, and arranging freight to the final customer. The selling functions performed in Canada are the same selling functions performed for mill-direct sales. Therefore, after the deduction of U.S. expenses and profit, we find that WBM's U.S. inventory sales are at the same LOT as mill-direct sales (U.S.1 and HM1), and we have matched them accordingly. We found that cross dock sales (channel 8) were most similar to WBM warehouse sales and, as such, designated them at the same LOT ( *i.e.* , U.S.1.) As was the case with Canadian sales, each U.S. channel of distribution services multiple customer categories. Channels 1-5 have buyers from at least five customer categories. The other three channels have two to four customer categories each but also realized significantly fewer sales during the POR. We found there were not significant differences in the application of selling functions by customer and instead the activities depended on the channel of distribution. Therefore, customer category is not a useful indicator of LOT for Weyerhaeuser's U.S. sales. Because we found a pattern of consistent price differences between LOTs, where we matched across LOTs, we made an LOT adjustment under section 773(a)(7)(A) of the Act. Currency Conversion We made currency conversions into U.S. dollars in accordance with section 773A of the Act, based on exchange rates in effect on the date of the U.S. sale, as certified by the Federal Reserve Bank. Preliminary Results of Review As a result of this review, we preliminarily determine that the following weighted-average margins exist for the period May 1, 2003, through April 30, 2004: Producer Weighted-Average Margin (Percentage) Abitibi (and its affiliates Abitibi-Consolidated Company of Canada, Produits Forestiers Petit Paris Inc., Societe en Commandite Scierie Opitciwan, Produits Forestiers La Tuque Inc.) 2.53 Buchanan (and its affiliates Atikokan Forest Products Ltd., Long Lake Forest Products Inc., Nakina Forest Products Limited, 18 Buchanan Distribution Inc., Buchanan Forest Products Ltd., Great West Timber Ltd., Dubreuil Forest Products Ltd., Northern Sawmills Inc., McKenzie Forest Products Inc., Buchanan Northern Hardwoods Inc., Northern Wood, and Solid Wood Products Inc.) 2.49 Canfor 19 * (and its affiliates Canadian Forest Products, Ltd., Daaquam Lumber Inc., Lakeland Mills Ltd., The Pas Lumber Company Ltd., and Skeena Cellulose) 1.42 Tembec (and its affiliates Marks Lumber Ltd., 791615 Ontario Limited (Excel Forest Products), Produits Forestiers Temrex Limited Partnership 20 ) 3.16 Tolko (and its affiliate Gilbert Smith Forest Products Ltd.) 3.22 Weldwood 5.62 West Fraser (and its affiliates West Fraser Forest Products Inc., and Seehta Forest Products Ltd. 0.51 Weyerhaeuser (and its affiliate Weyerhaeuser Saskatchewan Ltd.) 4.74 18 We note that Nakina Forest Products Limited is a division of Long Lake Forest Products, Inc, an affiliate of Buchanan Lumber Sales. 19 We note that this margin reflects a weighted-average of Canfor's and Slocan's respective margins. See *Collapsing Determinations* section above. 20 We note that Produits Forestiers Temrex Limited Partnership is the same entity as the company Produits Forestiers Temrex Usine St. Alphonse, Inc. included in the July 1, 2003, initiation notice. *See Notice of Initiation of Antidumping Duty Administrative Review,* 68 FR 39059 (July 1, 2003). REVIEW-SPECIFIC AVERAGE RATE APPLICABLE TO THE FOLLOWING COMPANIES: Producer Weighted-Average Margin (Percentage) 2 by 4 Lumber Sales Ltd 605666 BC Ltd 9027-7971 Quebec Inc. (Scierie Marcel Dumont) 9098-5573 Quebec Inc. (K.C.B. International) AFA Forest Products Inc A. L. Stuckless & Sons Limited AJ Forest Products Ltd Alexandre Cote Ltee Allmac Lumber Sales Ltd Allmar International Alpa Lumber Mills Inc American Bayridge Corporation Apex Forest Products, Inc Apollo Forest Products Limited Aquila Cedar Products Ltd Arbutus Manufacturing Limited Ardew Wood Products, Ltd Armand Duhamel & Fils Inc Ashley Colter
(1961)Limited Aspen Planers Ltd Associated Cedar Products Atco Lumber Atlantic Pressure Treating Ltd Atlantic Warehousing Limited Atlas Lumber (Alberta) Ltd AWL Forest Products B & L Forest Products Ltd Bakerview Forest Products Inc Bardeaux et Cedres St-Honore Inc. (Bardeaux et Cedres) Barrett Lumber Company Barrette-Chapais Ltee Barry Maedel Woods & Timber Bathurst Lumber (Division of UPM-Kymmene Miramichi Inc.) Beaubois Coaticook Inc Blackville Lumber (Division of UPM-Kymmene Miramichi Inc.) Blanchette et Blanchette Inc Bloomfield Lumber Limited Bois Cobodex
(1995)Inc Bois Daaquam Inc Bois De L'Est F.B. Inc Bois Granval G.D.S. Inc Bois Kheops Inc Bois Marsoui G.D.S. Inc Bois Neos Inc Bois Nor Que Wood Inc Boisaco Inc Boscus Canada Inc Boucher Forest Products Ltd Bowater Canadian Forest Products Inc Bowater Incorporated Bridgeside Forest Industries, Ltd Bridgeside Higa Forest Industries Ltd Brittainia Lumber Company Limited Brouwer Excavating Ltd Brunswick Valley Lumber Buchanan Lumber Busque & Laflamme Inc BW Creative Wood Byrnexco Inc C. E. Harrison & Son Ltd Caledon Log Homes
(FEWO)Caledonia Forest Products Ltd Cambie Cedar Products Ltd Canadian Lumber Company Ltd Cando Contracting Ltd Canex International Lumber Sales Ltd CanWel Building Materials Ltd CanWel Distribution Ltd Canyon Lumber Company Ltd Cape Cod Wood Siding Inc Cardinal Lumber Manufacturing & Sales Inc Careau Bois Inc Carrier & Begin Inc Carrier Forest Products Ltd Carrier Lumber Ltd Carson Lake Lumber Cattermole Timber CDS Lumber Products Cedarland Forest Products Ltd Cedrico Lumber Inc. (Bois d'Oeuvre Cedrico Inc.) Central Cedar, Ltd Centurion Lumber Manufacturing
(1983)Ltd Chaleur Sawmills Chasyn Wood Technologies Inc Cheminis Lumber Inc Cheslatta Forest Products Ltd Chisholm's (Roslin) LTd Choicewood Products Inc City Lumber Sales and Services Limited Clair Industrial Dev. Corp. Ltd Clermond Hamel Ltee Coast Clear Wood Ltd Colonial Fence Mfg. Ltd Columbia Mills Ltd Comeau Lumber Limited Commonwealth Plywood Company Ltd Cooper Creek Cedar Ltd Cottles Island Lumber Co. Ltd Cowichan Lumber Ltd Crystal Forest Industries Ltd Curley Cedar Post & Rail Cushman Lumber Company Inc D. S. McFall Holdings Ltd Dakeryn Industries Ltd Deep Cove Lumber Delco Forest Products Delta Cedar Products Devlin Timber Company
(1992)Limited Devon Lumber Co. Ltd Doman Forest Products Limited Doman Industries Limited Doman Western Lumber Ltd Domexport Inc Domtar Inc Downie Timber Ltd Dunkley Lumber Ltd E. Tremblay Et. Fils Ltee Eacan Timber Canada Ltd Eacan Timber Limited Eacan Timber USA Ltd East Fraser Fiber Co. Ltd Eastwood Forest Products Inc Ed Bobocel Lumber 1993 Ltd Edwin Blaikie Lumber Ltd Elmira Wood Products Limited Elmsdale Lumber Company Ltd ER Probyn Export Ltd Errington Cedar Products Evergreen Empire Mills Incorporated EW Marketing F.L. Bodogh Lumber Co. Ltd Falcon Lumber Limited Faulkner Wood Specialties Limited Federated Co-operatives Limited Fenclo Ltee Finmac Lumber Limited Fontaine Inc., J. A. and its affiliates Fontaine et fils Inc., Bois Fontaine Inc., Gestion Natanis Inc., Les Placements Jean-Paul Fontaine Ltee. Forex Log & Lumber Forstex Industries Inc Forwest Wood Specialties Inc Fraser Pacific Forest Products Inc Fraser Pacific Lumber Company Fraser Papers Inc Fraser Pulp Chips Ltd Frasierview Cedar Products Ltd Frontier Mills Inc G.D.S. Valoribois Inc Galloway Lumber Co. Ltd Gerard Crete & Fils Inc Gestofor Inc Gogama Forest Products Goldwood Industries Ltd Gorman Bros. Lumber Ltd Great Lakes MSR Lumber Ltd Greenwood Forest Products Groupe Lebel H. A. Fawcett & Son Limited H. J. Crabbe & Sons Ltd Haida Forest Products Ltd Hainesville Sawmill Ltd Harrison's Home Building Centers Harry Freeman & Son Ltd Hefler Forest Products Ltd Hi-Knoll Cedar Inc Hilmoe Forest Products Ltd Hoeg Brothers Lumber Ltd Holdright Lumber Products Ltd Hudson Mitchell & Sons Lumber Inc Hughes Lumber Specialties Inc Hyak Specialty Wood Products Ltd Industrial Wood Specialties Industries G.D.S. Inc Industries Perron Inc Interior Joinery Ltd International Forest Products Ltd Isidore Roy Limited Ivis Wood Products Ivor Forest Products Ltd J & G Logworks J. A. Turner & Sons
(1987)Limited J.D. Irving, Ltd J.S. Jones Timber Ltd Jackpine Engineered Wood Products Jackpine Forest Products Ltd Jackpine Group of Companies Jamestown Lumber Company Limited Jasco Forest Products Ltd Jeffery Hanson Julimar Lumber Co. Limited Kenora Forest Products Ltd Kent Trusses Ltd Kenwood Lumber Ltd Kispiox Forest Products Kitwanga Lumber Co. Ltd Kruger, Inc La Crete Sawmills Ltd Lakeburn Lumber Limited Lamco Forest Products Landmark Structural Lumber Landmark Truss & Lumber Inc Langely Timber Company Ltd Langevin Forest Products, Inc Lattes Waska Laths Inc Lawsons Lumber Company Ltd Lazy S Lumber Lecours Lumber Co. Limited Ledwidge Lumber Co., Ltd Leggett & Platt (B.C.) Ltd Leggett & Platt Inc Leggett & Platt Ltd Les Bois d'Oeuvre Beaudoin & Gauthier Inc Les Bois S &P Grondin Inc Les Chantiers Chibougamau Ltee Les Produits Forestiers D. G. Ltee. Les Produits Forestiers Dube Inc Les Produits Forestiers F.B.M. Inc Les Produits Forestiers Maxibois Inc Les Produits Forestiers Miradas Inc(Miradas Forest Products Inc.) Les Scieries Du Lac St-Jean Inc Les Scieries Jocelyn Lavoie Inc Leslie Forest Products Ltd Lignum Ltd Lindsay Lumber Ltd Liskeard Lumber Limited Littles Lumber Ltd Lonestar Lumber Inc Louisiana Pacific Corporation Lousiana Malakwa LP Canada Ltd LP Engineered Wood Products Ltd Lulumco Inc Lyle Forest Products Ltd M & G Higgins Lumber Ltd M. L. Wilkins & Son Ltd MacTara Limited Maibec Industries Inc. (Industries Maibec Inc.) Manitou Forest Products Ltd Maple Creek Saw Mills Inc Marcel Lauzon Inc Marine Way Mary's River Lumber Marwood Inc Marwood Ltd Materiaux Blanchet Inc Max Meilleur et Fils Ltee. McCorquindale Holdings Ltd McNutt Lumber Company Ltd Mercury Manufacturing Inc Meunier Lumber Company Ltd MF Bernard Inc Mid America Lumber Mid Valley Lumber Specialties Ltd Midway Lumber Mills Ltd Mill & Timber Products Ltd Millar Western Forest Products Ltd Millco Wood Products Ltd Miramichi Lumber Products Mobilier Rustique (Beauce) Inc Monterra Lumber Mills Limited Mountain View Specialty Reload Inc Murray A Reeves Forestry Limited Murray Bros. Lumber Company Limited N. F. Douglas Lumber Limited Nechako Lumber Co., Ltd Newcastle Lumber Co. Inc New West Lumber Nexfor Inc Nexfor Norbord Nicholson and Cates Limited Nickel Lake Lumber Norbord Industries Inc Norbord Juniper and Norbord's sawmills at La Sarre Senneterre Quebec NorSask Forest Products Inc North American Forest Products North American Forest Products Ltd (Division Belanger) North Atlantic Lumber Inc North Enderby Distribution Ltd (N.E. Distribution) North Enderby Timber Ltd North Mitchell Lumber Co. Ltd., Saran Cedar North Shore Timber Ltd North Star Wholesale Lumber Ltd Northchip Ltd Northland Forest Products Ltd Olav Haavaldsrud Timber Company Limited Olympic Industries Inc Optibois Inc P.A. Lumber & Planning Limited Pacific Lumber Company Pacific Lumber Remanufacturing Inc Pacific Northern Rail Contractors Corp Pacific Specialty Wood Products Ltd. (formerly Clearwood Industries Ltd.) Pacific Wood Specialties Pallan Timber Products Ltd Palliser Lumber Sales Ltd Pan West Wood Products Ltd Paragon Ventures Ltd. (Vernon Kiln and Millwork, Ltd. and 582912 BC, Ltd.) Parallel Wood Products Ltd Pastway Planing Limited Pat Power Forest Products Corporation Patrick Lumber Company Paul Fontaine Ltee. Paul Vallee Inc Paul Vallee Peak Forest Products Ltd Pharlap Forest Products Inc Pheonix Forest Products Inc Pleasant Valley Remanufacturing Ltd Pope & Talbot, Inc Porcupine Wood Products Ltd Portbec Forest Products Ltd. (Les Produits Forestiers Portbec Ltee.) Portelance Lumber Capreol Ltd Power Wood Corp Precibois Inc Preparabois
(2003)Inc Prime Lumber Limited Pro Lumber Inc Produits Forestiers P. Proulx Inc Promobois G.D.S. Inc Quadra Wood Products Ltd R. Fryer Forest Products Limited Raintree Forest Products Inc Raintree Lumber Specialties Ltd Ramco Lumber Ltd Redtree Cedar Products Ltd Redwood Value Added Products Inc Rembos Inc Rene Bernard Inc Ridgewood Forest Products Ltd Rielly Industrial Lumber Inc Riverside Forest Products Limited Rocam Lumber Inc. (Bois Rocam Inc.) Rojac Cedar Products Inc Rojac Enterprises Inc Roland Boulanger & Cie Ltee Russell White Lumber Limited Sauder Moldings, Inc. (Ferndale) Sauder Industries Limited Schols Cedar Products Scierie A&M St-Pierre Inc Scierie Adrien Arseneault Ltee Scierie Alexandre Lemay & Fils Inc Scierie Chaleur Scierie Dion et Fils Inc Scierie Gallichan Inc Scierie Gauthier Ltee. Scierie La Patrie, Inc Scierie Landrienne Inc Scierie Lapointe & Roy Ltee. Scierie Leduc, Division of Stadacona Inc Scierie Nord-Sud Inc. (North-South Sawmill Inc.) Scierie P.S.E. Inc Scierie St. Elzear Inc Scierie Tech Inc Scieries du Lac St. Jean Inc Selkirk Specialty Wood Ltd Sexton Lumber Seycove Forest Products Limited Seymour Creek Cedar Products Ltd Shawood Lumber Inc Sigurdson Bros. Logging Company Ltd Silvermere Forest Products Inc Sinclar Enterprises Ltd.* South Beach Trading Inc South River Planing Mills Inc South-East Forest Products Ltd Spray Lake Sawmills
(1980)Ltd Spruce Forest Products Ltd Spruce Products Ltd St. Anthony Lathing Ltd Stag Timber Standard Building Products Ltd Still Creek Forest Products Ltd Stuart Lake Lumber Co. Ltd Stuart Lake Marketing Inc Sunbury Cedar Sales Ltd Suncoast Lumber & Milling Sundance Forest Industries SWP Industries Inc Sylvanex Lumber Products Inc Taiga Forest Products Tall Tree Lumber Company Tarpin Lumber Incorporated Taylor Lumber Company Ltd Teal Cedar Products Ltd Teal-Jones Group Teeda Corp Terminal Forest Products Ltd T.F. Specialty Sawmill TFL Forest Ltd Timber Ridge Forest Products TimberWorld Forest Products Inc T'loh Forest Products Limited Top Quality Lumber Ltd T. P. Downey & Sons Ltd Treeline Wood Products Ltd Triad Forest Products Twin Rivers Cedar Products Ltd Tyee Timber Products Ltd Uneeda Wood Products Uniforet Inc Uniforet Scierie-Pate Vancouver Specialty Cedar Products Vanderhoof Specialty Wood Products Vandermeer Forest Products (Canada) Ltd Vanderwell Contractors
(1971)Ltd Vanport Canada, Co. Vernon Kiln and Millwork, Ltd Visscher Lumber Inc W. C. Edwards Lumber W. I. Woodtone Industries Inc Welco Lumber Corporation Wentworth Lumber Ltd Werenham Forest Products West Bay Forest Products & Manufacturing Ltd West Can Rail Ltd West Chilcotin Forest Products Ltd West Hastings Lumber Products Western Cleanwood Preservers Ltd Western Commercial Millwork Inc Western Wood Preservers Ltd Weston Forest Corp West-Wood Industries White Spruce Forst Products Ltd Wilfrid Paquet & Fils Ltee Wilkerson Forest Products Ltd Williams Brothers Limited Winnipeg Forest Products, Inc Woodko Enterprises, Ltd Woodland Forest Products Ltd Woodline Forest Products Ltd Woodtone Industries Inc Woodwise Lumber Ltd Wynndel Box & Lumber Co. Ltd Zelensky Bros. Forest Products 2.44 * We note that, during the POR, Sinclar Enterprises Ltd. (Sinclar) acted as an affiliated reseller for Lakeland, an affiliate of Canfor. In this review, we reviewed the sales of Canfor and its affiliates; therefore, Canfor's weighted-average margin applies to all sales produced by any member of the Canfor Group and sold by Sinclar. As Sinclar also separately requested a review, any sales produced by another manufacturer and sold by Sinclar will receive the “Review-Specific Average” rate. Please note that the names of the companies are listed above exactly as they will be included in instructions to CBP. Any alternate names, spellings, affiliated companies or divisions will not be considered or included in any instructions to CBP unless they are brought to the attention of the Department in a case brief. There will be no exceptions. Disclosure The Department will disclose calculations performed in accordance with 19 CFR 351.224(b). Public Hearing An interested party may request a hearing within 30 days of publication of these preliminary results. *See* 19 CFR 351.310(c). Any hearing, if requested, will be held 44 days after the date of publication, or the first working day thereafter. Interested parties may submit case briefs and/or written comments no later than 30 days after the date of publication of these preliminary results. Rebuttal briefs and rebuttals to written comments, limited to issues raised in such briefs or comments, may be filed no later than 37 days after the date of publication. Parties who submit arguments are requested to submit with the argument
(1)a statement of the issue,
(2)a brief summary of the argument, and
(3)a table of authorities. Further, the parties submitting written comments should provide the Department with an additional copy of the public version of any such comments on diskette. The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of these preliminary results. Assessment Upon completion of this administrative review, pursuant to 19 CFR 351.212(b), the Department will calculate an assessment rate on all appropriate entries. We will calculate importer-specific duty assessment rates on the basis of the ratio of the total amount of antidumping duties calculated for the examined sales to the total entered value of the examined sales for that importer. For the companies requesting a review, but not selected for examination and calculation of individual rates, we will calculate a weighted-average assessment rate based on all importer-specific assessment rates excluding any which are *de minimis* or margins determined entirely on adverse facts available. Where the assessment rate is above *de minimis* , we will instruct CBP to assess duties on all entries of subject merchandise by that importer. Cash Deposit Requirements The following deposit rates will be effective upon publication of the final results of this administrative review for all shipments of Certain Softwood Lumber Products From Canada entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act:
(1)the cash deposit rate listed above for each specific company will be the rate established in the final results of this review, except if a rate is less than 0.5 percent, and therefore *de minimis* , the cash deposit will be zero;
(2)for the non-selected companies we will calculate a weighted-average cash deposit rate based on all the company-specific cash deposit rates, excluding *de minimis* margins or margins determined entirely on adverse facts available;
(3)for previously reviewed or investigated companies not participating in this review, the cash deposit rate will continue to be the company-specific rate published for the most recent period;
(4)if the exporter is not a firm covered in this review, a prior review, or the less-than-fair-value
(LTFV)investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and
(5)if neither the exporter nor the manufacturer is a firm covered in this or any previous review conducted by the Department, the cash deposit rate will be 11.54, the “All Others” rate calculated in the Department's recent determination under section 129 of the Uruguay Round Agreement Act. *See Notice of Determination Under Section 129 of the Uruguay Round Agreements Act: Antidumping Measures on Certain Softwood Lumber Products from Canada* , 70 FR 22636 (May 2, 2005). These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review. This notice serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entities during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties. This determination is issued and published in accordance with sections 751(a)(1) and 777(i)(1) of the Act. Dated: May 31, 2005. Susan H. Kuhbach, Acting Assistant Secretary for Import Administration. [FR Doc. E5-2885 Filed 6-6-05; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE International Trade Administration [A-583-830] Stainless Steel Plate in Coils from Taiwan; Preliminary Rescission of Antidumping Duty Administrative Review AGENCY: Import Administration, International Trade Administration, Department of Commerce. EFFECTIVE DATE: June 7, 2005. FOR FURTHER INFORMATION CONTACT: Elizabeth Eastwood or Jill Pollack, AD/CVD Operations, Office 2, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230, telephone:
(202)482-3874 or
(202)482-4593, respectively. SUPPLEMENTARY INFORMATION: Background On May 3, 2004, the Department of Commerce (the Department) published in the **Federal Register** (69 FR 24117) a notice of opportunity to request an administrative review of the antidumping duty order on stainless steel plate in coils from Taiwan for the period May 1, 2003, through April 30, 2004. In accordance with 19 CFR 351.213(b)(1), on May 28, 2004, the petitioners ( *i.e.* , Allegheny Ludlum Corp., United Auto Workers Local 3303, Zanesville Armco Independent Organization, the United Steelworkers of America, and AFL-CIO/CLC) requested a review of this order with respect to the following producers/exporters: Chain Chon Industrial Co., Ltd. (Chain Chon), Chang Mien Industries Co., Ltd., Chien Shing Stainless Steel Co., Ltd., China Steel Corporation, East Tack Enterprise Co., Goang Jau Shing Enterprise Co., Ltd., PFP Taiwan Co., Ltd., Shing Shong Ta Metal Ind. Co., Ltd., Sinkang Industries, Ltd., Ta Chen Stainless Pipe Ltd. (Ta Chen), Tang Eng Iron Works Co., Ltd., Yieh Loong Enterprise Co., Yieh Mau Corp., Yieh Trading Co., and Yieh United Steel Corp (YUSCO). The Department initiated an administrative review on stainless steel plate in coils from Taiwan in June 2004. *See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part* , 69 FR 39409 (June 30, 2004). We issued questionnaires to the producers/exporters named by the petitioners in October 2004. In October and November 2004, the following companies informed the Department that they had no shipments or entries of subject merchandise during the period of review (POR): Chain Chon, Ta Chen and YUSCO. We reviewed data from U.S. Customs and Border Protection
(CBP)and attempted to confirm that there were no entries of subject merchandise from any of these companies. We also confirmed with CBP data that none of the other companies named by the petitioners in their request for review had entries of subject merchandise during the POR. However, initial CBP data showed that Ta Chen had potential entries of subject merchandise during the POR. Therefore, on November 1, 2004, we requested entry documentation from CBP for Ta Chen's entries. Our examination of the entry documentation appeared to confirm Ta Chen's claim and we informed the petitioners of our intent to rescind this administrative review with respect to Ta Chen in December 2004. On December 21, 2004, the petitioners requested that the Department extend the deadline for the preliminary results by 120 days in accordance with 19 CFR 351.213(h)(2). On January 28, 2005, we extended the deadline for the preliminary results of this review until no later than May 31, 2005. *See Stainless Steel Plate in Coils From Taiwan; Notice of Extension of Time Limits for Preliminary Results in Antidumping Duty Administrative Review* , 70 FR 5610 (Feb. 3, 2005). Further, on January 21, 2005, 1 the petitioners claimed that the information received from CBP and placed on the record of this proceeding showed that Ta Chen did have entries of subject merchandise during the POR, contrary to Ta Chen's assertion that it had no such entries. The petitioners submitted additional comments on this issue on February 11, 2005, and March 11, 2005. Ta Chen responded to the petitioners' comments on January 31, 2005, and February 22, 2005. 1 We note that while the petitioners originally submitted comments on this date, the Department rejected this filing because it was improperly bracketed. The petitioners submitted a properly bracketed version of their comments on February 2, 2005. In April 2005, we received additional documentation on Ta Chen's entries from CBP. After reviewing the documents and considering the comments of the parties, we preliminarily determine that Ta Chen did not have entries of subject merchandise during the POR. *See* the May 31, 2005, memorandum from Elizabeth Eastwood to Louis Apple entitled, “Analysis of Entries by Ta Chen Stainless Steel Pipe Co. Ltd. in the 2003-2004 Antidumping Duty Administrative Review on Stainless Steel Plate in Coil from Taiwan” for further discussion. Scope of the Order The product covered by this order is certain stainless steel plate in coils. Stainless steel is an alloy steel containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. The subject plate products are flat-rolled products, 254 mm or over in width and 4.75 mm or more in thickness, in coils, and annealed or otherwise heat treated and pickled or otherwise descaled. The subject plate may also be further processed ( *e.g.* , cold-rolled, polished, etc.), provided that it maintains the specified dimensions of plate following such processing. Excluded from the scope of this order are the following:
(1)plate not in coils,
(2)plate that is not annealed or otherwise heat treated and pickled or otherwise descaled,
(3)sheet and strip, and
(4)flat bars. The merchandise subject to this order is currently classifiable in the Harmonized Tariff Schedule of the United States
(HTS)at subheadings: 7219110030, 7219110060, 7219120006, 7219120021, 7219120026, 7219120051, 7219120056, 7219120066, 7219120071, 7219120081, 7219310010, 7219900010, 7219900020, 7219900025, 7219900060, 7219900080, 7220110000, 7220201010, 7220201015, 7220201060, 7220201080, 7220206005, 7220206010, 7220206015, 7220206060, 7220206080, 7220900010, 7220900015, 7220900060, and 7220900080. Although the HTS subheadings are provided for convenience and customs purposes, the written description of the merchandise subject to this order is dispositive. Rescission of Review Because none of the companies for which we initiated this administrative review had shipments of subject merchandise during the POR, in accordance with 19 CFR 351.213(d)(3) and consistent with our practice, we are preliminarily rescinding this review of the antidumping duty order on stainless steel plate in coils from Taiwan for the period of May 1, 2003, through April 30, 2004. Interested parties may submit comments for consideration in the Department's final results not later than 30 days after publication of this notice. Responses to those comments may be submitted not later than 10 days following submission of the comments. All written comments must be submitted in accordance with 19 CFR 351.303, and must be served on all interested parties on the Department's service list in accordance with 19 CFR 351.303(f). The Department will issue the final results of this administrative review, which will include the results of its analysis of issues raised in any such comments, within 120 days of publication of the preliminary results, and will publish these results in the **Federal Register** . This notice is published in accordance with section 751 of the Tariff Act of 1930, as amended, and 19 CFR 351.213(d)(4). Dated: May 31, 2005. Susan H. Kuhbach, Acting Assistant Secretary for Import Administration. [FR Doc. E5-2886 Filed 6-6-05; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE International Trade Administration (A-489-501) Notice of Preliminary Results of Antidumping Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube from Turkey AGENCY: Import Administration, International Trade Administration, U.S. Department of Commerce. SUMMARY: In response to a request by domestic interested parties, Allied Tube and Conduit Corporation (“Allied Tube”) and Wheatland Tube Company (“Wheatland”), the Department of Commerce (“the Department”) is conducting an administrative review of the antidumping duty order on certain welded carbon steel pipe and tube (“welded pipe and tube”) from Turkey. This review covers the following two producers/exporters of the subject merchandise:
(1)the Yücel Group (“Yücel”), which includes Çayirova Boru Sanayi ve Ticaret A.S. (“Çayirova”) and its affiliate, Yücel Boru Ithalat-Ihracat ve Pazarlama A.S. and
(2)the Borusan Group (“Borusan”). We preliminarily determine that both Yücel and Borusan made sales below normal value (“NV”). If these preliminary results are adopted in our final results, we will instruct U.S. Customs and Border Protection (“CBP”) to assess antidumping duties based on the difference between the export price (“EP”) and the NV. EFFECTIVE DATE: June 7, 2005. FOR FURTHER INFORMATION CONTACT: Christopher Hargett, George McMahon, or Martin Claessens, at
(202)482-4161,
(202)482-1167, or
(202)482-5451, respectively; AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. SUPPLEMENTARY INFORMATION: Background On May 15, 1986, the Department published in the **Federal Register** the antidumping duty order on welded pipe and tube from Turkey. *See* 51 FR 17784 (May 15, 1986). On May 3, 2004, the Department published a notice of opportunity to request an administrative review of this order. *See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review* , 69 FR 24117 (May 3, 2004). On May 28, 2004, in accordance with 19 CFR 351.213(b), domestic interested parties Allied Tube and Wheatland requested a review of Yücel and Borusan. On June 30, 2004, the Department published a notice of initiation of administrative review of the antidumping duty order on welded pipe and tube from Turkey, covering the period May 1, 2003, through April 30, 2004. *See Initiation of Antidumping and Countervailing Duty Administrative Reviews and Request for Revocation in Part* , 69 FR 39409 (June 30, 2004). On November 1, 2004, the Department extended the deadline for the preliminary results until no later than May 31, 2005. *See Certain Welded Carbon Steel Pipe and Tube from Turkey: Extension of Time Limit for Preliminary Results of Antidumping Duty Administrative Review* , 69 FR 63366 (November 1, 2004). On August 4, 2004, the Department sent an antidumping duty administrative review questionnaire to Yücel. 1 In the cover letter, the Department erred in asking Yücel to respond to section D of the questionnaire. In its questionnaire response, Yücel reported section D data. Subsequently, on January 6, 2005, a Department official spoke with counsel for Yücel about the error, and counsel for Yücel decided to leave the section D information on the record. Counsel for Yücel stated that he was amenable to leaving the cost data on the record without prejudice to Yücel's rights vis-à-vis the requirement of a cost allegation. *See* Memorandum to The File dated January 6, 2005. 1 The questionnaire consists of sections A (general information), B (sales in the home market or to third countries), C (sales to the United States), D (cost of production/constructed value), and E (cost of further manufacturing or assembly performed in the United States). We conducted a sales verification of Yücel's questionnaire responses from April 4 through April 8, 2005. Scope of the Order The products covered by this order include circular welded non-alloy steel pipes and tubes, of circular cross-section, not more than 406.4 millimeters (16 inches) in outside diameter, regardless of wall thickness, surface finish (black, or galvanized, painted), or end finish (plain end, beveled end, threaded and coupled). Those pipes and tubes are generally known as standard pipe, though they may also be called structural or mechanical tubing in certain applications. Standard pipes and tubes are intended for the low pressure conveyance of water, steam, natural gas, air, and other liquids and gases in plumbing and heating systems, air conditioner units, automatic sprinkler systems, and other related uses. Standard pipe may also be used for light load-bearing and mechanical applications, such as for fence tubing, and for protection of electrical wiring, such as conduit shells. The scope is not limited to standard pipe and fence tubing, or those types of mechanical and structural pipe that are used in standard pipe applications. All carbon steel pipes and tubes within the physical description outlined above are included in the scope of this order, except for line pipe, oil country tubular goods, boiler tubing, cold-drawn or cold-rolled mechanical tubing, pipe and tube hollows for redraws, finished scaffolding, and finished rigid conduit. Imports of these products are currently classifiable under the following Harmonized Tariff Schedule of the United States (“HTSUS”) subheadings: 7306.30.10.00, 7306.30.50.25, 7306.30.50.32, 7306.30.50.40, 7306.30.50.55, 7306.30.50.85, and 7306.30.50.90. Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this proceeding is dispositive. Verification As provided in section 782(i)(3) of the Tariff Act of 1930, as amended (“the Act”), we verified the information provided by Yücel. We used standard verification procedures, including an examination of the relevant sales and financial records. Our verification results are detailed in the company-specific verification report placed in the case file in the Central Records Unit (“CRU”), room B-099 of the main Department building. We made minor revisions to certain sales and cost data based on verification findings with the exception of warranties, discussed below. *See* the Yücel Verification Report, May 25, 2005, and Calculation Memorandum, May 31, 2005, in the CRU. Product Comparisons We compared the EP to the NV, as described in the *Export Price* and *Normal Value* sections of this notice. In accordance with section 771(16) of the Act, we first attempted to match contemporaneous sales of products sold in the United States and comparison market that were identical with respect to the following characteristics:
(1)grade;
(2)nominal pipe size;
(3)wall thickness;
(4)surface finish;
(5)end finish. When there were no sales of identical merchandise in the home market to compare with U.S. sales, we compared U.S. sales with the most similar merchandise based on the characteristics listed above in order of priority listed. Export Price Because both Yücel and Borusan sold subject merchandise directly to the first unaffiliated purchaser in the United States prior to importation, and constructed export price methodology was not otherwise warranted based on the record facts of this review, in accordance with section 772(a) of the Act, we used EP as the basis for all of Yücel's and Borusan's sales. We calculated EP using, as starting price, the packed, delivered price to unaffiliated purchasers in the United States. In accordance with section 772(c)(2)(A) of the Act, we made the following deductions from the starting price (gross unit price), where appropriate: foreign inland freight from the mill to warehouse to port, foreign brokerage and handling, international freight, marine insurance, and other related charges. In addition, we added duty drawback to the starting price, having found preliminarily that such an adjustment was warranted under the standard two-prong test. *See Allied Tube and Conduit Corp. v. United States* , Slip Op. 05-56 (May 12, 2005). Normal Value A. Selection of Comparison Market In order to determine whether there was a sufficient volume of sales in the home market to serve as a viable basis for calculating NV, we compared both Yücel's and Borusan's volume of home-market sales of the foreign like product to their respective volume of U.S. sales of the subject merchandise, in accordance with section 773(a)(1)(C) of the Act. Because both Yücel's and Borusan's aggregate volume of home-market sales of the foreign like product were greater than five percent of their respective company's aggregate volume of U.S. sales of the subject merchandise, we determined that each home market was viable. We calculated NV as noted in the “Calculation of NV Based on Comparison Market Prices” and “Calculation of NV Based on Constructed Value” sections of this notice. B. Cost of Production (“COP”) Analysis Because the Department disregarded sales below the COP in the last completed review of Borusan, we have reasonable grounds to believe or suspect that sales of the foreign like product under consideration for the determination of NV in this review may have been made at prices below the COP as provided by section 773(b)(2)(A)(ii) of the Act. Therefore, pursuant to section 773(b)(1) of the Act, we initiated a COP investigation of sales by Borusan in the home market. *See Notice of Final Results of Antidumping Duty Administrative Review: Certain Welded Carbon Steel Pipe and Tube From Turkey* , 65 FR 48843 (August 11, 2004) (“ *Final Results, Turkey* ”). 1. Calculation of COP In accordance with section 773(b)(3) of the Act, we calculated the COP based on the sum of Borusan's costs of materials and fabrication employed in producing the foreign like product, plus selling, general, and administrative expenses (“SG&A”) and the cost of all expenses incidental to packing and preparing the foreign like product for shipment. 2. Test of Comparison Market Sales Prices We compared the weighted-average COP figures to home-market sales of the foreign like product as required by section 773(b) of the Act, in order to determine whether these sales had been made at prices below the COP. On a product-specific basis, we compared the COP to the home-market prices, less any applicable movement charges, rebates, discounts, packing, and direct selling expenses. 3. Results of the COP Test Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 percent of the respondent's sales of a given product were at prices less than the COP, we do not disregard any below-cost sales of that product because we determine that the below-cost sales were not made in “substantial quantities.” We found that, for certain products, more than 20 percent of Borusan's home-market sales were sold at prices below the COP. Further, we found that the prices for these sales did not permit the recovery of all costs within a reasonable period of time. We therefore excluded these sales from our analysis and used the remaining sales as the basis for determining NV, in accordance with section 773(b)(1) of the Act. C. Calculation of NV Based on Comparison Market Prices For Borusan, for those comparison products for which there were sales at prices above the COP, we based NV on home-market prices. No allegation was submitted that Yücel made sales below the COP; and therefore, we did not conduct a sales-below-cost test on Yücel's sales. In these preliminary results, for Borusan, we were able to match all U.S. sales to contemporaneous sales, made in the ordinary course of trade, of either an identical or a similar foreign like product, based on matching characteristics. For Yücel, we based NV on home-market prices. For U.S. sales that we could not appropriately match to contemporaneous home-market sales, we used constructed value. For both Borusan and Yücel, we calculated NV based on free on board (“FOB”) mill/warehouse or delivered prices to unaffiliated customers, or prices to affiliated customers which were determined to be at arm's length ( *see* discussion below regarding these sales). We made deductions, where appropriate, from the starting price for discounts, rebates, inland freight, and pre-sale warehouse expense. Additionally, we added billing adjustments and interest revenue. In accordance with section 773(a)(6) of the Act, we deducted home-market packing costs and added U.S. packing costs. In accordance with section 773(a)(6)(C)(iii) of the Act, we adjusted for differences in the circumstances of sale (“COS”). These circumstances included differences in imputed credit expenses and other direct selling expenses. We also made adjustments, where appropriate, for physical differences in the merchandise in accordance with section 773(a)(6)(C)(ii) of the Act and for differences in the level of trade ( *see* discussion below regarding level of trade). Calculation of NV Based on Constructed Value (“CV”) For Yücel, when we could not determine the NV based on comparison market sales because there were no contemporaneous sales of a comparable product, we compared the EP to CV. In accordance with section 773(e) of the Act, we calculated CV based on the sum of the cost of manufacturing (“COM”) of the product sold in the United States, plus amounts for SG&A expenses, profit, and U.S. packing costs. In accordance with section 773(e)(2)(A) of the Act, we based SG&A expenses and profit on the amounts incurred by Yücel in connection with the production and sale of the foreign like product in the comparison market. For price-to-CV comparisons, we made adjustments to CV for COS differences, in accordance with section 773(a)(8) of the Act and 19 CFR 351.410. We made COS adjustments by deducting direct selling expenses incurred on comparison market sales and adding U.S. direct selling expenses. Adverse Facts Available In accordance with section 776(a)(2) of the Act, the Department has determined that the use of facts available is appropriate for the treatment of warranty expenses for purposes of determining the preliminary results for the subject merchandise sold by Yücel. Section 776(a)(2) of the Act provides: If an interested party
(A)withholds information that has been requested by the administrating authority;
(B)fails to provide such information by the deadlines for the submission of the information or in the form and the manner requested, subject to subsections (c)(1) and
(e)of section 782;
(C)significantly impedes a proceeding under this title; or
(D)provides such information but the information cannot be verified as provided in section 782(i), the administering authority shall, subject to section 782(d), use the facts otherwise available in reaching the applicable determination under this title. Moreover, section 776(b) of the Act provides that: If the administering authority finds that an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information from the administering authority, the administering authority, in reaching the applicable determination under this title, may use an inference that is adverse to the interests of the party in selecting from among the facts otherwise available. Yücel failed to report warranty expenses properly in the home market and did not provide such information by the deadlines for the submission of the information or in the form and the manner requested. The Department gave Yücel several opportunities to report warranty expenses properly in the WARRH data field. Specifically, the Department issued Yücel two supplemental questionnaires in addition to the initial sections A-C of the questionnaire. Despite these opportunities, the Department discovered at verification that Yücel failed to report warranties to certain customers in its original submissions. In addition, the Department found that the original data reported by Yücel included warranties for customers that were not identified in the database ( *i.e.* , customers to whom Yücel did not sell subject merchandise in the home market during the POR). Yücel had the opportunity and ability to report warranty expenses properly; however, it failed to do so in the initial questionnaire response and subsequent supplemental questionnaire responses. Although Yücel presented the correction to home-market warranty expenses at the onset of verification, the Department did not verify this information. In accordance with Department practice, Yücel's verification outline clearly states the following: “{p}lease note that verification is not intended to be an opportunity for submitting new factual information. New information will be accepted at verification only when
(1)the need for that information was not evident previously,
(2)the information makes minor corrections to information already on the record, or
(3)the information corroborates, supports, or clarifies information already on the record.” See Yücel's Verification Outline, dated March 25, 2005, at page 2. Based on the fact that Yücel repeatedly reported incorrectly its warranty expense data until the beginning of verification, the Department is rejecting Yücel's belated correct reporting of warranty expenses. *See* Yücel's Verification Report, dated May 31, 2005, in the CRU. As stated by the U.S. Court of Appeals for the Federal Circuit (“CAFC”), “if a respondent 'fails to provide {requested} information by the deadlines for submission,' Commerce shall fill in the gaps with 'facts otherwise available.' The focus of subsection
(a)is respondent's failure to provide information. The reason for the failure is of no moment. As a separate matter, subsection
(b)permits Commerce to 'use an inference that is adverse to the interests of {a respondent} in selecting from among the facts otherwise available,' only if Commerce makes the separate determination that the respondent 'has failed to cooperate by not acting to the best of its ability to comply.' The focus of subsection
(b)is respondent's failure to cooperate to the best of its ability, not its failure to provide requested information.” *See Nippon Steel Corporation vs. United States* , 37 F. 3d 1373 (August 8, 2003) (“ *Nippon Steel* ”). In *Nippon Steel* , the CAFC held that “the statutory mandate that a respondent act to the 'best of its ability' requires the respondent to do the maximum it is able to do.” *See Nippon Steel* , 337 F.3d at 1382. Yücel's actions fell well below the standard of doing the maximum it was able to do. It failed to properly evaluate and submit the requested information in its initial questionnaire response, and failed twice more despite specific follow-up questioning by the Department. Indeed, Yücel's untimely presentation of requested information regarding warranties at the beginning of verification demonstrated that it would have been able to provide the Department with the information requested, if it had exercised the requisite effort. However, Yücel's failure to do so by the deadlines for submission demonstrates it did not act to the best of its ability. Therefore, pursuant to section 776(a)(2) of the Act, the Department has determined that the use of facts available is appropriate with respect to Yücel's warranty expenses in the home market. Pursuant to section 776(b)(3) of the Act, we have used an adverse inference by not accepting Yücel's warranty expenses in the home market. Arm's-Length Sales We included in our analysis Yücel's and Borusan's home-market sales to affiliated customers only where we determined that such sales were made at arm's-length prices, *i.e.* , at prices comparable to prices at which Yücel and Borusan, respectively, sold identical merchandise to their unaffiliated customers. Each respondent's sales to affiliates constituted less than five percent of overall home-market sales. To test whether the sales to affiliates were made at arm's-length prices, we compared the starting prices of sales to affiliated and unaffiliated customers net of all movement charges, direct selling expenses, discounts, and packing. Where the price to that affiliated party was, on average, within a range of 98 to 102 percent of the price of the same or comparable merchandise sold to the unaffiliated parties, we determined that the sales made to the affiliated party were at arm's length. *See Antidumping Proceedings: Affiliated Party Sales in the Ordinary Course of Trade* , 67 FR 69186 (November 15, 2002). Level of Trade As set forth in section 773(a)(1)(B)(i) of the Act and in the Statement of Administrative Action (“SAA”) accompanying the Uruguay Round Agreements Act, at 829-831 ( *see* H.R. Doc. No. 316, 103d Cong., 2d Sess. 829-831 (1994)), to the extent practicable, the Department calculates NV based on sales at the same level of trade (“LOT”) as U.S. sales, either EP or CEP. When the Department is unable to find sale(s) in the comparison market at the same LOT as the U.S. sale(s), the Department may compare sales in the U.S. and foreign markets at different LOTs. The NV LOT is that of the starting-price sales in the home market. To determine whether home-market sales are at a different LOT than U.S. sales, we examine stages in the marketing process and selling functions along the chain of distribution between the producer and the unaffiliated customer. If the comparison-market sales are at a different LOT and the differences affect price comparability, as manifested in a pattern of consistent price differences between the sales on which NV is based and comparison-market sales at the LOT of the export transaction, we make an LOT adjustment under section 773(a)(7)(A) of the Act. In implementing these principles, we examined information from each respondent regarding the marketing stages involved in the reported home-market and EP sales, including a description of the selling activities performed by each for each channel of distribution. We determined that with respect to Yücel's sales, there was one home market LOT and one U.S. LOT, and with respect to Borusan's sales, there were two home-market LOTs and one U.S. LOT. For home-market sales, we found that Yücel sold mill-direct, FOB, without the use of a selling agent. In some cases, Yücel arranged for freight; however, the purchaser took possession of the merchandise upon loading in all cases. No additional services were undertaken by Yücel. Yücel's U.S. sales were made at only one LOT. Selling functions were limited to maintaining stock until full container loads were produced, and arranging for shipment of the merchandise to the United States. Yücel's U.S. sales were made-to-order, with title passing to the purchaser when the goods passed the ship's rail. No other sales activities were undertaken by Yücel. Because Yücel's sales functions in each market were nearly identical, we have determined that the LOT in each market is the same and therefore have made no LOT adjustments in comparing its U.S. and home-market sales. With regard to Borusan, we examined information from the respondent on the marketing stages involved in the reported home-market and EP sales, including a description of the selling activities performed by Borusan for each channel of distribution. Consistent with the prior reviews of this respondent, we determined that with respect to Borusan's sales, there were two home-market LOTs and one U.S. LOT ( *i.e.* , the EP LOT). *See Final Results, Turkey* , 65 FR 48843. For home-market sales, we found that Borusan's back-to-back sales by affiliated resellers and mill-direct sales comprised one LOT. We found that Borusan's inventory sales by affiliated resellers warranted a separate LOT. Back-to-back sales by affiliated resellers are sales by Borusan through an affiliated selling agent. Such sales are very similar to mill-direct sales; however, the affiliated agent arranges for freight. The affiliated agent does not take possession of the merchandise; it is transferred directly from the mill to the final customer. For mill-direct sales, Borusan provided customer advice, product information and technical services, warranty services, and advertising. For back-to-back sales by affiliated resellers, the resellers engage in marketing activities and make freight arrangements, and warranty services are provided by the mill. For inventory sales by affiliated resellers, the resellers have a sales staff that sells Borusan products out of the reseller's warehouse. Those resellers maintain such warehouses, provide product information, and customer advice. Warranty services for these sales were provided by the mill. The first main difference between Borusan's inventory sales by affiliated resellers and Borusan's mill-direct and back-to-back sales is off-site warehouse maintenance and operation. Borusan's affiliated resellers that sell from inventory operate their own warehouses. Second, for its back-to-back and mill-direct sales, Borusan transfers the title of the merchandise directly and immediately to the first unaffiliated customer, but Borusan cannot perform such a transfer of title in its sales out-of-inventory by affiliated resellers. Last, Borusan provides discounts for both mill-direct and back-to-back sales, but provides only very limited discounts for inventory sales. Borusan's U.S. sales were made at only one LOT. The selling functions for U.S. sales included customer advice and product information, warranty services, and freight and delivery arrangements. Borusan's sales to the United States were not made out of warehouses. This LOT is most similar to the first LOT in the home market (mill-direct and back-to-back sales). Where possible, we compared U.S. sales to sales at the identical home-market LOT mill-direct sales and back-to-back affiliated reseller sales. If no match was available at the same LOT, we compared sales at the U.S. LOT to sales at the second home-market LOT. To determine whether an LOT adjustment was warranted, we examined the prices of comparable product categories, net of all adjustments, between sales at the two home-market LOTs we had designated. We found a pattern of consistent price differences between sales at these LOTs. In making the LOT adjustment, we calculated the difference in prices between the two home-market LOTs. Where U.S. sales were compared to home-market sales at a different LOT, we adjusted the home-market price by the amount of this calculated difference. Currency Conversion The Department's preferred source for daily exchange rates is the Federal Reserve Bank. However, the Federal Reserve Bank does not track or publish exchange rates for the Turkish lira. Therefore, we made currency conversions based on the daily exchange rates from the Dow Jones Business Information Services. Section 773A(a) directs the Department to use a daily exchange rate in order to convert foreign currencies into U.S. dollars, unless the daily rate involves a “fluctuation.” It is the Department's practice to find that a fluctuation exists when the daily exchange rate differs from a benchmark rate by 2.25 percent. The benchmark rate is defined as the rolling average of the rates for the past 40 business days. When we determine that a fluctuation existed, we generally utilize the benchmark rate instead of the daily rate, in accordance with established practice. Date of Sale In the home market, Yücel reported its date of sale based on the invoice date. However, for sales to the United States, Yücel reported its date of sale based on the “order confirmation date,” which Yücel refers to as its “contract date.” Yücel indicated that its “order confirmation” constitutes the acceptance of an offer made by its U.S. customers which was made in the form of a purchase order. *See* Yücel's supplemental questionnaire response dated February 24, 2005, at pages 24-25. During verification, Yücel reported that it confirms orders via e-mail and that Yücel maintains a file that documents the order confirmations for each of its sales to the United States. At verification, the Department attempted to corroborate this claim by verifying a sample of the order confirmations, which would enable a comparison to the reported shipment sale dates. However, Yücel was unable to produce all the e-mail confirmations requested by the Department and Yücel was unable to substantiate its claim that order confirmation date (“contract date”) was representative of the date on which the material terms of sale were finalized. Therefore, for purposes of the preliminary results, we have used the invoice date reported by Yücel as the basis for Yücel's U.S. date of sale. Preliminary Results of Review As a result of this review, we preliminarily determine that the following margins exist for the period May 1, 2003, through April 30, 2004: Manufacturer/Exporter Margin (percent) Yücel 12.11 Borusan 0.86 We will disclose the calculations used in our analysis to parties to this proceeding within five days of the publication date of this notice. *See* section 351.224(b) of the Department's regulations. Interested parties are invited to comment on the preliminary results. Interested parties may submit case briefs within 30 days of the date of publication of this notice. Rebuttal briefs, limited to issues raised in the case briefs, may be filed no later than 37 days after the date of publication of this notice. Parties who submit arguments are requested to submit with each argument:
(1)a statement of the issue,
(2)a brief summary of the argument, and
(3)a table of authorities. Further, parties submitting written comments should provide the Department with an additional copy of the public version of any such comments on a diskette. Any interested party may request a hearing within 30 days of publication of this notice. *See* section 351.310(c) of the Department's regulations. If requested, a hearing will be held 44 days after the publication of this notice, or the first workday thereafter. The Department will publish a notice of the final results of this administrative review, which will include the results of its analysis of issues raised in any written comments or hearing, within 120 days from publication of this notice. Assessment Pursuant to section 351.212(b) of the Department's regulations, the Department calculated an assessment rate for each importer of subject merchandise. Upon completion of this review, the Department will instruct CBP to assess antidumping duties on all entries of subject merchandise by those importers. We have calculated each importer's duty assessment rate based on the ratio of the total amount of antidumping duties calculated for the examined sales to the total calculated entered value of examined sales. Where the assessment rate is above *de minimis* , the importer-specific rate will be assessed uniformly on all entries made during the POR. Cash Deposit Requirements The following cash deposit rates will be effective upon publication of the final results of this administrative review for all shipments of welded pipe and tube from Turkey entered, or withdrawn from warehouse, for consumption on or after the publication date, as provided by section 751(a)(1) of the Act:
(1)the cash deposit rates for the companies listed above will be the rates established in the final results of this review, except if the rates are less than 0.5 percent and, therefore, *de minimis* , the cash deposit will be zero;
(2)for previously reviewed or investigated companies not listed above, the cash deposit rate will continue to be the company-specific rate published for the most recent period;
(3)if the exporter is not a firm covered in this review, a prior review, or the less-than-fair-value (“LTFV”) investigation, but the manufacturer is, the cash deposit rate will be the rate established for the most recent period for the manufacturer of the merchandise; and
(4)if neither the exporter nor the manufacturer is a firm covered in this or any previous review or the LTFV investigation conducted by the Department, the cash deposit rate will be 14.74 percent, the “All Others” rate established in the LTFV investigation. These cash deposit requirements, when imposed, shall remain in effect until publication of the final results of the next administrative review. This notice serves as a preliminary reminder to importers of their responsibility under section 351.402(f)(2) of the Department's regulations to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Secretary's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties. This determination is issued and published in accordance with sections 751(a)(1) and 777(I)(1) of the Act. Dated: May 27, 2005. Holly A. Kuga, Acting Assistant Secretary for Import Administration. [FR Doc. E5-2887 Filed 6-6-05; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE International Trade Administration (C-122-839) Notice of Preliminary Results of Countervailing Duty Administrative Review: Certain Softwood Lumber Products from Canada AGENCY: Import Administration, International Trade Administration, Department of Commerce. SUMMARY: The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty order on certain softwood lumber products from Canada for the period April 1, 2003, through March 31, 2004. If the final results remain the same as these preliminary results of administrative review, we will instruct U.S. Customs and Border Protection
(CBP)to assess countervailing duties as detailed in the “Preliminary Results of Review” section of this notice. Interested parties are invited to comment on these preliminary results. ( *See Public Comment* section of this notice.) EFFECTIVE DATE: June 7, 2005. FOR FURTHER INFORMATION CONTACT: Stephanie Moore at
(202)482-3692, or Robert Copyak at
(202)482-2209, AD/CVD Operations, Office 3, Import Administration, International Trade Administration, U.S. Department of Commerce, Room 4012, 14th Street and Constitution Avenue, NW, Washington, DC 20230. SUPPLEMENTARY INFORMATION: Background On May 22, 2002, the Department published in the **Federal Register** (67 FR 36070) the amended final affirmative countervailing duty
(CVD)determination and CVD order on certain softwood lumber products from Canada (67 FR 37775, May 30, 2002). On May 3, 2004, the Department published a notice of opportunity to request an administrative review of this CVD order. *See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity to Request Administrative Review* , 69 FR 24117 (May 3, 2004). The Department received requests that it conduct an aggregate review from, among others, the Coalition for Fair Lumber Imports Executive Committee (petitioners) and the Government of Canada (GOC), as well as requests for review covering an estimated 263 individual companies. 1 On June 25, 2004, we initiated the review covering the period April 1, 2003, through March 31, 2004. *See* 69 FR 39409. 1 Of these 263 company-specific requests, 116 were for zero/ *de minimis* rate reviews under 19 CFR 351.213(k)(1). On July 30, 2004, we determined to conduct this administrative review on an aggregate basis consistent with section 777A(e)(2)(B) of the Tariff Act of 1930, as amended (the Act). *See* the memorandum to James J. Jochum, Assistant Secretary for Import Administration, from Jeffrey May, Deputy Assistant Secretary for Import Administration, entitled, “Methodology for Conducting the Review,” dated July 30, 2004, which is a public document on file in the Central Records Unit
(CRU)in room B-099 of the main Commerce building. The Department further determined that it was not practicable to conduct any form of company-specific review. *Id* . On September 8, 2004, we issued our initial questionnaire to the GOC as well as to the Provincial Governments of Alberta (GOA), British Columbia (GOBC), Manitoba (GOM), New Brunswick (GONB), Newfoundland (GON), Nova Scotia (GONS), Ontario (GOO), Prince Edward Island (GOPEI), Quebec (GOQ), and Saskatchewan (GOS). On September 30, 2004, we extended the period for completion of these preliminary results until May 31, 2005, pursuant to section 751(a)(3)(A) of the Act. *See Certain Softwood Lumber Products From Canada: Extension of Time Limit for Preliminary Results of Countervailing Duty Administrative Review* , 69 FR 58394 (September 30, 2004). On November 22, 2004, the GOC, GOA, GOBC, GOM, GONB, GON, GONS, GOO, GOPEI, GOQ, and GOS submitted their initial questionnaire responses. From February through May 2005, we issued a series of supplemental questionnaires to the GOC, GOBC, GOA, GOS, GOM, GOO, GOQ, GONS, and GONB. The Federal and Provincial Governments of Canada responded to all supplemental questionnaires in a timely manner. Pursuant to 19 CFR 351.301, the deadline for interested parties to submit factual information is 140 days after the last day of the anniversary month. However, both petitioners' and the Canadian parties requested that the Department extend this due date. After a series of extensions, we established that the deadline for interested parties to submit factual information would be March 2, 2005. Accordingly, the due date for submitting rebuttal and/or clarifying information was extended to March 15, 2005. Both petitioners and the Canadian parties submitted factual information by the March 2 and March 15 deadlines. Period of Review The period of review
(POR)for which we are measuring subsidies is April 1, 2003, through March 31, 2004. Scope of the Review The products covered by this order are softwood lumber, flooring and siding (softwood lumber products). Softwood lumber products include all products classified under headings 4407.1000, 4409.1010, 4409.1090, and 4409.1020, respectively, of the Harmonized Tariff Schedule of the United States (HTSUS), and any softwood lumber, flooring and siding described below. These softwood lumber products include:
(1)Coniferous wood, sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or finger-jointed, of a thickness exceeding six millimeters;
(2)Coniferous wood siding (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed;
(3)Other coniferous wood (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces (other than wood moldings and wood dowel rods) whether or not planed, sanded or finger-jointed; and
(4)Coniferous wood flooring (including strips and friezes for parquet flooring, not assembled) continuously shaped (tongued, grooved, rabbeted, chamfered, v-jointed, beaded, molded, rounded or the like) along any of its edges or faces, whether or not planed, sanded or finger-jointed. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise subject to this order is dispositive. As specifically stated in the Issues and Decision Memorandum accompanying the *Notice of Final Determination of Sales at Less Than Fair Value: Certain Softwood Lumber Products from Canada* , 67 FR 15539 (April 2, 2002) ( *see* comment 53, item D, page 116, and comment 57, item B-7, page 126), available at www.ia.ita.doc.gov, drilled and notched lumber and angle cut lumber are covered by the scope of this order. The following softwood lumber products are excluded from the scope of this order provided they meet the specified requirements detailed below:
(1)*Stringers* (pallet components used for runners): if they have at least two notches on the side, positioned at equal distance from the center, to properly accommodate forklift blades, properly classified under HTSUS 4421.90.98.40.
(2)*Box-spring frame kits* : if they contain the following wooden pieces—two side rails, two end (or top) rails and varying numbers of slats. The side rails and the end rails should be radius-cut at both ends. The kits should be individually packaged, they should contain the exact number of wooden components needed to make a particular box spring frame, with no further processing required. None of the components exceeds 1” in actual thickness or 83” in length.
(3)*Radius-cut box-spring-frame components* , not exceeding 1” in actual thickness or 83” in length, ready for assembly without further processing. The radius cuts must be present on both ends of the boards and must be substantial cuts so as to completely round one corner.
(4)*Fence pickets* requiring no further processing and properly classified under HTSUS heading 4421.90.70, 1” or less in actual thickness, up to 8” wide, 6' or less in length, and have finials or decorative cuttings that clearly identify them as fence pickets. In the case of dog-eared fence pickets, the corners of the boards should be cut off so as to remove pieces of wood in the shape of isosceles right angle triangles with sides measuring 3/4 inch or more.
(5)*U.S. origin lumber* shipped to Canada for minor processing and imported into the United States, is excluded from the scope of this order if the following conditions are met: 1) the processing occurring in Canada is limited to kiln-drying, planing to create smooth-to-size board, and sanding, and 2) if the importer establishes to the satisfaction of CBP that the lumber is of U.S. origin.
(6)*Softwood lumber products contained in single family home packages or kits* , 2 regardless of tariff classification, are excluded from the scope of this order if the importer certifies to items 6 A, B, C, D, and requirement 6 E is met: 2 To ensure administrability, we clarified the language of exclusion number 6 to require an importer certification and to permit single or multiple entries on multiple days as well as instructing importers to retain and make available for inspection specific documentation in support of each entry. A. The imported home package or kit constitutes a full package of the number of wooden pieces specified in the plan, design or blueprint necessary to produce a home of at least 700 square feet produced to a specified plan, design or blueprint; B. The package or kit must contain all necessary internal and external doors and windows, nails, screws, glue, sub floor, sheathing, beams, posts, connectors, and if included in the purchase contract, decking, trim, drywall and roof shingles specified in the plan, design or blueprint. C. Prior to importation, the package or kit must be sold to a retailer of complete home packages or kits pursuant to a valid purchase contract referencing the particular home design plan or blueprint, and signed by a customer not affiliated with the importer; D. Softwood lumber products entered as part of a single family home package or kit, whether in a single entry or multiple entries on multiple days, will be used solely for the construction of the single family home specified by the home design matching the entry. E. For each entry, the following documentation must be retained by the importer and made available to CBP upon request: i. A copy of the appropriate home design, plan, or blueprint matching the entry; ii. A purchase contract from a retailer of home kits or packages signed by a customer not affiliated with the importer; iii. A listing of inventory of all parts of the package or kit being entered that conforms to the home design package being entered; iv. In the case of multiple shipments on the same contract, all items listed in E(iii) which are included in the present shipment shall be identified as well. Lumber products that CBP may classify as stringers, radius cut box-spring-frame components, and fence pickets, not conforming to the above requirements, as well as truss components, pallet components, and door and window frame parts, are covered under the scope of this order and may be classified under HTSUS subheadings 4418.90.45.90, 4421.90.70.40, and 4421.90.97.40. Finally, as clarified throughout the course of the investigation, the following products, previously identified as Group A, remain outside the scope of this order. They are: 1. Trusses and truss kits, properly classified under HTSUS 4418.90; 2. I-joist beams; 3. Assembled box spring frames; 4. Pallets and pallet kits, properly classified under HTSUS 4415.20; 5. Garage doors; 6. Edge-glued wood, properly classified under HTSUS item 4421.90.98.40; 7. Properly classified complete door frames; 8. Properly classified complete window frames; 9. Properly classified furniture. In addition, this scope language has been further clarified to now specify that all softwood lumber products entered from Canada claiming non-subject status based on U.S. country of origin will be treated as non-subject U.S.-origin merchandise under the countervailing duty order, provided that these softwood lumber products meet the following condition: upon entry, the importer, exporter, Canadian processor and/or original U.S. producer establish to CBP's satisfaction that the softwood lumber entered and documented as U.S.-origin softwood lumber was first produced in the United States as a lumber product satisfying the physical parameters of the softwood lumber scope. 3 The presumption of non-subject status can, however, be rebutted by evidence demonstrating that the merchandise was substantially transformed in Canada. 3 *See* the scope clarification message (# 3034202), dated February 3, 2003, to CBP, regarding treatment of U.S. origin lumber on file in the CRU. Subsidies Valuation Information Allocation Period In the underlying investigation and pursuant to 19 CFR 351.524(d)(2), the Department allocated, where applicable, all of the non-recurring subsidies provided to the producers/exporters of subject merchandise over a 10-year average useful life
(AUL)of renewable physical assets for the industry concerned, as listed in the Internal Revenue Service's
(IRS)1977 Class Life Asset Depreciation Range System, as updated by the Department of the Treasury. *See Notice of Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, and Alignment of Final Countervailing Duty Determination With Final Antidumping Determination: Certain Softwood Lumber Products From Canada* , 66 FR 43186 (August 2001) ( *Preliminary Determination* ); *see also Notice of Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Softwood Lumber Products From Canada* , 67 FR 15545 (April 2, 2002) ( *Final Determination* ). No interested party challenged the 10-year AUL derived from the IRS tables. Thus, in this review, we have allocated, where applicable, all of the non-recurring subsidies provided to the producers/exporters of subject merchandise over a 10-year AUL. Recurring and Non-Recurring Benefits The Department has previously determined that the sale of Crown timber by Canadian provinces confers countervailable benefits on the production and exportation of the subject merchandise under 771(5)(E)(iv) of the Act because the stumpage fees at which the timber is sold are for less than adequate remuneration. *See, e.g.* , “Recurring and Non-Recurring Benefits” section of the March 21, 2002, Issues and Decision Memorandum the accompanied the *Final Determination (Final Determination Decision Memorandum); see also Notice of Preliminary Results of Countervailing Duty Administrative Review: Certain Softwood Lumber Products from Canada* , 69 FR 33204 (June 14, 2004) ( *Preliminary Results of 1st Review* ). For the reasons described in the program sections, below, the Department continues to find that Canadian provinces sell Crown timber for less than adequate remuneration to softwood lumber producers in Canada. Pursuant to 19 CFR 351.524(c)(1), subsidies conferred by the government provision of a good or service normally involve recurring benefits. Therefore, consistent with our regulations and past practice, benefits conferred by the provinces' administered Crown stumpage programs have, for purposes of these preliminary results, been expensed in the year of receipt. In this review the Department is also investigating other programs that involve the provision of grants to producers and exporters of subject merchandise. Under 19 CFR 351.524, benefits from grants can either be classified as providing recurring or non-recurring benefits. Recurring benefits are expensed in the year of receipt, while grants providing non-recurring benefits are allocated over time corresponding to the AUL of the industry under review. However, under 19 CFR 351.524(b)(2), grants which provide non-recurring benefits will also be expensed in the year of receipt if the amount of the grant under the program is less than 0.5 percent of the relevant sales during the year in which the grant was approved (referred to as the 0.5 percent test). We have preliminarily determined to expense all grants under non-stumpage programs in the year of receipt. Benchmarks for Loans and Discount Rate In selecting benchmark interest rates for use in calculating the benefits conferred by the various loan programs under review, the Department's normal practice is to compare the amount paid by the borrower on the government provided loans with the amount the firm would pay on a comparable commercial loan actually obtained on the market. *See* section 771(5)(E)(ii) of the Act; 19 CFR 351.505(a)(1) and (3)(i). However, because we are conducting this review on an aggregate basis and we are not examining individual companies, for those programs requiring a Canadian dollar-denominated, short-term or long-term benchmark interest rate, we used for these preliminary results the national average interest rates on commercial short-term or long-term Canadian dollar-denominated loans as reported by the GOC. The information submitted by the GOC was for fixed-rate short-term and long-term debt. For short-term debt, the GOC provided monthly weight-averaged short-term interest rates based on the prime business rate, small and medium enterprise
(SME)rate, three-month corporate paper rate, and one-month bankers' acceptance rate, as reported by the Bank of Canada. For long-term debt, the GOC provided quarterly implied rates calculated from long-term debt and the interest payments made on long-term debt as reported by Statistics Canada (STATCAN). Based on these rates, we derived simple averaged POR rates for both short-term and long-term debt. Some of the reviewed programs provided long-term loans to the softwood lumber industry with variable interest rates instead of fixed interest rates. Because we were unable to gather information on variable interest rates charged on commercial loans in Canada, we have used as our benchmark for those variable loans the rate applicable to long-term fixed interest rate loans for the POR as reported by the GOC. Aggregate Subsidy Rate Calculation As noted above, this administrative review is being conducted on an aggregate basis. We have used the same methodology to calculate the country-wide rate for the programs subject to this review that we used in the *Final Determination and Notice of Final Results of Countervailing Duty Administrative Review and Rescission of Certain Company-Specific Reviews: Certain Softwood Lumber Products from Canada* , 69 FR 75917 (December 20, 2004) ( *Final Results of 1st Review* ). Provincial Crown Stumpage Programs For stumpage programs administered by the Canadian provinces subject to this review, we first calculated a provincial subsidy rate by dividing the aggregate benefit conferred under each specific provincial stumpage program by the total stumpage denominator calculated for that province. For further information regarding the stumpage denominator, *see* “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates” section, below. As required by section 777A(e)(2)(B) of the Act, we next calculated a single country-wide subsidy rate. To calculate the country-wide subsidy rate conferred on the subject merchandise from all stumpage programs, we weight-averaged the subsidy rate from each provincial stumpage program by the respective provinces' relative shares of total exports to the United States during the POR. As in *Final Determination* and the *Final Results of the 1st Review* , these weight-averages of the subject merchandise do not include exports from the Maritime Provinces or sales of companies excluded from the countervailing duty order. 4 We then summed these weight-average subsidy rates to determine the country-wide rate for all provincial Crown stumpage programs. 4 The Maritime provinces are Nova Scotia, New Brunswick, Newfoundland, and Prince Edward Island. Other Programs We also examined a number of non-stumpage programs administered by the Canadian Federal Government and certain Provincial Governments in Canada. To calculate the country-wide rate for these programs, we used the same methodology employed in the first administrative review. For federal programs that were found to be specific because they were limited to certain regions, we calculated the countervailable subsidy rate by dividing the benefit by the relevant denominator ( *i.e.* , total production of softwood lumber in the region or total exports of softwood lumber to the United States from that region), and then multiplying that result by the relative share of total softwood exports to the United States from that region. For federal programs that were not regionally specific, we divided the benefit by the relevant country-wide sales ( *i.e.* , total sales of softwood lumber, total sales of the wood products manufacturing industry (which includes softwood lumber), or total sales of the wood products manufacturing and paper industries). For provincial programs, we calculated the countervailable subsidy rate by dividing the benefit by the relevant sales amount for that province ( *i.e.* , total exports of softwood lumber from that province to the United States, total sales of softwood lumber in that province, or total sales of the wood products manufacturing and paper industries in that province). That result was then multiplied by the relative share of total softwood exports to the United States from that province. Where the countervailable subsidy rate for a program was less than 0.005 percent, the program was not included in calculating the country-wide countervailing duty rate. 5 The denominators used for non-stumpage programs are discussed below in the individual program write-ups. Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates 5 1. Aggregate Numerator and Denominator As noted above, the Department is determining the stumpage subsidies to the production of softwood lumber in Canada on an aggregate basis. The methodology employed to calculate the *ad valorem* subsidy rate requires the use of a compatible numerator and denominator. In the final results of the first review, the Department explained that in the numerator of the net subsidy rate calculation, the Department included only the benefit from those softwood Crown logs that entered and were processed by sawmills during the POR ( *i.e.* , logs used in the lumber production process). *See* “Denominator” section of the December 13, 2004, Issues and Decision Memorandum that accompanied the Final Results of 1st Review (Final Results of 1st Review Decision Memorandum). Accordingly, the denominator used for the final calculation included only those products that result from the softwood lumber manufacturing process. *Id.* For purposes of these preliminary results, we continue to calculate the numerator and denominator using the approach adopted in the final results of the first review. 6 6 In the case of Alberta and British Columbia, it was necessary to derive the volume of softwood Crown logs that entered and were processed by sawmills during the POR ( *i.e.* , logs used in the lumber production process). Our methodology for deriving those volumes is described in the Calculation of Provincial Benefits section of these preliminary results. Consistent with the Department's previously established methodology, we included the following in the denominator: softwood lumber, including softwood lumber that undergoes some further processing (so-called “remanufactured” lumber), softwood co-products ( *e.g.* , wood chips and sawdust) that resulted from softwood lumber production at sawmills, and residual products produced by sawmills that were the result of the softwood lumber manufacturing process, specifically, softwood fuelwood and untreated softwood ties. We would have included in the denominator those softwood co-products produced by lumber remanufacturers that resulted from the softwood lumber manufacturing process. However, the GOC failed to separate softwood co-products that resulted from the softwood lumber manufacturing process of lumber remanufacturers from those resulting from the myriad of other production processes performed by producers in the remanufacturing category that have nothing to do with the production of subject merchandise. Lacking the information necessary to determine the value of softwood co-products that resulted from the softwood lumber manufacturing process of lumber remanufacturers during the softwood lumber manufacturing process, we have preliminarily determined not to include any softwood co-product values from the non-sawmill category. *See Final Results of 1st Review Decision Memorandum* at Comment 16. 2. Adjustments to Account for Companies Excluded from the Countervailing Duty Order In the investigation, we deducted from the denominator sales by companies that were excluded from the countervailing duty order. The Department has since also concluded expedited reviews for a number of companies, pursuant to which a number of additional companies have been excluded from the countervailing duty order. *See Final Results of Countervailing Duty Expedited Reviews: Certain Softwood Lumber Products from Canada: Notice of Final Results of Countervailing Duty Expedited Reviews* , 68 FR 24436, (May 7, 2003); *see also Notice of Final Results of Countervailing Duty Expedited Reviews of the Order on Certain Softwood Lumber from Canada* , 69 FR 10982 (March 9, 2004). In the final results of the first review, we removed the sales of companies excluded from the countervailing duty order from the relevant sales denominators of our country-wide rate calculations. *See* “Excluded Companies” section of the *Final Results of 1st Review Decision Memorandum* . In its case briefs submitted for consideration in the final results of the first review, the GOC argued for the first time in that proceeding that, for the numerator and denominator to match, the Department must also reduce the numerator to account for any *de minimis* benefits received by the excluded companies. 7 *See, e.g.* , Final Results of 1st Review Decision Memorandum at Comment 15. We agreed with the GOC in principle. *Id.* However, because the GOC first raised the issue in its case briefs, the Department was unable to solicit the information from the excluded Canadian parties regarding the appropriate numerator. Thus, we placed the exclusion calculations from the underlying investigation and expedited reviews on the record of the first review. *Id.* We then multiplied the countervailable volumes of logs and lumber reported by the excluded companies by each subject provinces' weight-average unit benefit. The resulting products were then removed from provincial stumpage benefit of each of the corresponding province. *See Final Results of 1st Review Decision Memorandum* at Comment 15. 7 Though excluded from the countervailing duty order, many companies involved in the exclusion and/or expedited review processes received *de minimis* levels of countervailable benefits. In the current review, we requested benefit and sales data, on an aggregate basis for each province, as they pertained to the excluded companies during the POR. */* page 2 of our April 8, 2005 supplemental questionnaire. The GOC, GOO, and GOQ responded that they did not have the requested POR sales data. *See* page 2 of the GOC's April 28, 2005 questionnaire response. Regarding the benefit information we requested, the GOQ and GOO stated that the excluded companies in their respective provinces did not harvest Crown timber during the POR. The GOC stated the same with respect to the excluded companies in the Yukon Territories. *Id.* at page 6. The GOC, GOO and GOQ further claimed they did not have any information regarding the volume of lumber and/or Crown logs purchased by the excluded companies during the POR. Pursuant to our prior practice and, as discussed above, we have deducted the sales of all companies excluded from the countervailing duty order from the relevant sales denominators used to calculate the country-wide subsidy rates. Because we lack POR sales data from the excluded companies, we have, consistent with our approach in the final results of first review, indexed the excluded companies' sales data to the POR using province-specific lumber price indices obtained from STATCAN. We then subtracted the indexed sales data of the excluded companies from the corresponding provincial denominators. *See Preliminary Results of 1st Review* , 69 FR at 33207 and the “Excluded Companies” section of the *Final Results of 1st Review Decision Memorandum* . Because the Canadian parties have stated that the excluded companies did not acquire Crown timber during the POR and because they have not provided any other additional benefit data from the companies, we have not adjusted the aggregate numerator data from the relevant provinces. 3. Pass-through In the first administrative review, the Canadian parties claimed that a portion of the Crown timber processed by sawmills was purchased by the mills in arm's-length transactions with independent harvesters. The Canadian parties further claimed that such transactions must not be included in the subsidy calculation unless the Department determines that the benefit to the independent harvester passed through to the lumber producers. In the first review, we determined that Alberta, British Columbia (B.C.), Manitoba, Ontario, and Saskatchewan each failed to substantiate this claim. *See Preliminary Results of 1st Review* , 69 FR at 33208, 33209 and Comments 10 and 11 of the *Final Results of 1st Review Decision Memorandum* . The basis of our determination in the first administrative review was that transactions cannot be considered arm's-length transactions if they are characterized by limitations that constrain buyers and sellers of harvested Crown timber or other conditions that render those sales ineligible for the pass-through analysis. The limitations and other conditions we identified include
(1)government-imposed appurtenancy and local processing requirements;
(2)government-mandated wood supply agreements;
(3)the structure of certain log purchase agreements;
(4)fiber exchanges between Crown tenure holders; and
(5)the payment of Crown stumpage fees by sawmills for logs purchased from independent harvesters. Thus, the starting point of our analysis was to examine whether in these log sale transactions the ability of a buyer or seller to bargain freely with whomever they chose was encumbered by government mandates or other conditions that render those sales not at arm's-length or otherwise ineligible for the pass-through analysis. If a transaction was conducted under the constraint(s) of one or more of these factors, we determined that it was not conducted at arm's-length or otherwise is ineligible for a pass-through analysis, and no adjustment to the stumpage calculation was warranted. For example, where we found that the sawmills paid the Crown for stumpage fees for logs acquired from so-called independent harvesters, no pass-through analysis was warranted because any benefits go directly to the sawmill. *Id.* In anticipation of a similar claim in this administrative review, we requested in the initial questionnaire that each of the Canadian provinces report, by species, the volume and value of Crown logs sold by independent harvesters to unrelated parties during the POR. *See* *e.g.* , page III-22 of the Department's September 8, 2004, initial questionnaire. In response to the Department's original questionnaire, the Canadian parties provided two sets of information for us to analyze. The GOA, GOBC, British Columbia Lumber Trade Counsel (BCLTC), and GOO each provided an “aggregate” claim (with accompanying information) of the amount of Crown timber that was obtained by the sawmills through arm's-length transactions. The Ontario Lumber Manufacturers Association
(OLMA)also provided company-specific transaction data and supporting information for us to analyze with respect to Ontario and Manitoba. Regarding Quebec, the GOQ asserted that the Department would have to conduct a pass-through analysis before it included any softwood log volumes harvested under Forest Management Contracts
(FMCs)and Forest Management Agreements (FMAs). 8 8 The GOM and GOS did not claim that their sawmills purchased Crown logs in arm's length transactions. *See* page MB-69 of the GOM's November 22, 2004 questionnaire response and page SK-99 of the GOS's November 22, 2004 questionnaire response. Therefore, we have preliminarily concluded that a pass-through analysis is not warranted for Manitoba and Saskatchewan. We have reviewed and considered all of the information provided on the record of this administrative review. We determine that none of the provinces or parties provided any new information regarding their aggregate claims which warrants a change in or departure from the methodology we used in the first administrative review. As in the first administrative review, we determine that Alberta, B.C., Manitoba, Ontario, and Saskatchewan each failed to provide the information necessary to demonstrate that the transactions included in their respective “aggregate” claims were in fact conducted at arm's length. Consistent with our determination in the first administrative review, we also determine that no pass-through analysis is warranted for many of the transactions, *e.g.* , where the sawmill paid the stumpage fee directly to the Crown, and for fiber exchanges between Crown tenure holders. We therefore preliminarily determine that changes to the subsidy calculation based on the provinces' “aggregate” claims are not warranted. However, for purposes of these preliminary results, we preliminarily determine that, based our analysis of the company-specific data and information provided by the OLMA, a reduction in the Ontario subsidy benefit is warranted. Our analysis and preliminary findings with respect to these claims are detailed, by province, below. a. Alberta In the first review, the GOA claimed that the numerator of Alberta's provincial subsidy rate calculation should be reduced to account for fair-market, arm's length sales of Crown logs between unrelated parties. The GOA based its claim on a survey of TDA transactions that was conducted by a private consulting firm hired by the GOA. *See Preliminary Results of 1st Review* , 69 FR at 33208. In the final results of the first review, the Department found that it is common for sawmills in Alberta to enter into agreements where a tenure-holding independent harvester will supply timber to the sawmills but the sawmill will pay the stumpage directly to the GOA. *Id.* ; see also *Final Results of 1st Review Decision Memorandum* at Comment 11. Accordingly, we found that in such transactions, known as “delegation of signing authority” or SA agreements, any stumpage benefit would go directly to the sawmill paying the stumpage fee, just as if the sawmill were drawing from its own tenure and contracting out for harvesting and hauling services. We therefore found that the GOA failed to substantiate that the volumes in the TDA survey were free of any volumes associated with SA agreements and, thus, the GOA's pass-through claim was not warranted. *Id.* In the current review, we stated that for any pass-through claim, the GOA had to provide a breakdown by species of the total volume and value that it claims did not pass-through to the purchasing sawmill. *See* page III-22 of our September 8, 2004 questionnaire. We also instructed the GOA not to include in its pass-through claim any purchases for which the mills paid the stumpage fee to the Crown. *Id.* The GOA claimed in its initial questionnaire response that “at least by 1.7 million cubic meters of softwood logs were purchased by Alberta mills in arm's length, cash only transactions with unrelated parties.” *See* page XII-1 and AB-S-76 of the GOA's November 22, 2004 questionnaire response. As in the first review, the GOA based its contention on the TDA survey, as updated for the POR. We note that the updated TDA survey and the GOA's questionnaire responses do not indicate whether the volumes it analyzed were subject to SA agreements. *See* page 45 of the GOA's April 8, 2005 supplemental questionnaire response. In fact, regarding the TDA survey, the GOA stated that “Alberta does not have access to the detailed information on log sales collected on a company-by-company basis by the independent private consultant . . .” hired by the GOA to conduct the TDA survey. *See* page XII-2 of the GOA's November 22, 2004 questionnaire response. Given the GOA's failure to indicate whether the sales in the TDA survey were made pursuant to SA agreements, and the GOA's statement that it lacked access to company-specific data collected by the consultant it hired to conduct the TDA survey, we asked the GOA to respond to the pass-through questions contained in our initial questionnaire without reliance on the TDA survey. *See* page 9 of our March 16, 2005 supplemental questionnaire. In particular, we instructed the GOA to: . . . breakout all data on arm's length log transactions and include information regarding the volume, value, species, corporate affiliations of the parties subject to the transaction, {as well as} a chart identifying whether or not the transaction is subject to a delegation of signing authority
(SA)agreement. *Id.* The GOA responded that it did not maintain or collect such information as any part of its normal function and that it had no means on its own to respond to our pass-through questions aside from the TDA survey. *See* page 45 of the GOA's April 8, 2005 supplemental questionnaire response. In our subsequent supplemental questionnaire, we noted the GOA's claims regarding its inability to respond to our pass-through questions without reliance on the TDA survey and pointed out that in the concurrent Section 129 proceeding the GOA was, indeed, able to report company-specific data separate from the TDA survey in response to the same pass-through questions. 9 We therefore asked the GOA to provide in this review the same type of company-specific data, updated for the POR. *See* page 2 of the Department's April 21, 2005 supplemental questionnaire. In response to our request for company-specific pass-through information that was not reliant on the TDA survey, the GOA answered that the Province “does not keep the information requested here” and it reiterated its assertion that the Department should conduct its pass-through analysis for Alberta using the TDA survey. *See* page 2 of its May 2, 2005 questionnaire response. 9 In our April 21, 2005 supplemental questionnaire, we inadvertently referred to the first administrative review of the countervailing duty order when we should have instead referred to the Section 129 proceeding concerning the pass-through issue in the underlying investigation. The GOA further stated that, “in an effort to provide some additional information,” it contacted PricewaterhouseCoopers LLP
(PwC)to provide a “limited” update of the survey that was included in the pass-through claim the GOA made in the context of the Section 129 proceeding. *Id.* PWC performed this update of the Section 129 data using information held by the GOA on volumes of section 80/81 wood purportedly transferred to tenure-holding sawmills from unrelated parties. *Id.* In regard to the volume represented in the TDA survey, we note that the GOA failed to indicate whether the sales in the TDA survey were made pursuant to SA agreements and the GOA explained that it lacks access to the underlying company-specific data. Regarding the claimed lack of access, the GOA has been unable or unwilling to demonstrate that it made reasonable efforts to obtain the necessary company-specific data. Consequently, we preliminarily find that we are unable to rely on the TDA survey as a basis for the GOA's pass-through claim. Regarding the data supplied by the PwC, we note that, by the GOA's own admission, the data constitutes a “limited” survey population and, thus, does not reflect the total volumes included in the pass-through claim made by the GOA in this review. *See* page 2 and Exhibit AB-S-102 of the GOA's May 2, 2005 supplemental questionnaire response. Further, the information from PwC does not include any documentation regarding purchase agreements, as requested in our April 21, 2005 questionnaire. 10 *See* pages 1-3 and Exhibit AB-S-102 of the GOA's May 2, 2005 supplemental questionnaire response. Moreover, the information from PwC lacks any corresponding value information that would enable the Department to conduct its pass-through analysis on a transaction-specific basis. *Id.* The GOA has been unable or unwilling to explain why it has not supplied the necessary information. Therefore, we preliminarily determine to reject the information from the PwC as a basis for the GOA's pass-through claim. 10 As explained above, it is necessary to examine purchase contacts in order to determine whether they were structured as SA agreements. In addition, it is necessary to review the purchase contracts to ensure that the transactions were made at arm's length, *i.e.* , were not affected by any additional factors we previously identified, including:
(1)limitations on log sales that may be contained in Crown tenure contracts such as appurtenancy requirements
(2)local processing requirements, or
(3)fiber exchanges between Crown tenureholders. Therefore, based on our findings above, we preliminarily determine that a pass-through analysis for Alberta is not warranted. b. British Columbia The GOBC claims that 14.7 million cubic meters of Crown timber, or 22 percent of the total Crown softwood log harvest, was harvested by so-called independent harvesters, *i.e.* , harvesters that do not own and are not affiliated with sawmills during the POR. The GOBC further claims that no subsidy that may be attributable to this harvest volume passed through to purchasing sawmills and, thus, the volumes should not be included in the numerator of British Columbia's provincial subsidy rate calculation. *See* page BC-XIV-2 of the GOBC's November 22, 2004 questionnaire response. In support of this claim, the GOBC provided survey data on what were purported to be B.C.'s primary sawmills' arm's-length log purchases. These data, covering the prior review period, were originally placed on the record of the first review by the BCLTC. *See* “Norcon Forestry Ltd. Survey of Primary Sawmills' Arm's Length Log Purchases in the Province of British Columbia,” which was placed on the record of this review at Volume IV, Exhibit 24 A, B of the BCLTC's February 24, 2005 submission (Norcon Study). 11 11 In its initial questionnaire response, the GOBC claimed that the BCLTC would provide a Norcon Study updated for the POR of this review. *See* page BC-XIV-1 of the GOBC's November 22, 2004 questionnaire response. In the first review, the Department found that the transactions in the Norcon Study involved sales of Crown logs through Section 20 auctions as well as sales to mills by small woodlot owners. *See e.g.* , Preliminary Results of 1st Review, 69 FR 33208 and *Final Results of 1st Review Decision Memorandum* at Comment 10. In the first review, we further found that most of the Section 20 transactions are structured under standard contracts called “Log Purchase Agreements” in which sawmills purchasing the Crown timber are billed for the Crown stumpage fee directly by the B.C. Ministry of Forests. *Id.* As explained above, in the first review, we determined that no pass-through analysis is warranted where the sawmill or some third-party company pays Crown stumpage fees for logs purchased from independent harvesters. *See Final Results of 1st Review Decision Memorandum* at Comment 10. In addition to the information in the Norcon Study, evidence obtained in this review further supports our finding that sawmills pay the stumpage fee directly to the Crown for logs purchased from so-called independent harvesters. *See* Exhibits BC-S-245, 246, and 247 of the GOBC's April 21, 2005 questionnaire response, which contain source documents illustrating how sawmills pay for stumpage on Section 20 sales. Thus, under such arrangements, any stumpage benefit would go directly to the sawmills paying the stumpage fee, just as if the sawmill were drawing from its own tenure and contracting out for harvesting and hauling services, thereby eliminating the need for a pass-through analysis. In the prior review, we determined that log sales cannot be considered to be arm's-length transactions where there are restrictive government-imposed appurtenancy and local processing requirements that dictate to the harvester those entities to whom it may sell, thereby severely hampering the ability of the harvesters to bargain freely with willing purchasers in the marketplace. *See Final Results of 1st Review Decision Memorandum* at Comment 10. However, in this review the GOBC has stated that amendments to the Forest Act, effective November 2003, nullified the timber processing and appurtenancy clauses for replaceable and non-replaceable licenses older than 10 years. For licenses in effect fewer than 10 years, the timber processing and appurtenancy clauses will expire with the licenses or be nullified upon the license's tenth anniversary. Further, the GOBC claims that no new licenses advertised after November 4, 2003 contain any of these clauses. *See* GOBC's November 22, 2004 questionnaire response at BC-III-11 and GOBC's April 13, 2005 questionnaire response at page 60. In light of the GOBC's new legislation and because pre-existing licenses continued to retain the appurtenancy clauses we identified in the prior review, we requested that the GOBC demonstrate that none of the tenure agreements for which it claimed no benefits passed through from the independent harvesters to the sawmills contained any of these restrictive clauses. In response, the GOBC claimed that the timber processing and appurtenancy clauses have no impact on the arm's length transactions and are therefore irrelevant to the Department's pass-through analysis. As to our request that it demonstrate that none of the tenure agreements included in its pass-through claim contained any restrictive clauses, the GOBC claimed that it could not provide such information because it would be burdensome. *See* page 61 of the GOBC's April 13, 2005 questionnaire response. Instead, the GOBC provided some copies of the types of tenure agreements that may have been held by so-called independent harvesters during the POR. However, regarding these agreements, the GOBC provided no information linking the tenure agreements it submitted to those transactions included in its no-pass-through claim ( *e.g.* , several of the submitted agreements were merely blank templates). Therefore, for purposes of these preliminary results, we find that the GOBC has failed to demonstrate that the restrictive clauses were eliminated as a consequence of the amendments to the Forest Act. We also continue to disagree with the GOBC that these restrictions are irrelevant to the pass-through analysis. These government-imposed restrictions severely limit the ability of buyers and sellers of logs to bargain freely with whomever they choose or to bargain on terms that are not encumbered by government mandates. For the reasons explained above, and the fact that the GOBC has not submitted any new information that warrants reconsideration of the Department's prior findings, we preliminarily conclude that the GOBC has failed to adequately substantiate its pass-through claim, and no adjustment to the provincial numerator has been made. c. Ontario As mentioned above, in response to the Department's initial questionnaire, the GOO submitted an “aggregate” claim of the portion of the Crown timber processed by Ontario sawmills that was purchased in arm's-length transactions. The GOO made a claim of no pass-through for 2,459,812 cubic meters or 23.55 percent of the total invoiced volume of Crown timber entering the largest 25 sawmills in Ontario during the POR. In support of this claim, the GOO provided a breakdown of log transactions between the 25 largest mills in Ontario and tenure holders that do not own a sawmill, and certifications from officials of three mills each stating that their mill is not affiliated with its timber suppliers. The OLMA separately submitted company-specific information for one harvester and eight mills. The information included transaction-specific data, statements and certification of non-affiliation, and additional supporting documentation. For the reasons described below, we preliminarily determine that the GOO failed to substantiate its “aggregate” no-pass-through claim. Although the Department accepts the three certifications of non-affiliation provided by the GOO, the GOO's submission is lacking certifications for the other mills it included in its claim. Furthermore, in the initial questionnaire, we requested that the GOO “not include (as part of its claim) any transactions that were made pursuant to wood supply commitments or purchases for which the mills paid the stumpage to the Crown rather than the harvester.” page VI-22 of the Initial Questionnaire at “Section VI: Questionnaire for the Province of Ontario. However, the GOO did not delineate the transactions in which the mills paid the stumpage fees directly to the Crown or the transactions that were made under a wood supply commitment letter or a wood supply agreement. *See* pages ON-237 and ON-238 of Vol. 1 of 19 and exhibit ON-PASS-1 of Vol. 17 of 19 of the GOO's November 22, 2004, initial questionnaire response. Due to these deficiencies, we are unable to conduct a pass-through analysis using the “aggregate” data provided by the GOO. We therefore preliminarily determine that changes to the subsidy calculation based on the GOO's “aggregate” no-pass-through claim are not warranted. With respect to the company-specific data and information provided by the OLMA, we preliminarily determine that these are sufficient for purposes of conducting a pass-through analysis. We accept the certifications by the companies that the transactions they reported were between unaffiliated parties. In addition, the company-specific data clearly identified those transactions for which the harvesters (rather than the mills) paid the stumpage fees and those that were not subject to other restrictions, such as government-mandated wood supply commitments or fiber exchange agreements. Accordingly, we determine that a portion of the log sale transactions reported by the OLMA were conducted at arm's-length and were otherwise not affected by other conditions during the POR. For these transactions, we then performed the next step of our pass-through analysis by examining whether the mill received a competitive benefit from the purchase of the subsidized logs. This competitive benefit analysis is guided by the provisions of the Department's regulation on upstream subsidies. *See* 19 CFR 351.523. Under this analysis, a competitive benefit exists when the price for the input is lower than the price for a benchmark input price. The Department's regulations provide for the use of actual or average prices for unsubsidized input products, including imports, or an appropriate surrogate as the benchmark input price. We have previously determined that the record in the first administrative review did not contain any private prices in Ontario that were suitable for use as benchmarks to measure the adequacy of remuneration for Crown provided stumpage. *See* “Private Provincial Market Prices” section and *Final Results of 1st Admin Review* at Comments 20, 21. As explained in “Provincial Stumpage Programs” below, we have reached the same conclusion based on the record in this proceeding. We have also explained in the first administrative review with respect to British Columbia, that “stumpage and log markets are closely intertwined and therefore Crown stumpage prices affect both stumpage and log prices, “ and that subsidized prices in the stumpage market would result in price suppression in log markets. *Id.* at “B.C. Log Prices Are Not An Appropriate Benchmark.” We have reached the same conclusion with respect to the log markets in Ontario. In Ontario, Crown timber supplies a dominant portion of the market, and the unit cost of this supply effectively determines the market prices of logs in Ontario. As shown on the record in this review and the prior review, the prices harvesters charge for logs are derived directly from the prices they pay for stumpage plus harvesting costs. Because of the relationship between timber (stumpage) and log prices, prices for logs in Ontario would be suppressed by the subsidized prices in the timber markets. As such, log prices in Ontario are unsuitable for purposes of measuring whether a competitive benefit has passed-through in transactions involving sales of Crown logs. Instead, we have turned to private stumpage prices in the Maritimes, which we have determined are market-determined, in-country prices. However, because we are measuring the competitive benefit for the sale of subsidized logs, we have derived species-specific benchmark log prices by combining the unsubsidized Maritimes stumpage prices with the various harvest, haul, road, and management costs reported by the GOO. We then compared the per unit prices listed for each transaction reported by the OLMA that we determined was eligible for a competitive benefit analysis with our benchmark log prices. If the price per cubic meter was equal to or higher than the benchmark price, we determined that no competitive benefit passed through and the corresponding volume was excluded from the numerator of our calculations. Where the per unit price was lower than the benchmark price, and where the difference between the benchmark and actual log prices was greater than that province-specific per-unit stumpage benefit ( *e.g.* , C$8.74 for Ontario SPF), we capped the amount of the subsidy considered to have “passed-through” by the province-specific per-unit stumpage benefit. As such, the amount of the competitive benefit that calculated as was not passed though in the transaction was never greater than the subsidy granted by the Crown. The result of these calculations is that only a small portion of the Crown harvest volume originally included in the numerator is excluded from the numerator of our revised subsidy calculations. Accordingly, a small reduction in the Ontario subsidy benefit is warranted. The calculations are business proprietary. *See* the May 31, 2005, Preliminary Calculations Memorandum for Ontario. As noted above, if we were unable to determine that the transaction qualified as an arm's-length transaction or was subject to other conditions ( *e.g.* , the stumpage for the log was paid by the harvester), we did not conduct a competitive benefit analysis and the corresponding volume associated with these transactions was not excluded from the subsidy calculation. d. Manitoba The Canadian parties and the GOM did not make an “aggregate” claim of the portion of the Crown timber processed by Manitoba sawmills that was purchased in arm's-length transactions. Rather, the OLMA submitted company-specific information on behalf of Tembec Inc. We determine that the company-specific data and information provided by the OLMA are sufficient for purposes of our analysis and that a portion of the transactions in Manitoba constitute arm's-length sales of logs by independent harvesters to unaffiliated sawmills during the POR. We accept the statement that “with respect to its operations in Manitoba, Tembec is an independent harvester.” *See* page 4 of Volume 1 of the OLMA”s November 22, 2004, submission. In addition, the information and data provided indicate that the transactions were not characterized by the limitations which constrain buyers and sellers of harvested Crown timber from free negotiation, described above. Accordingly, we determine that a portion of the transactions in Manitoba constitute arm's-length sales of logs by independent harvesters to unaffiliated sawmills during the POR. We applied the same methodology as described above in the Ontario pass-through section when conducting our competitive benefit analysis. Because the GOM did not submit any log pricing data on the record, we derived the species-specific benchmark log price by combining the private market-determined, in-country Maritime stumpage prices with the various costs reported by the GOM. Because the GOM did not report certain harvesting costs and hauling costs, we used, where necessary, harvesting and hauling costs placed on the record by the GOO as surrogates. The result of these calculations is that none of the Crown harvest volume originally included in the numerator is excluded from the numerator of our revised subsidy calculations. Accordingly, no reduction in the Manitoba subsidy benefit is warranted. The calculations contain business proprietary information and, thus, cannot be discussed in further detail in these preliminary results. Therefore, for further details, *see* the May 31, 2005, Preliminary Calculations Memorandum for Manitoba. e. Quebec In the first review, the Department did not include Crown timber harvested by FMC and FMA licensees in the numerator of Quebec's provincial subsidy rate calculation. While we acknowledged that evidence on the record of the first review demonstrated that some of the timber harvested under FMCs was sold to sawmills during the POR, such transactions may have included sales of logs from non-sawmill owning tenure holders to sawmills and, thus, would have required a pass-through analysis. *SeeFinal Results of the 1st Review Decision Memorandum* at Comment 13. Because in the first review we did not examine the relationship between the harvesters and sawmills or the terms and conditions of the timber sales in the context of a pass-through analysis, we found that we were unable to reach a determination as to whether the volume of timber harvested under FMCs should be included in the numerator. *Id.* However, we indicated that we would reconsider the issue in the course of the second review. *Id.* In this review, petitioners assert that the Department must include in the numerator of the Quebec provincial subsidy rate calculation the volumes of Crown timber harvested by FMC and FMA licensees on the grounds that the GOQ has refused to answer the Department's questions concerning these licensees. *See* page 112 through 114 of petitioners' April 29, 2005 submission. For purposes of these preliminary results, we have included the volume of Crown timber harvested under the FMC license program in the numerator of Quebec's provincial subsidy rate calculation. In our initial questionnaire, we explained to the GOQ that if it wished to claim that any portion of the reported volume of Crown timber harvested under the FMC and FMA licences was sold in arm's length transactions and that any subsidies provided for that portion of timber of the Crown harvest did not “pass- through” to purchasing sawmill(s), it had to provide a breakdown, by species, of the total volume and value of this harvested timber during the POR. In addition, we instructed the GOQ to respond to a series of questions regarding the terms and conditions of the transactions covered by any pass-through claim and to identify any affiliations between the buyer and seller of the logs in question. *See* VII-30 of our September 8, 2005 questionnaire. In its response, the GOQ stated: At this time, the Gouvernment of Quebec is not claiming that any portion of the reported volume of Crown harvest was sold in arms' length transactions. This is not to suggest that there are no such transactions. To the contrary, the volumes of Crown timber harvested pursuant to FMCs and FMAs, and subsequently sold in open market transactions are undoubtedly arm's length transactions. . . Because the volume of standing timber harvested under FMCs and FMAs is negligible, the Department's consistent practice has been to base its calculations on the volumes harvested pursuant to TSFMAs. Adherence to this practice obviates the need for pass-through analysis in Quebec. *See* page QC-157 through QC-158 of the GOQ's November 22, 2004 questionnaire response. The GOQ added that if the Department decided to include FMC and FMA volumes in its calculations, then it would have to undertake a pass-through analysis. *Id.* In our initial questionnaire, we further asked the GOQ to indicate the total volume and value of Crown timber billed to any person or company that did not own or operate a sawmill and was not affiliated with a sawmill that the GOQ permitted to harvest Crown timber during the POR. *See* page VII-6 of our September 8, 2004 questionnaire. In response, the GOQ provided a list of FMC holders that it claimed did not own or operate sawmills during the POR. *See* Exhibit 50 of its November 22, 2004 questionnaire response. Many of the FMC holders identified in Exhibit 50 were municipalities. The GOQ also provided consolidated volume and value harvest data for FMC holders that “paid no stumpage” and those that “paid stumpage.” *See* Exhibit 57 of the GOQ's November 22, 2004 questionnaire response. However, this exhibit did not list the volume and value data separately for each FMC holder, as instructed by our initial questionnaire. In our initial questionnaire, we also asked the GOQ to identify the volume and value, by species and grade, of Crown log sales by FMC holders to companies that own sawmills. *See* page VII-7 of our September 8, 2004 questionnaire. In its questionnaire response, the GOQ stated: The requested volume and value data is collected by the {Ministry of Natural Resources} as part of an annual process. The data for the POR are not yet available. The {Ministry} does not know the specific arrangements entered into by holders of FMCs and FMAs and, therefore, cannot describe the nature of those agreements or provide the representative contracts. *See* page QC-48 of the GOQ's November 22, 2004 questionnaire response. FMC Licences Pursuant to section 102 of the Forestry Act, the GOQ may grant a FMC license to any “person.” *See* QC-S-13 and page QC-44 of the GOQ's November 22, 2004 questionnaire response. Thus, FMC license holders may or may not own sawmills. However, cross-referencing a list of FMC holders, as provided in Exhibit 32 of the GOQ's November 22, 2004 questionnaire response, with a list of sawmills with GOQ authorization to consume softwood timber, reveals that several sawmills did hold FMCs during the POR. For authorized consumption data, see page 55, Attachment III, of the June 2, 2004 “Quebec Private Price Documentation Memo” from the *Preliminary Results of the 1st Review* , which was placed on the record of this review the February 28, 2005 memorandum to the file from Maura Jeffords, Case Analyst. In addition, evidence indicates that the GOQ often grants FMCs to municipalities in the province. *See* page QC-24 of the GOQ's November 22, 2005 questionnaire response and *Preliminary Results of 1st Review* , 69 FR at 33225. Further, sections 104.2 and 104.3 of the GOQ's Forestry Act stipulate that the holder of a FMC license must supply standing timber covered by the license to timber wood processing plants in Quebec in the amount specified on the license's management permit. This stipulation is also reflected in the standard language of the FMC contract. *See e.g.* , page 3 and 10 of the sample FMC contract contained in Exhibit 31 of the GOQ's November 22, 2004 questionnaire response. Therefore, based on the information discussed above, we preliminarily determine that the FMC volume reported by the GOQ includes FMC licenses held by sawmills as well as softwood log volumes that were sold directly by government entities in Quebec ( *e.g.* , municipalities) to sawmills. As explained above, we provided the GOQ an opportunity to substantiate its claim that Crown logs were sold in arm's length transactions and that any subsidies did not “pass-through” to purchasing sawmills. We also specifically instructed the GOQ not to include in its pass-through claim any logs sold directly by government entities holding FMCs. The GOQ did not do so. Rather, the GOQ reported the entire volume of timber harvested under FMC licenses, which, apart from government municipalities, may also include timber harvested by sawmills with tenure. The volume of timber harvested by government entities and sawmills with tenure is not be eligible for a pass-through analysis. The sale by government municipalities of Crown-harvested logs is no different from the provincial government itself selling the logs and thus does not involve an “indirect” subsidy. Further, timber harvested by sawmills with tenure would be used by these mills to produce lumber in their own facilities rather than for the sale of logs to other sawmills. Because the GOQ did not break out separately the volume of Crown timber harvested by government entities and sawmills with tenure from the volume harvested by independent harvesters that sold logs to sawmills during the POR, we preliminarily determine that a pass-through analysis is not warranted. Therefore, we have included all of the FMC harvest volume in the numerator of our subsidy calculations. Petitioners have further argued that the GOQ's questionnaire response indicates that no stumpage fees at all were paid for a portion of FMC harvest volume and that the Department should reflect that lack of payment in our calculations. *See* Exhibit QC-S-82 of the GOQ's November 22, 2004 questionnaire response. We disagree. In cases where the FMC licensee is a municipality, the municipality collects dues for the cutting rights, not the GOQ. *See* QC S—92 of the GOQ's November 22, 2004 questionnaire response. Thus, the information contained in Exhibit QC-S-82 reflects the FMC harvest volumes sold by government municipalities and non-profit organizations but not the corresponding prices charged to the buyers of the logs. Therefore, lacking the price information for these FMC volumes, as facts available we are applying the unit prices that the GOQ reported for the remaining amount of the FMC volume. FMA Licenses We are not including the timber volumes harvested under FMA licenses in the numerator of our calculations. Under section 84.1 of the Forest Act, an FMA licensee may not be the holder of a wood processing permit nor be affiliated with the holder of a wood processing permit. *See* QC-S-13 of the GOQ's November 22, 2004 questionnaire response. Although the record does not contain the prices which the FMA license holders charge their customers for Crown logs even if the full amount of the subsidy is assumed to pass-through to its customer, inclusion of this volume in the numerator has no impact on the portion of the country-wide rate attributable to Quebec. Therefore, we have not included any of the FMA harvest volume in our calculations. Analysis of Programs I. Programs Preliminarily Determined to Confer Subsidies A. Provincial Stumpage Programs In Canada, the vast majority of standing timber sold originates from lands owned by the Crown. Each of the reviewed Canadian provinces, *i.e.* , Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan, 12 has established programs through which it charges certain license holders “stumpage” fees for standing timber harvested from these Crown lands. With the exception of British Columbia, these administered stumpage programs have remained largely unchanged. Thus, for a description of the stumpage programs administered by the GOA, GOS, GOM, GOO, and GOQ, *see* “Description of Provincial Stumpage Programs” section of the *Preliminary Results of 1st Review* . Changes to British Columbia administered stumpage system are discussed below. 12 In this review, we did not examine the stumpage programs with respect to the Yukon Territory, Northwest Territories, and timber sold on federal land because the amount of exports to the U.S. is insignificant and would have no measurable effect on any subsidy rate calculated in this review. Legal Framework In accordance with section 771(5) of the Act, to find a countervailable subsidy, the Department must determine that a government provided a financial contribution and that a benefit was thereby conferred, and that the subsidy is specific within the meaning of section 771(5A) of the Act. As set forth below, no new information or argument on the record of this review has resulted in a change in the Department's determinations from the final results of the first review that the provincial stumpage programs constitute financial contributions provided by the provincial governments and that they are specific. Financial Contribution and Specificity In the underlying investigation, the Department determined, consistent with section 771(5)(D)(iii) of the Act, that the Canadian provincial stumpage programs constitute a financial contribution because the provincial governments are providing a good to lumber producers, and that good is timber. The Department further noted that the ordinary meaning of “goods” is broad, encompassing all “property or possessions” and “saleable commodities.” *See* “Financial Contribution” in the *Final Determination Decision Memorandum* . Further, the Department found that “nothing in the definition of the term 'goods' indicates that things that occur naturally on land, such as timber, do not constitute 'goods.'” To the contrary, the Department found that the term specifically includes ”. . . growing crops and other identified things to be severed from real property.” *Id.* The Department further determined that an examination of the provincial stumpage systems demonstrated that the sole purpose of the tenures was to provide lumber producers with timber. Thus, the Department determined that regardless of whether the provinces are supplying timber or making it available through a right of access, they are providing timber. *Id.* No new information has been placed on the record of this review warranting a change in our finding that the provincial stumpage programs constitute a financial contribution in the form of a good, and that the provinces are providing that good, *i.e.* , timber, to lumber producers. Consistent with our findings in the underlying investigation, we preliminarily continue to find that the stumpage programs constitute a financial contribution provided to lumber producers within the meaning of section 771(5)(D)(iii) of the Act. In the investigation, the Department determined that provincial stumpage subsidy programs were used by a “limited number of certain enterprises” and, thus, were specific in accordance with section 771(5A)(D)(iii)(I) of the Act. More particularly, the Department found that stumpage subsidy programs were used by a single group of industries, comprised of pulp and paper mills, and the sawmills and remanufacturers that produce the subject merchandise. *See* “Specificity” section of the *Final Determination Decision Memorandum* . This was true in each of the reviewed provinces. No information in the record of this review warrants a change in this determination and, thus, we preliminarily continue to find that the provincial stumpage programs are specific within the meaning of section 771(5A)(D)(iii)(I) of the Act. Benefit Section 771(5)(E)(iv) of the Act and 19 CFR 351.511(a) govern the determination of whether a benefit has been conferred from subsidies involving the provision of a good or service. Pursuant to section 771(5)(E)(iv) of the Act, a benefit is conferred by a government when the government provides a good or service for less than adequate remuneration. Section 771(5)(E) further states that the adequacy of remuneration: . . . shall be determined in relation to prevailing market conditions for the good or service being provided . . . in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of . . . sale. The hierarchy for selecting a benchmark price to determine whether a government good or service is provided for less than adequate remuneration is set forth in 19 CFR 351.511(a)(2). The hierarchy, in order of preference, is:
(1)market-determined prices from actual transactions within the country under investigation or review;
(2)world market prices that would be available to purchasers in the country under investigation; or
(3)an assessment of whether the government price is consistent with market principles. Under this hierarchy, we must first determine whether there are actual market-determined prices for timber sales in Canada that can be used to measure whether the provincial stumpage programs provide timber for less than adequate remuneration. Such benchmark prices could include prices resulting from actual transactions between private parties, actual imports, or, in certain circumstances, actual sales from competitively-run government auctions. *See* 19 CFR 351.511(a)(2)(i). The Preamble to the CVD Regulations provides additional guidance on the use of market-determined prices stemming from actual transactions within the country. *See* “Explanation of the Final Rules “ *Countervailing Duties, Final Rule* , 63 FR 65348, 65377 (November 25, 1998) (the Preamble). For example, the Preamble states that prices from a government auction would be appropriate where the government sells a significant portion of the good or service through competitive bid procedures that are open to everyone, that protect confidentiality, and that are based solely on price. The Preamble also states that the Department normally will not adjust such competitively bid prices to account for government distortion of the market because such distortion will normally be minimal as long as the government involvement in the market is not substantial. 63 FR at 65377. The Preamble also states that “[w]hile we recognize that government involvement in the marketplace may have some impact on the price of the good or service in that market, such distortion will normally be minimal unless the government provider constitutes a majority or, in certain circumstances, a substantial portion of the market. Where it is reasonable to conclude that actual transaction prices are significantly distorted as a result of the government's involvement in the market, we will resort to the next alternative in the hierarchy.” 13 13 *Preamble* , 63 FR at 65377-78 (emphasis added); *see also Hot-Rolled Carbon Steel Flat Products from Thailand* , 66 Fed. Reg. at 20259. The guidance in the Preamble reflects the fact that, when the government is the predominant provider of a good or service there is a likelihood that it can affect private prices for the good or service. Where the government effectively determines the private prices, a comparison of the government price and the private prices cannot capture the full extent of the subsidy benefit. In such a case, therefore, the private prices cannot serve as an appropriate benchmark. In the first administrative review, the Department determined that there were no usable private market stumpage prices in the provinces whose stumpage programs are under review that could serve as benchmarks. *See* “Private Provincial Market Prices” section of the *Final Results of 1st Review Decision Memorandum* . For the reasons discussed below, the Department continues to find that there are no private stumpage market prices in the provinces under review that can serve as first-tier benchmarks in Alberta, British Columbia, Manitoba, Ontario, Quebec, and Saskatchewan. There Are No Useable First-Tier Benchmarks in the Subject Provinces Measuring the Benefit on Stumpage Programs Administered by the GOA, GOBC, GOO, GOQ, GOM, and GOS In this administrative review, the GOA reported private price data and government competitive bid data as reported in Alberta's 2004 Timber Damage Assessment
(TDA)update; the GOO provided an updated survey of private prices prepared by Demers Gobeil Mercier & Associes Inc. (DGM); the GOQ provided private stumpage prices charged in its province; and the GOBC provided prices from auctions the government administers under the B.C. Timber Sales
(BCTS)program. As discussed below, we have preliminarily determined that pricing data reported by the GOA, GOO, GOQ, and GOBC are not suitable for use as a benchmark within the meaning of 19 CFR 351.111(a)(2)(i). Province of Alberta In response to the Department's request for private timber prices, the GOA explained that it is not involved in private party transactions and does not know the process by which private timber is sold. *See* GOA's November 22, 2004 response, Volume 1 at page VIII-1. However, the GOA submitted the TDA as a source of data for arm's-length, cash only private log sales. *See* GOA's November 22, 2003 response at Exhibit AB-S-76. We have examined Alberta's TDA private price data and government “competitive” bid data reported in Alberta's TDA 2004 update and continue to find that the TDA prices are not actual market-determined prices, as required by the CVD regulations, and, thus, cannot be used as a benchmark. *See Preliminary Results of 1st Review* , 69 FR at 33214 and “Private Provincial Market Prices” section of the *Final Results of 1st Review Decision Memorandum* and at Comment 19. The GOA explains that the TDA began in the mid-1990's as a means for mediating disputes between timber operators and other industrial operators concerning the value of standing timber adversely affected by industrial operations on timber tenures. Pursuant to these efforts, a consultant has collected information on log purchases which does not differentiate between private and Crown sources. The GOA describes the methodology, stating that “the values on the {TDA} table are derived by consultants from a two year average of competitive Commercial Timber Permit
(CTP)sales values, as well as the value of arm's length log purchases, adjusted to stumpage values by backing out harvesting and haul costs.” *See* the GOA's November 22, 2004, Questionnaire Response at Volume 1, page I-8. The GOA's response indicates that the methodology used to report the TDA private timber transaction data for this administrative review is consistent with and has not changed since the period covered by the prior administrative review. *Id.* As previously explained by the Department, the vast majority of the CTP prices do not reflect competition for the right to harvest timber and the CTP prices underlying the TDA calculations do not reflect market determined prices. *See Final Results of 1st Review Decision Memorandum* at Comment 19. There is no new evidence offered by the GOA that would result in a reconsideration of the Department's decision to reject the use of TDA as a provincial benchmark. Moreover, due to the fact that the TDA data does not differentiate private and Crown sources in its survey, there is no method for the Department to identify the potentially private transactions captured by the TDA survey (which would only represent a maximum of 203,041 cubic meters or 2 percent of Alberta's total softwood sawmill Section 80/81 harvest volume that is reported as harvested from private lands). *See* GOA's November 22, 2003 response Table 1 at Exhibit AB-S-1. Therefore, based on the record evidence and consistent with the Department's prior determinations, we find that the TDA prices are not actual market-determined prices, as required by the CVD regulations, and, thus, cannot be used as a benchmark. *See* 19 CFR 351.511(a)(2). Province of British Columbia British Columbia did not provide private stumpage prices for the record of this proceeding. Instead, the Province provided prices from auctions the government administers under section 20 of the Forest Act. These auctions were formerly conducted under the Small Business Forest Enterprise Program (SBFEP). In the investigation and first administrative review, the Department determined that the auction prices under the SBFEP program were not suitable for use as benchmarks in determining whether the GOBC sold Crown timber for less than adequate remuneration because the SBFEP auctions were only open to small business forest enterprises. As such, we determined that these prices did not reflect prices from a competitively run government auction, as required by our regulations. *See* 19 CFR 351.511(a)(2)(i) and the Preamble, 63 FR at 65377; see also the “Private Provincial Market Prices” section of the *Final Results of 1st Review Decision Memorandum* and *Preliminary Results of 1st Review* , 69 FR at 33214. The GOBC has explained in this proceeding that the Forest Act was amended effective November 4, 2003. The amendments include specific changes to the section 20 auction program, under which the SBFEP was replaced by the new B.C. Timber Sales
(BCTS)program. The GOBC claims that pursuant to these changes, section 20 auction prices may serve as first-tier benchmarks for the November 2003 to April 2004 period to determine whether Crown timber in British Columbia was sold for less than adequate remuneration. *See* GOBC November 22, 2004 Questionnaire Response, BC-III-1. *See also* GOBC May 18, 2005 Comments at page 2. To support its claim, the GOBC highlights an amendment that eliminated the limitation of section 20 auctions to small businesses. Before the amendment, section 20 sales under the SBFEP were classified under three categories. The second and third categories were subsumed into the new BCTS program largely unchanged, and continue to contain the same restrictions on participants as before the amendments to the law. According to the GOBC, the first category, however, was broadened to include individuals or corporations that own a timber processing facility. Previously, these participants were excluded. This change effectively eliminated the restriction of section 20 auction sales to small businesses allowing them to include all applicants in the Province. *See* GOBC November 22, 2004 Questionnaire Response, BC-III-2. As explained in detail, below, the Department preliminarily determines that record evidence does not support the use of prices for Crown timber auctioned under section 20 of the Forest Act, as amended, as benchmarks to measure the adequacy of remuneration for Crown stumpage. Firstly, the volume sold at auction does not meet the standard set out in the Department's Regulations. Secondly, the auction prices submitted by the GOBC are not market determined prices as they are effectively limited by Crown stumpage prices paid by Crown tenure-holding sawmills. The Department's analysis cannot utilize a benchmark that would reflect any underlying subsidy to determine whether and to what extent that very subsidy exists. Section 351.511(a)(2)(i) of the CVD Regulations states that in measuring the adequacy of remuneration the benchmark may be derived from actual sales from competitively run government auctions and that, when choosing from such auction prices, product similarity, quantities sold, and other factors affecting comparability will be considered. The Preamble to the CVD Regulations further elaborates on this as it requires the use of market determined prices which may include actual sales prices from government-run auctions where such sales are competitive, account for a significant portion of the total market, and are based solely on price. *See* Preamble, 63 FR at 65377. Record evidence does not support the use of prices for Crown timber auctioned under section 20 of the Forest Act, as amended, as benchmarks because the volumes sold under the auctions are not “significant.” As such, these prices do not meet this part of the standard as stipulated in the CVD Regulations. Specifically, since the amendments to the Forest Act became effective, on November 4, 2003, to the end of the POR, on March 31, 2004, participants in the BCTS program, including all auction sales ( *i.e.* , section 20 and section 21), accounted for 7.1 percent of the total Crown harvest and volume billed, while participants in the newly “unrestricted” category 1 auction sales accounted for only 1.1 percent of the total Crown harvest and volume billed. *See* GOBC April 13, 2005, Exhibit BC-S-225. Thus, the volume of Crown timber sold by the GOBC through the section 20 auctions during the POR cannot be considered to represent a “significant” portion of the timber sold in British Columbia during the POR, and the prices from these auctions therefore do not meet a key requirement for their consideration as benchmarks for measuring the adequacy of remuneration for government provided goods. Our determination that the prices for Crown timber auctioned under section 20 of the Forest Act, as amended, are not market-determined prices, but rather reflect prices for administratively-set Crown stumpage, is based on a number of factors. First, participants in the auctions included Crown tenure holding sawmills but, most often, were loggers who then sold the timber to Crown tenure holding sawmills. Second, the price that Crown tenure holding mills are willing to pay at auction or, more frequently, to loggers is determined by the price they pay for Crown stumpage because of the non-binding Annual Allowable Cut
(AAC)in B.C. Third, the price loggers bid at the auctions is limited by the price they receive from their customers, the largest of whom are tenure-holding sawmills. Therefore, the auction prices represented directly or indirectly by sales to Crown tenure-holding sawmills are effectively determined by Crown stumpage prices. The substantial presence of valuations by Crown tenure-holding sawmills within the BCTS prices means that the BCTS auction prices are not market-determined prices as required in the Department's Regulations and are not useable as benchmarks for measuring the adequacy of remuneration. Record information demonstrates that the participants in BCTS section 20 auctions were primarily logging firms but included some limited participation by Crown tenure-holding sawmills . In a study prepared by Susan Athey and Peter Cramton of Market Design Inc, titled “Competitive Auction Markets in British Columbia,” (BCLTC Study), the authors state at pages 6—7, that “most of the bidders in the auctions during this time period were not the major timber companies or tenure-holders, but rather most bidders were logging firms.” *See* BCLTC's March 2, 2005, factual submission. A footnote in the study clarifies that “about two-thirds of the 34 Coast tracts were won by log brokers or market loggers, while about four-fifths of the 142 Interior tracts were won by log brokers or market loggers.” *Id* The record further shows that a large portion of the Crown timber purchased in the auctions by loggers was, in turn, sold to Crown tenure-holding sawmills in the province. The BCLTC Study explains that because of the nature of the industry in B.C.: the efficient industry structure has specialized logging firms and manufacturing firms. The logging firms place bids in BCTS auctions, and they sell the timber directly to mills, through log markets, or some combination thereof. Mills occasionally participate in auctions directly, but this participation is the exception rather than the rule. *Id.* During the course of this proceeding, we specifically asked the GOBC for additional information concerning the identity of the BCTS section 20 auctions bidders and the use of the timber obtained from these auctions. *See* the Department's requests for information in the questionnaires to the GOBC, dated March 16, 2005, March 23, 2005, and April 5, 2005. The GOBC contacted the Department on March 21, March 28, and on April 8, to advise that it was unable to respond fully to these questionnaires because of the voluminous data associated with each of the timber sale licences
(TSL)associated with the section 20 auctions sales. 14 14 TSLs grant the right to harvest timber within a specific Timber Supply Area or TFL Area. TSLs have a duration of no more than 10 years. TSLs under Section 20 and 23 typically have a one-year term while TSLs under Section 21 have terms averaging four or five years. In light of this, the Department requested information from 14 randomly selected TSLs, including a copy of “payment distribution,” of the Ministry of Forests
(MOF)invoices. The GOBC provided the requested information for ten of these TSLs, stating that no invoices were issued during the POR for the remaining four TSLs selected by the Department. The information from these 10 TSLs shows that the winning bidders of the Crown timber under BCTS section 20 auctions sold at least 65 percent of the timber to large Crown tenure holders with sawmills. *See* Exhibits BC-S-245 and 246 of the GOBC's April 21, 2005 questionnaire response. The evidence that the auction winning loggers' principal customers are large tenure-holding sawmills is supported by the dominance of the B.C. timber market by the large Crown tenure-holding sawmills. This is significant to the extent that it limits the loggers' ability to sell timber bought at the auctions to other customers. Record information demonstrates that a small number of these large tenure-holding sawmills harvest the majority of the Crown timber in B.C. For example, the ten largest licensees by AAC (Canadian Forest Products Ltd., Weyerhaeuser Company Limited, Slocan Forest Products Ltd., West Fraser Mills Ltd., Doman Industries, International Forest Products, Riverside Forest Products Limited, Weldwood of Canada Limited, Tolko Industries Ltd., and Tembec Industries Inc) account for approximately 59 percent of the Crown harvest and 52 percent of all timber harvested in the province. *See* BC-III-14 of the GOBC's November 22, 2004 questionnaire response and Exhibits BC-S-1 and BC-S-10. These large Crown tenure-holding sawmills, and the timber harvested from administratively-set Crown logs, thus dominate a significant portion of the timber market in British Columbia. The idea that the customers of loggers bidding at the auctions are large tenure-holding sawmills is further supported with other information on the record. For example, West Fraser, a large Crown tenure-holding sawmill, claims that it purchased logs from market loggers who won bids in section 20 small business or BCTS auctions; in such purchases, West Fraser also claims that other sawmills participated. *See* BCLTC's February 28, 2005 submission at Appendix C, page 2. Other sawmills submitted statements that they too purchased section 20 auction logs from winning bidders. *Id.* at Appendices B—G. On the basis of the record information described above showing that most of the participants in the auctions were loggers who sold most of the timber bought at auction to Crown tenure-holding sawmills, we determine that it is reasonable to conclude that most of the Crown timber sold in BCTS section 20 auctions was ultimately purchased and used by Crown tenure-holding sawmills. The AAC in the province effectively limits the amount that Crown tenure-holding mills are willing to pay for timber from the auctions or pay to loggers who win bids at the auctions. The AAC in BC is not an effective limitation on timber supply for Crown tenure-holding sawmills, as sawmills can just decide to harvest more from their Crown tenure, the price they pay for auctioned timber would be limited by what they pay for Crown stumpage. The record shows that these large Crown tenure-holding sawmills did not exhaust the amount of timber they could harvest from their tenures during the POR. As such, they were not forced to obtain timber from other sources, such as the BCTS section 20 auctions, because of a scarcity of available timber on their own tenure. Specifically, the Crown tenure-holding sawmills, who hold forest licenses and tree farm licenses, were allocated 61.0 million cubic meters of timber or 85 percent of the AAC, which is the annual rate of timber harvesting specified in each Timber Supply Area (TSA), during the POR. However, these licensees harvested only 42.4 million cubic meters or 70 percent of their AAC, a shortfall of 18.6 million cubic meters. *See* GOBC's November 22, 2004, Questionnaire Response at BC-S-139. Moreover, since Crown tenure holders are allowed to overcut their AAC, even meeting their AAC would not have necessitated their buying from the auctions as additional timber could have been harvested under their tenures. *See* GOBC November 22, 2004, Questionnaire Response at BC-S-88. The mills' willingness to pay for timber from other sources, such as the auctions, will be limited by their costs for obtaining timber from their own tenures. The price that loggers bid at the auctions is limited by the price they receive from tenure-holding sawmills because these sawmills are major purchasers of timber from the loggers and the major producers of softwood lumber in B.C. That loggers consider the price they will receive from tenure-holding sawmills and that this price determines what they bid in the BCTS auctions is demonstrated in the record by the fact that logging firms negotiate with the Crown tenure holding sawmills prior to placing a bid in the BCTS auction. *See* GOBC's November 22, 2004, Questionnaire Response at BC-IV-43 and April 13, 2005, Supplemental Response at page 47, and GOBC's November 22, 2004, Questionnaire Response at BC-S-26. *See also* the BCLTC Study at page 6-7, which states that: The BCTS auctions during this time period restricted bidders to hold no more than three BCTS timber licenses simultaneously. .. In addition, if a [saw]mill is unable to bid on a tract due to the restriction, the market loggers participating in the BCTS auctions will still take into account the mill's valuation for the logs, since the loggers anticipate being able to sell the harvested logs directly to the mill or through the log market (where log market prices will reflect the valuations of all local mills). Thus, a mill's valuation for the logs is still reflected in the auction prices, even it if does not bid directly. (Emphasis added.) As stated previously, our analysis cannot utilize a benchmark that would reflect any underlying subsidy to determine whether and to what extent that very subsidy exists. As described above, the prices for timber auctioned under section 20 are effectively limited by Crown stumpage prices paid by Crown tenure-holding sawmills. These sawmills purchase the predominant amount of the timber bought in the auctions by logging companies at prices that are negotiated with the loggers prior to the auction in addition to being minor participants in the auctions. Moreover, the sawmills are in a position to establish these timber prices in a manner that reflects the prices they pay for Crown stumpage on their own tenures, *i.e.* , administratively-set prices, because they are not faced with a scarcity of timber from their tenure. For these reasons, we preliminarily determine that the prices of Crown timber auctioned under section 20 of the Forest Act, as amended during the POR, are effectively limited by prices for administratively-set Crown timber. As such, these prices cannot serve as benchmarks to measure the adequacy of remuneration for Crown provided timber, because they do not reflect market-determined prices from competitively run government auctions, a key requirement of the CVD regulations. *See* 19 CFR 351.511(a)(2)(i). Province of Ontario In the first administrative review, we determined that the prices for private standing timber in Ontario placed on the record by the GOO could not be used for benchmark purposes. Specifically, we determined that the prices reported in a survey prepared by DGM could not be used as benchmarks because the prices are effectively determined by the price for public timber. *See Preliminary Results of 1st Review* , 69 FR at 33215-33217; and *Final Results of 1st Review Decision Memorandum* at Comments 20 and 21. In this review, the GOO submitted estimates (based on mill return data) of the volumes of private timber delivered to the various mills and a survey of prices of standing timber from private lands conducted by Bearing Point. In addition, the GOO submitted an economic analysis written by Charles River Associates and a map which shows the distribution of private forest lands in Ontario. This new information has not led us to alter our findings from the first review. As in the prior review, we determine that the prices for private standing timber in Ontario are effectively determined by the price for public timber and, thus, cannot be used as benchmarks for determining whether the GOO sells Crown timber for less than adequate remuneration. Information on the record indicates that sawmills in Ontario rely on Crown timber for the vast majority of their timber supply needs and use private timber in small quantities. According to mill return data provided by the GOO, 70 out of 75 mills reported usage of both Crown timber and timber from private lands, accounting for 99.7 percent of the total volume reported. *See* Exhibit ON-SUPP-3 of the GOO's April 15, 2005, supplemental questionnaire response. Also according to data provided by the GOO, the twenty-five largest sawmills, which account for about 74 percent of the volume reported, used approximately 10 million cubic meters of Crown timber during POR and less than one half million cubic meters of private timber. Information provided on the record by the GOO also indicates that tenure holders in Ontario are virtually unconstrained in the amount of Crown timber they can obtain. During the POR, loggers and mills in Ontario harvested only 70 percent of the annual allowable cut set by the GOO. *See* exhibit ON-TNR-3 of the GOO's April 15, 2005, supplemental questionnaire response. In each of the last four years, the harvest level ranged from as low as 56 percent to no more than 88 percent of the annual allowable cut. *Id.* With no constraints on the amount of Crown timber that sawmills can obtain, the price that loggers are willing to bid on private stumpage is dictated by the difference of the expected sale price of the log and their harvesting costs plus profit. Loggers who sell to tenure-holding mills cannot expect to charge more for their private logs than the cost of the logs that the mills can source from their public tenure. The largest 25 softwood sawmills, producing 92 percent of the lumber in Ontario, have Crown tenure for which they pay government-set stumpage prices. *See* page ON-236 of the GOO's November 22, 2004 initial questionnaire response. Because the AAC in Ontario is not binding, mills with public tenure can always harvest more timber from their tenure and are not driven to the private market by demand that cannot be met from their tenure-holdings. *See Final Results of 1st Review Decision Memorandum* at Comment 20. Their willingness to pay for logs from other sources will be limited by their costs for obtaining timber from their own tenures. Therefore, the prices loggers bid for private stumpage are limited by the public stumpage prices paid by these mills. For these reasons, the Department finds that the transactions recorded in the Bearing Point Survey are effectively determined by the Crown stumpage prices and are, hence, not suitable benchmarks for assessing adequacy of remuneration. Our analysis cannot utilize a benchmark that would reflect any underlying subsidy to determine whether and to what extent that very subsidy exists. Because the prices in the Bearing Point Survey are dictated by the price for Crown timber, they are not useable under tier one of our regulatory hierarchy. Province of Quebec In the first administrative review, we concluded that prices for private standing timber in Quebec could not serve as benchmarks for determining whether the GOQ sells Crown timber for less than adequate remuneration because the incentives that tenure holders face vis-a-vis the private market are distorted. We based our conclusion on the following factors: • Tenure-holding sawmills have an interest in maintaining a low value of standing trees in private forests, as this value provides the basis for calculating Crown timber prices (the Feedback Effect) • Sawmills with access to Crown timber can avoid sourcing in the private forest because, among other things, the annual allowable cut on Crown land is not binding. • Tenure-holding sawmills dominate the private market • Sawmills without access to Crown timber account for small harvest volume in the private forest *See Preliminary Results of 1st Review* , 69 FR at 33215-33217. *See also Final Results of 1st Review Decision Memorandum* at Comments 22 through 33. A review of the information on the record of this review has not led us to alter this finding. Similar to the first administrative review, the GOQ provided the aggregate sourcing patterns of Quebec's 1,020 softwood sawmills during 2003. The mills were divided into four categories: mills sourcing exclusively from public sources (purely public mills), mills sourcing exclusively from private sources (purely private mills), mills sourcing from public and private sources, and mills sourcing from public, private, and other ( *e.g.* , imports) sources (public/private/other mills). Analysis of the data provided shows that purely private mills sourced 534,769 cubic meters of softwood timber which accounted for only 1.7 percent of the volume of softwood harvested in the province. *See* Exhibit 162 of the GOQ's April 19, 2005 supplemental questionnaire response; see also Table 1 of the May 31, 2005, Memorandum to the File from Eric B. Greynolds, “Quebec Internal Price Memorandum” (Quebec Internal Price Memorandum) Further, record evidence indicates that the average consumption rate of the 819 purely private mills continues to be small, on average approximately 653 cubic meters, relative to the 146 dual-source mills, whose consumption rate was approximately 171,421 cubic meters (a.k.a., mills that source from public and private sources). *Id.* In addition, evidence on the record of this review indicates that dual-source mills dominate the market for private standing timber. The 146 dual-source mills accounted for 85.9 percent of the private timber harvested in 2003. *Id.* At the same time, dual-source mills obtained only a small percentage of their total harvest during 2003 from private lands. For instance, public/private/other mills obtained 17.6 percent of their total harvest from the private forest while public/private mills sourced just 10.6 percent of their softwood from the private forest. *Id.* Thus, the data continue to indicate that the public stumpage market is a much more important sourcing component for dual-source mills and, thus, continues to be the market on which these mills focus the majority of their interests and operations. As in the first administrative review, record evidence indicates that the dominance of the dual-source mills is pronounced at the corporate level. In Exhibit 120 of its March 15, 2005 questionnaire response, the GOQ provided actual consumption data for 440 of Quebec's softwood sawmills. 15 The data in Exhibit 120 indicate that in 2003 six corporations, whose mills source from both public and private sources, consumed approximately 54 percent of the total timber harvest, 63 percent of the public harvest, and 31 percent of the private harvest. *See* Table 2 of the Quebec Internal Price Memorandum. Further, sorting the data in Exhibit 120 by private timber consumption indicates that 20 corporations (15 of which operate dual-source mills) account for over 70 percent of the private timber harvest. *See* Table 3 of the Quebec Internal Price Memorandum. However, while these corporations consume the majority of private timber in Quebec, private-origin timber accounts, on a weighted-average basis, for 12 percent of their inputs while public timber accounts for 83 percent. 15 These mills accounted for nearly all (95 percent) of the softwood processed in the Province during the POR. Thus, we find that the data in Exhibit 120 provide a reasonable summary of the consumption patterns of Quebec's softwood sawmills in operation during 2003. In addition, information on the record of this review indicates that there have been no changes to Quebec's Forestry Act that would lead us to alter our previous findings that feedback effects inherent in the GOQ's administered stumpage system encourage tenure holders to maintain low prices for private timber. We also continue to find that sawmills with access to Crown timber can avoid sourcing in the private forest. Therefore, for purposes of these preliminary results, we find that private prices for standing timber in Quebec cannot serve as benchmarks within the meaning of 19 CFR 351.511(a)(2)(i) when determining whether the GOQ sells Crown timber for less than adequate remuneration, because these prices are distorted by a combination of the GOQ's administered stumpage system, the relative size of public and private markets, feedback effects between the private and public markets, and a non-binding AAC. *See* “Private Provincial Market Prices” section of the *Final Results of 1st Review Decision Memorandum* . Provinces of Manitoba and Saskatchewan With respect to Manitoba and Saskatchewan, the provincial governments did not supply private market timber prices upon which to base a first-tier benchmark arising from those provinces. Private Stumpage Prices in New Brunswick and Nova Scotia May Serve as a First-Tier Benchmarks in the Subject Provinces As in the first administrative review, private stumpage prices for New Brunswick and Nova Scotia (together, the Maritimes) were submitted on the record of this review by the GONB and GONS, respectively. These prices are contained in separate price surveys prepared by AGFOR, Inc. Consulting (AGFOR) for each of the Maritimes' governments. *See* New Brunswick AGFOR Report at Exhibit 1 of the GONB's November 22, 2004 questionnaire response. *See* Nova Scotia AGFOR Report at Exhibit 4 of the GONS's November 22, 2004 questionnaire response. In the first administrative review, we determined that private stumpage prices in the Maritimes constituted market determined, in-country prices consistent with the first-tier of the adequate remuneration hierarchy of 19 CFR 351.511(a)(2). Therefore, we used these prices to assess the adequacy of remuneration of the Crown stumpage provided by the GOA, GOM, GOO, GOQ, and GOS. *See Preliminary Results of 1st Review* , 69 FR at 33218. *See also* “Private Stumpage Prices in New Brunswick and Nova Scotia” section of the *Final Results of 1st Review Decision Memorandum* and at Comments 34, 35, 37, and 38. As explained in the first administrative review, Maritimes' stumpage price reports were prepared by AGFOR on behalf of the Maritimes' governments to establish the bases for their administered stumpage rates and not for the purpose of this proceeding. *Id.* Record evidence further indicated that in establishing their Crown stumpage rates, the Maritimes consider the prevailing prices for stumpage in the private market and the calculations for the Crown stumpage rates are thus directly linked to actual market-based transactions in the private market. *Id.* In addition, in the first administrative review, we found that the private supply standing timber constitutes a significant portion of the overall market in the Maritimes. *See Preliminary Results of 1st Review* , 69 FR at 33218. During the POR of this administrative review, private supply accounts for 49.2 percent of the total harvest in New Brunswick and over 89.4 percent in Nova Scotia. *See* Exhibit 1 of the GONB's May 2, 2005 submission; *see* page 2 of the GONS's November 23, 2004 submission. Although interested parties have contested our use of Maritimes' private stumpage prices in this review, we find their comments do not contain any new evidence or argument which would warrant a reconsideration of our prior finding. For example, the argument that Maritimes' private stumpage prices do not reflect prevailing market conditions in the subject provinces is fully addressed in the first review. *See Final Results of 1st Review Decision Memorandum* at Comment 38. Thus, we preliminarily determine that the Maritimes' private prices are market-determined prices in Canada, and are therefore usable under the first tier of our adequate remuneration hierarchy, and consistent with our approach in the first administrative review, we have used Maritimes' private prices to measure the adequacy of remuneration of the stumpage programs administered by the GOA, GOS, GOM, GOO, and GOQ. 16 16 In the first administrative review, we determined that Maritimes' private prices were not the most appropriate benchmark for British Columbia. *See* “Benchmark Prices for B.C.” section of the *Final Results of 1st Review Decision Memorandum* . We have continued to adopt this approach in the current review. *See* “Maritimes Prices are not the most appropriate Benchmark for British Columbia” section of these preliminary results for further discussion. Comparability of Maritimes Standing Timber to Standing Timber in Alberta, Manitoba, Ontario, Quebec, and Saskatchewan The Nova Scotia and New Brunswick Reports contain prices for the general timber species category of eastern SPF. 17 The species included in eastern SPF are also the primary and most commercially significant species reported in the SPF groupings for Quebec, Ontario, Manitoba, Saskatchewan and a portion of Alberta, accounting for over 90 percent of the entire timber harvest across these provinces. 18 17 This category includes, among other species, white spruce, black spruce, red spruce, jack pine, and balsam fir which represents the vast majority of the species harvested in the Maritimes. 18 98 percent for Quebec, 94 percent for Ontario, 99 percent for Saskatchewan, 99 percent for Manitoba, and 99 percent for Alberta. In the first administrative review, we found that although there is some minor variation of the relative concentration of individual species across provinces, this does not affect comparability for benchmark purposes. *See, e.g.* , Preliminary Results of 1st Review, 69 FR at 33219; and “Private Stumpage Prices in New Brunswick and Nova Scotia” section of the *Final Results of 1st Review Decision Memorandum* and at Comment 38. We further found that the provinces themselves do not generally differentiate between these species; rather, they tend to group all eastern SPF species into one category for data collection and pricing, *e.g.* , Quebec charges one stumpage price for “SPF.” *Id.* In this review, petitioners contend that it is not appropriate to measure the adequacy of the GOA's administered stumpage system because a significant portion of Alberta's Crown harvest consists of species that are made into Western “SPF” lumber, which is superior and, therefore, not comparable to the Eastern “SPF” lumber produced from standing timber harvested in the Maritimes. *See* page 63 through 69 of petitioners' April 29, 2005, submission. Petitioners further argue that it is not appropriate to compare Maritimes' stumpage prices to Alberta's Crown stumpage prices because there is little commonality between western and eastern softwood species. *Id.* 19 19 Petitioners made similar contentions regarding the dissimilarity of logs and lumber from the Maritimes and Alberta during their April 14 and May 5 meetings with members of the Import Administration staff. *See* the attachments in the April 14 and May 6, 2005 memorandums to the file from Eric B. Greynolds, Program Manager, Office of AD/CVD Enforcement III, entitled, “Meeting with Counsel to the Coalition for Fair Lumber Imports Concerning the Upcoming Preliminary Results.” We note that petitioners' contentions are premised on the notion that there is a premium attached to Western “SPF” lumber, which results in a premium for Western “SPF” logs. On this point, we note that petitioners have themselves asserted the opposite. In a submission to the Department regarding the ruling of the NAFTA dispute settlement panel, petitioners urged the Department to measure the adequacy of remuneration of the subject provinces' administered stumpage system using a U.S.-based log benchmark. *See* petitioners' August 27, 2003 submission, a public document on file in the CRU. In support of their argument that the use of a U.S.-based log benchmark would be feasible, petitioners contended that minimal adjustments would be necessary to calculate the subsidy benefits for the subject provinces: Any comparisons based on log prices should be species-specific. With the exception of the BC Coast, however, the large majority of Canadian timber falls into the spruce-pine-fir (“SPF”) category, which is generally recognized as commercially interchangeable. *See* page 72 of petitioners' August 27, 2003 submission. They further stated that because, ”. . . most Canadian lumber . . . is sold as part of the undifferentiated SPF lumber grouping, timber harvests are largely simply SPF as well.” *Id.* Petitioners went on to cite a statement made by a major Canadian lumber company, Abitibi-Consolidated, Inc., in the context of the antidumping investigation in which it also attested to the interchangeability of eastern and western SPF lumber. *Id.* On this basis, petitioners concluded that in calculating a U.S.-based log benchmark, “adjustments for species within the SPF group, therefore, are not necessary.” *Id.* Further, in the context of the antidumping proceeding, the Department also found eastern and western SPF to be interchangeable. *See Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Softwood Lumber Products from Canada* , 66 FR 56062 (November 6, 2001), where, in reference to lumber, the Department stated: . . . Eastern and Western Spruce-Pine-Fir are identical from the viewpoints of the markets and with respect to end-use. The “eastern” and “western” designations are simply a regional distinction which is irrelevant for purposes of product comparison in this investigation. Regarding the comparability of the Maritimes to the subject provinces, in the first administrative review we also determined that the species maps for SPF demonstrate that the species group's range of growth stretches from the Maritimes to Alberta. *See Final Results of 1st Review Decision Memorandum* at Comment 38. We further determined that record evidence demonstrated that SPF trees are comparable across their entire growing range as demonstrated by tree diameter, which is one of the most important characteristics in terms of lumber use. *Id.* For example, we found comparable diameters among SPF trees grown from the Maritimes to Alberta. *Id.* In particular, we found that at the easternmost portion of their range, SPF's average diameter at breast height
(DBH)in New Brunswick is 7.78 inches, at the westernmost portion of their range in Alberta, the DBH is 8.00 inches, and in Quebec, which accounts for the largest overall harvest, the DBH is 7.91. *Id.* In their April 29, 2005 submission, petitioners contend that the diameter information the Department relied on in the first administrative review overstated the average diameter of the Maritimes' standing timber and understated the diameter of the subject provinces, namely that of Alberta. They argue that if the Department accounts for biases in the diameter data, it will find that, regardless of the preponderance of SPF, the Maritimes logs are too small relative to those of the subject provinces to be used as stumpage benchmark. The Department continues to rely on the diameter data it relied on in the first review. We note that petitioners previously stated that: . . .for sawlog sizes up to the 10-inch diameter class—the vast bulk of relevant logs in both the U.S. and Canada, outside of the B.C. Coast—log prices do not substantially vary on a per-unit-basis, as long as the logs are of a sufficient size and quality to be sold to sawmills for milling into lumber. *Id.* at 73. For these reasons, we preliminarily determine that Maritimes' prices for eastern SPF are comparable to Crown stumpage prices for the SPF species groupings in Quebec, 20 Ontario, Manitoba, Saskatchewan, and Alberta. Accordingly, consistent with 19 CFR 351.511(a)(2)(i), we have compared these market-determined, in-country prices to the Crown stumpage prices in each of the provinces to determine whether the Crown prices were for less than adequate remuneration. 20 Consistent with our approach in the first administrative review, we continue to find that Quebec's SPF basket includes larch. Accordingly, we constructed an SPF benchmark which includes larch for Quebec for this review. *See, e.g.* , Final Results of 1st Review Decision Memorandum at Comment 40. Application of Maritimes Prices Having preliminarily found that the Maritimes' prices are in-country, market-determined prices, we next consider how to apply these prices in our benefit calculations. 1. Indexing The Nova Scotia Report contains price data from 1999. The New Brunswick Report contains price data for the period July 1, 2002, to November 30, 2002. In the first administrative review, we indexed the data in the Nova Scotia Report using using a lumber-specific index reported for the Atlantic Region by STATCAN. * See Preliminary Results of 1st Review * , 69 FR at 33218. 21 In the current administrative review, petitioners have argued that it is incorrect to index stumpage prices using a lumber price index, especially since the evidence they submitted on the record purportedly indicates diverging lumber and log prices. *See* page 89 of petitioners' April 29, 2005 submission. Petitioners contend that we should instead rely on indices derived from log price data from the Atlantic Forestry Review (AFR), a Maritimes-based publication that reports softwood sawlog prices on a bi-annual basis, to index the pricing data from Nova Scotia and New Brunswick. They further argue that if we continue to use the STATCAN index for Nova Scotia, then we should index the private pricing data in the New Brunswick Report using a constructed lumber price index derived from lumber pricing data reported by Madison's Canadian Lumber Reporter (Madison's), a British Columbia-based lumber reporting publication, on the grounds that record evidence indicates that the GONB uses the Madison's publication to set their administered stumpage prices. 21 It was not necessary to index the pricing data in the New Brunswick Report because it coincided with the POR of the first administrative review. During the POR, the AFR published price information in July 2003 and January 2004. *See* the May 31, 2005, Memorandum to the File from Maura Jeffords, Case Analyst, AD/CVD Enforcement, Office 3 ( *AFR Memorandum* ). The July 2003 publication covered a one-week period in May 2003, while the January publication covered a one-week period in late November 2003. *Id.* According to officials at the AFR, their softwood log price surveys cover approximately 20 respondents, with five to ten percent of the selection varying between publications. *Id.* Regarding Madison's, officials from the publication stated that it does not collect lumber prices from entities in the Maritime provinces. *See* the May 31, 2005, Memorandum to the File from Maura Jeffords, Case Analyst, AD/CVD Enforcement, Office 3 ( *Madison's Memorandum* ). For purposes of these preliminary results, we have determined to index the private price data from the New Brunswick and Nova Scotia Reports using the lumber-specific index reported for the Atlantic Region by STATCAN. First, information from Madison's indicates that it does not collect lumber price information for the Maritimes. We further note that the AFR and Madison's simply contain price information and are not indices in and of themselves. Thus, to use the publications in the manner requested by petitioners requires that the Department construct an index based on limited data. In contrast, the lumber index from STATCAN is prepared and maintained in the ordinary course of business and can be incorporated into our calculations without the added steps that would be necessary to construct an index using the data from AFR and Madison's. *See* the May 31, 2005, Memorandum to the File from Eric B. Greynolds, Program Manager, AD/CVD Enforcement, Office 3, “Data on the Statistics Canada Obtained from the Internet and Placed on the Record.” Further, STATCAN produces its lumber index using an established and consistent methodology from year to year that involves mandatory respondents, including a group of “must take” respondents that are included in every survey period. *Id.* In addition, STATCAN employs commodity specialists to conduct follow-up inquiries of outlier, incorrect, or suspicious prices. *Id.* Thus, we acknowledge that, in an ideal situation, we would use a pre-existing stumpage or log index to adjust for price changes in the Maritime price data. However, in light of the evidence submitted on the record of this review, we preliminary determine that the constructed log index proposed by petitioners remains inferior to the lumber price index from STATCAN. 2. Costs That Must Be Paid in Order to Harvest Private Standing Timber in New Brunswick and Nova Scotia In the first administrative review, we found that the pricing data for New Brunswick and Nova Scotia reflect the prices paid by harvesters for standing timber and include the value of the timber being purchased in addition to any landowner costs. *See Final Results of 1st Review Decision Memorandum* at Comment 39. We also found that harvesters in the Maritimes incur additional costs that must be paid in order to be able to acquire private timber. Specifically, we found that harvesters in New Brunswick are required to pay silviculture fees as well as administrative fees to the marketing board operating within the region. In Nova Scotia, in order to be able to acquire the standing timber, the registered buyer must either pay for or perform in-kind activities equal to C$3.00 for every cubic meter of private wood harvested. *Id.* 22 For purposes of these preliminary results, we find there has been no new information or arguments from interested parties that would warrant a reconsideration of these findings. Therefore, we added these costs to the indexed stumpage prices to obtain the average stumpage price for softwood logs from New Brunswick and Nova Scotia. 22 In the final results of the first review, we also confirmed that harvesters of private standing timber in Nova Scotia and New Brunswick do not incur any other charges ( *i.e.* , road building/maintenance costs, fire prevention costs, or land-owner related costs). 3. Weighting of Studwood in the Nova Scotia Benchmark The GONS does not collect harvest volume data by log type ( *i.e.* , studwood log, sawlog, or treelength log). Thus, in its Nova Scotia Report, AGFOR used a methodology which allowed it to allocate prices to the corresponding log type. Specifically, AGFOR, when it constructed the weighted prices found on page 23 of the AGFOR Nova Scotia Report, allocated an equal share of the volume to all of the log types harvested in a given region within Nova Scotia. *See, e.g.* , page 13 and 14 of the October 1, 2004 memorandum to Melissa G. Skinner, Director, Office of AD/CVD Enforcement 3, from Maura Jeffords, Case Analyst, Office of AD/CVD Enforcement 3, regarding, “Verification of the Questionnaire Responses Submitted by Governments of New Brunswick
(GONB)and Nova Scotia
(GONS)and AGFOR Reports Submitted in Reference to Private Prices in New Brunswick and Nova Scotia,” (Maritimes Verification Report), which was placed on the record of this review in the GOC's March 15, 2005 submission. In the first administrative review, we determined that it was reasonable to accept AGFOR's methodology for reporting the Nova Scotia stumpage prices. *See Final Results of 1st Review Decision Memorandum* at Comment 37. Petitioners contend that it is not appropriate to weight the studwood prices in the manner described above. They argue that lumber production capacity data for Nova Scotia sawmills contained in a 2003 United States Forest Service
(USFS)Survey demonstrate that the Department's approach in the first administrative review vastly overstates the amount of studwood in Nova Scotia. They assert that the data in the USFS survey demonstrate that a weight of 10.3 percent should be attributed to the studwood prices contained in the Nova Scotia Report. *See* petitioners' April 29, 2005 submission at page 97. First, we acknowledge the difficulty involved in attaching a weight to the studwood prices contained in the AGFOR report. In light of this fact, in these preliminary results we continue to rely on the approach adopted by AGFOR in the Nova Scotia Report. As noted in *Final Results of 1st Review Decision Memorandum* , AGFOR developed this approach in the ordinary course of business prior to the initiation of the CVD investigation. Moreover, the Department found AGFOR's approach to be reasonable in the first administrative review. Second, regarding the studwood weight that petitioners derived using mill capacity data from the USFS survey, we note that it is based on only 8 sawmills and, thus, does not account for dozens of additional mills in Nova Scotia that produce significant commercial quantities of lumber. Benchmark Prices Used for British Columbia Maritimes' Stumpage Prices Are Not the Most Appropriate Benchmarks for British Columbia In the final results of the first review, we concluded that the Maritimes' private stumpage prices were not suitable as benchmarks for British Columbia because of the lack of commercial interchangeability between the species in British Columbia and the eastern SPF species in the Maritimes. *See* “Maritimes Benchmarks Are Not the Most Appropriate for B.C.” section of the *Final Results of 1st Review Decision Memorandum* . We preliminarily determine that the record does not contain any new evidence which would warrant a reconsideration of our finding from the final results of the first review. B.C. Log Prices Are Not An Appropriate Benchmark In the final results of the first review, we found that stumpage and log markets in British Columbia were closely intertwined and therefore Crown stumpage prices affected both stumpage and log prices. *See* “B.C. Log Prices Are Not An Appropriate Benchmark” section of the *Final Results of 1st Review Decision Memorandum* . We further found that Crown logs were, in fact, sold in substantial quantities on the log market. *Id.* For example, we found that the great majority of wood sold in B.C. (apart from allocated Crown wood) was purchased by large integrated tenure-holding producers who purchase wood for their sawmills following standard purchase contracts that were structured as log or stumpage purchases. Thus, we determined that these producers were indifferent as to which form of wood, *i.e.* , either timber or logs, they purchased for use in softwood lumber production and that the decision to purchase either timber or logs would instead ultimately depend on price. In the final results of the first administrative review, we further determined that, because these companies simultaneously purchased and used both forms of wood, they must in principle view the cost of stumpage and logs as equivalent, *i.e.* , stumpage price plus the cost of harvesting should equate to the cost of a log. In addition, we explained that the fact these producers used both timber and logs throughout the period of the first review to produce softwood lumber meant that stumpage-log price equivalence was maintained throughout that review period and that this, in turn, suggested that the timber and log prices were linked ( *e.g.* , low (or high) timber prices means low (or high) log prices). *Id.* On this basis, in the final results of the first review, we determined that there was sufficient record evidence to conclude that subsidized prices in the Crown stumpage market would result in price suppression in the sales of Crown logs. *Id.* For these reasons, we also determined that B.C. log prices are not market-determined prices independent from the effects of the underlying Crown stumpage prices and, therefore, cannot be used to assess the adequacy of remuneration of B.C.'s stumpage program. For purposes of these preliminary results, we find that the record does not contain any new evidence which would warrant a reconsideration of our finding from the final results of the first review. U.S. Stumpage Prices Are Not the Most Appropriate Benchmark for British Columbia In the first administrative review, we explained that we were cognizant of the fact that a NAFTA Panel, considering the B.C. benchmark employed in the underlying investigation, found that standing timber is not a good that is commonly traded across borders. *See* “World Market Prices” in *Final Results of 1st Review Decision Memorandum* . We also explained, in considering U.S. stumpage prices as a benchmark under our regulatory hierarchy, that using those prices would require complex adjustments to the available data. We therefore turned our analysis to U.S. log prices. *Id.* For purposes of these preliminary results, we find that the record of this review does not contain any new evidence that would warrant a reconsideration of our finding from the final results of the first review. U.S. Log Prices Are a More Appropriate Benchmark In the final results of the first administrative review, we found that U.S. log prices may constitute third-tier benchmarks when determining the adequacy of remuneration of the GOBC's administered stumpage program ( *i.e.* , a benchmark that is consistent with market principles under 19 CFR 351.511(a)(2)(iii)). *See* “U.S. Log Prices Are a More Appropriate Benchmark” in *Final Results of 1st Review Decision Memorandum* . In the final results of the first review, we stated that a market principles analysis by its very nature depends on the available information concerning the market sector at issue, and must, therefore, be developed on a case-by-case basis. In this case, we found that using U.S. log prices is consistent with a market principles analysis, because
(1)stumpage values are largely derived from the demand for logs produced from a given tree;
(2)the timber species in the U.S. Pacific Northwest and British Columbia are very similar and, therefore, U.S. log prices, properly adjusted for market conditions in British Columbia, are representative of prices for timber in British Columbia; and
(3)U.S. log prices are market determined. *Id.* For purposes of these preliminary results, we find that the record of the current review does not contain any new evidence which would warrant a reconsideration of our finding from the final results of the first review. We also continue to make the same adjustments to derive the market stumpage prices for British Columbia. *See* “Calculation of the “Derived Market Stumpage Price” section below. Application of U.S. Log Prices 1. Selection of Data Sources In the final results of the first review, our U.S. log benchmark for the B.C. Coast consisted of *Log Lines* prices for Washington and Oregon, as well as Oregon prices from the Oregon Department of Forestry. Our U.S. log benchmark prices for the B.C. Interior consisted of prices from Northwest Management Inc.'s *Log Market Report* covering eastern Washington and Northern Idaho (Area 1) and western Montana (Area 4) as well as prices from the University of Montana's *Montana Sawlog & Veneer Log Report* that contains log prices for western Montana. In this review, interested parties have submitted updated U.S. log prices from the four sources covering the same regions listed above. Interested parties have also submitted additional U.S. log price data for the current review period from the following sources: Oregon Log Market Report, Washington Log Market Report, Pacific Rim Wood Market Report, Timber Data Company, and Idaho Department of Lands. We preliminarily determine to continue to use the U.S. log price sources listed above for the B.C. Coast and Interior, as updated for the current POR. In addition, we preliminarily determine to include the following additional U.S. log price data sources for the B.C. coast: Oregon Log Market Report, Washington Log Market Report, and Pacific Rim Wood Market Report (which cover the coast, northwest, and southwest Oregon and Washington). For the B.C. interior, we preliminarily determine to include the following additional U.S. log price data sources: Oregon Log Market Report and Washington Log Market Report (which cover eastern Oregon, eastern Washington, Idaho, and Montana). We have preliminarily decided not to use the Western Washington log prices reported by the Timber Data Company and the Idaho Department of Lands' “pond value” log prices, as prepared by the Timber Data Company. For additional information concerning our selection of the additional data sets, *see* the May 31, 2005, Memorandum to the File regarding the Preliminary Calculations for the Province of British Columbia. 2. Derivation of U.S. Log Prices on a Per Unit Basis For Use in Comparison to Log Prices on the B.C. Coast and Interior a. Weighting of U.S. Log Price Sources As explained above, in the final results of the first review, we used a total of four sources to derive our U.S. log price benchmarks ( *i.e.* , two sources for the B.C. Coast and two sources for the B.C. Interior). For both the B.C. Coast and Interior, we derived the U.S. log benchmark prices by taking the average unit price of the two respective data sources. *See* the February 28, 2005, Memorandum to the File regarding the Amended Final Results Calculations for B.C. at Table 3A. The GOBC argues that if the Department continues to use U.S. logs as the benchmark for British Columbia, it should calculate simple averages using a different methodology from the one it employed in the first administrative review. *See* GOBC and BCLTC's February 28, 2005 Factual Submission at Vol. 1, p.76. The GOBC asserts that the methodology employed by the Department in the final results of the first review overstates the significance of log price data in certain states based on nothing other than the availability of data for those states. They argue that it is more appropriate to develop a simple average for each state within each benchmark area, and then calculate a simple average of those prices. *Id.* We preliminarily find that the GOBC's proposed simple-averaging methodology creates additional complications and we have not made the requested changes. For example, some U.S. log data sources report log prices for regions or areas which include two U.S. states. However, we welcome comments from interested parties on the simple-average methodology previously employed and on the GOBC and BCLTC comments on this issue. We will continue to examine the manner in which we average the benchmark U.S. log prices used in measuring the adequacy of remuneration of the GOBC's stumpage programs on the B.C. Coast and Interior. b.Conversion of U.S. Log Prices into Canadian Dollar
(CAD)/ cubic meter The U.S. log price data was expressed in U.S. dollars
(USD)per thousand board feet (mbf). Therefore, it was necessary to convert our benchmark data so that they were expressed in the same currency and unit of measure as the B.C. administered stumpage prices. In the final results of the first review, we converted U.S. log price data for the B.C. Coast using a conversion factor of 6.76 USD / cubic meter. For the B.C. Interior, we used a conversion factor of 5.93 USD / cubic meter. We then converted the benchmark prices into Canadian currency based on the average of the daily USD / CAD daily exchange rate, as published by the Federal Reserve Bank of New York. For purposes of these preliminary results, we find that the record does not contain any new evidence which would warrant a reconsideration of our approach from the final results of the first review. Therefore, we continue to apply the same conversion factors and exchange approach that was employed in the final results of the first review. Calculation of Provincial Benefits Adjustment to Administrative Stumpage Unit Price In the final results of the first review, we established a methodology for adjusting the unit prices of the Crown stumpage programs administered by the GOA, GOS, GOM, GOO, and GOQ. *See, e.g.* , Final Results of 1st Review Decision Memorandum at Comment 39. Under this methodology, we focused on those costs that are assumed under the timber contract ( *e.g.* , the Crown tenure agreement) and those costs that are necessary to access the standing timber for harvesting (but that may differ substantially depending on the location of the timber). Where such costs are incurred by harvesters in either the Maritimes or the subject provinces, we included them in our benefit calculations. We did not, however, make adjustments for costs that might be necessary to access the standing timber for harvesting but that do not differ substantially based on the location of the timber ( *e.g.* , costs for tertiary road construction and harvesting). Because the Maritimes data reflect prices at the point of harvest, we also did not include post-harvest activities such as scaling and delivering logs to mills or market. *Id.* In this manner, we adjusted the unit stumpage prices of the GOA, GOS, GOM, GOO, and GOQ such that they were on the same “level” as the private stumpage prices we obtained from the Maritimes. We preliminarily determine that the record does not contain any new evidence which would warrant a reconsideration of our finding from the final results of the first review. 1. Province of Alberta a. Derivation of Administered Stumpage Unit Prices To derive Alberta's administratively established stumpage rate, we divided the total timber dues charged to tenure holders during the POR for each species by the total softwood stumpage billed under each tenure for each species. In this manner, we obtained a weighted-average stumpage price per species that was paid by tenure holders during the POR. b. Adjustments to Administered Stumpage Unit Price Pursuant to the methodology established in the final results of the first review, we have added the following costs to Alberta's administered stumpage unit price: 23 23 For a description of the derivation of the unit costs added to the GOA's administered stumpage price, see the May 31, 2005, Preliminary Calculations Memorandum for Alberta. The derivation of the unit costs for the GOS, GOM, GOO, and GOQ are also described in this calculation memorandum. The categories of costs added to the administered stumpage prices of the GOA, GOS, GOM, GOO, and GOQ are the same as those used in the final results of the review. *See Final Results of 1st Review Decision Memorandum* at Comment 39. • Costs for Primary and Secondary Roads ( *e.g.* , Permanent Road Costs in Road Classes 1 Through 4) • Basic Reforestation • Forest Management Planning • Holding and Protection • Environmental Protection • Forest Inventory • Reforestation Levy • Fire, Insect, and Disease Protection c. Calculation of the Benefit To calculate the unit benefit under this program, we compared the species-specific benchmark prices (the Maritimes private stumpage prices described above) to the GOA's corresponding adjusted administered stumpage prices. In this manner, we calculated a unit benefit for each species group. Next, we calculated the species-specific unit benefit by the total species-specific softwood timber billed volume in Alberta during the POR. Regarding the softwood timber billed volume used in the benefit calculations, the GOA claims that its stumpage classification system does not allow the province to isolate the wood volumes going strictly to sawmills and used to produce lumber. Thus, it is necessary to derive the volume of softwood Crown logs that entered and were processed by Alberta's sawmills during the POR ( *i.e.* , logs used in the lumber production process). We performed a similar calculation in the first administrative review. However, upon identifying additional information discussed below, we determined that it is necessary to alter our approach to the calculations for Alberta. The GOA argues that this volume amount harvested by non-sawmill-owning tenure holders should not be included in our calculations. However, by the GOA's own admission, this volume amount includes logs that were subsequently sold to sawmills. *See, e.g.* , page 8 of the GOA's May 2, 2005 supplemental questionnaire response. Further, with respect to this volume amount, the GOA provided no means by which we could identify the portion of the volume that went to sawmills and the portion that was exported or went to non-sawmills. Thus, because there is no way to break out this volume amount and because the GOA has offered no information on whether any subsidies attributable to this softwood timber did or did not pass through to any sawmills, we have, as a starting point, included the entire timber volume in question when determining the volume of Crown logs to include in the numerator of Alberta's provincial subsidy rate calculation. In order to determine the volume of Crown logs that went to sawmills ( *a.k.a.* , “net-down” approach), we have slightly revised the methodology that was used in the first administrative review. Specifically, we have used the GOA's Section 80/81 timber data from Table 39, Exhibit AB-S-87 that has not been “netted down” as the basis for Alberta's benefit calculation. This data differs from the data set reported in the first review (Alberta Verification Exhibit, GOA-3, AR Table 43, Exhibit AB-S-70) because it represents the Section 80/81 basket category of timber which has not been “netted down” to exclude the volumes from tenure holders who do not own sawmills. We subsequently added the volumes of certain non-lumber categories to the Crown Section 80/81 data to capture the universe of timber going to sawmills which corresponds to the provincial softwood billed volume identified in the PwC survey and reported by the GOA in Exhibit AB-S-107. The resulting aggregate Crown softwood billed volume was then “netted down” using the “percentage of survey billed volume as lumber” reported in the PwC survey results. This calculation enabled the Department to derive the Alberta's total Crown stumpage billed volume on a species-specific basis, which reflects the volume of provincial stumpage cut by tenure holders and sent to sawmills for processing into lumber and co-products. For further discussion, see the Preliminary Calculation Memorandum. 24 Finally, we summed the species-specific benefits to calculate the total stumpage benefit for the province. 24 We note that this volume of timber is separate from the volume of timber included in the GOA's pass through claim. For further information regarding the GOA's pass through claim, see the “Pass Through” section of these preliminary results. d. Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit by Alberta's POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, see “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates” in these preliminary results. As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by Alberta's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” 2. Province of Manitoba a. Adjustments to Administered Stumpage Unit Price The GOM reported average, per unit stumpage prices for the POR. Thus, our next step was to adjust the per unit stumpage prices pursuant to the methodology described above in “Calculation of Provincial Benefits.” Specifically, we have added the following costs to Manitoba's administered stumpage unit price: • Forest Renewal Charge • Forest Management License Silviculture • Costs for Permanent Roads ( *e.g.* , Primary and Secondary Roads) • Forest Inventory • Forest Management Planning • Environmental Protection • Fire Protection. b. Calculation of the Benefit To calculate the unit benefit conferred under the GOM's administered stumpage program, we subtracted from the species-specific benchmark prices the cost-adjusted weighted average stumpage price per species. Next, we calculated the species-specific benefit by multiplying the species-specific unit benefit by the total softwood timber harvest volume for that species during the POR. We then summed the species-specific benefits to calculate the total stumpage benefit for the province. c. Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit for Manitoba by the POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, *see* “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates.” As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by Manitoba's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” 3. Province of Saskatchewan a. Derivation of Administered Stumpage Unit Prices To derive Saskatchewan's administratively established stumpage rate, we divided the total stumpage collections for each species by the corresponding volume of Crown softwood timber destined to sawmills. In this manner, we obtained a weighted-average stumpage price per species that was paid by tenure holders during the POR. b. Adjustments to Administered Stumpage Unit Price Next, we adjusted the administered stumpage unit prices pursuant to the methodology describe above in “Calculation of Provincial Benefits.” Specifically, we have added the following costs to Saskatchewan's administered stumpage unit price: • Forest Management Fee • Processing Facilities License Fee • Forest Product Permit Application Fee • Forest Management Activities • Costs for Permanent Roads ( *e.g.* , Primary and Secondary Roads). c. Calculation of the Benefit To calculate the unit benefit conferred under the GOS's administered stumpage program, we subtracted from the species-specific benchmark prices the cost-adjusted weighted average stumpage price per species. Next, we calculated the species-specific benefit by multiplying the species-specific unit benefit by the total softwood timber harvest volume for that species during the POR. We then summed the species-specific benefits to calculate the total stumpage benefit for the province. d.Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit for Saskatchewan by the POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, *see* “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates.” As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by Ontario's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” 4. Province of Ontario a. Derivation of Administered Stumpage Unit Prices To derive Ontario's administratively established stumpage rate, we divided the total stumpage collections for each species by the corresponding volume of Crown softwood timber destined to sawmills. In this manner, we obtained a weighted-average stumpage price per species that was paid by tenure holders during the POR. b. Adjustments to Administered Stumpage Unit Price Next, we adjusted the administered stumpage unit prices pursuant to the methodology describe above in the “Calculation of Provincial Benefits” section of these preliminary results. Specifically, we have added the following costs to Ontario's administered stumpage unit price: • Forest Management Planning • Construction and Maintenance of Primary and Secondary Roads • Fire Protection. b Calculation of the Benefit To calculate the unit benefit conferred under the GOO's administered stumpage program, we subtracted from the species-specific benchmark prices the cost-adjusted weighted average stumpage prices per species. Next, we calculated the species-specific benefit by multiplying the species-specific unit benefit by the total softwood timber harvest volume for that species during the POR. We then summed the species-specific benefits to calculate the total stumpage benefit for the province. c. Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit for Ontario by the POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, see “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates.” As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by Ontario's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” 5. Province of Quebec To derive Quebec's administratively established stumpage rate, we divided the total stumpage collections for each species by the corresponding volume of Crown softwood timber destined to sawmills. In this manner, we obtained a weighted-average stumpage price per species that was paid by tenure holders during the POR. b. Adjustments to Administered Stumpage Unit Price Next, we adjusted the administered stumpage unit prices pursuant to the methodology describe above in “Calculation of Provincial Benefits.” Specifically, we have added the following costs to Quebec's administered stumpage unit price: • Forest Fund • Administrative Forest Planning • Non-Credited Silviculture • Construction and Maintenance of Primary and Secondary Roads • Fire and Insect Protection • Logging Camps • Silviculture Credits for Non-Mandatory Activities (Negative Adjustment). b Calculation of the Benefit To calculate the unit benefit conferred under the GOQ's administered stumpage program, we subtracted from the species-specific benchmark prices the cost-adjusted weighted average stumpage prices per species. Next, we calculated the species-specific benefit by multiplying the species-specific unit benefit by the total softwood timber harvest volume for that species during the POR. We then summed the species-specific benefits to calculate the total stumpage benefit for the province. c. Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit for Quebec by the POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, *see* “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates.” As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by Ontario's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” 6. Province of British Columbia a. Derivation of Administered Stumpage Unit Prices To derive British Columbia's administratively established stumpage rate, we divided the total stumpage collections for each species for the Coast and Interior by the corresponding Crown softwood sawlog volume. In this manner, we obtained a weighted-average stumpage price per species. b. Calculation of the “Derived Market Stumpage Price” Consistent with our approach from the final results of the first review, we calculated a “derived market stumpage price” for each species by using U.S. log prices as the benchmark for standing timber prices to measure the adequacy of remuneration of B.C.'s administered stumpage system. *See supra* section on use of U.S. log prices as B.C. benchmarks. Specifically, we deducted from the U.S. log prices all B.C. harvesting costs, including costs associated with Crown tenure for calendar year 2003. As in the final results of the first review, we relied on cost data from surveys of major tenure holders prepared by PwC. Specifically, PwC was engaged by the B.C. Ministry of Forests
(MOF)to collect calendar year 2003 logging and forest management cost data for the Coast and Interior regions of British Columbia. The cost data presented by PwC was derived from three separate surveys the MOF's 2004 annual Coast survey and two surveys (one for the Coast and the other for the Interior) conducted by PwC itself. In these preliminary results, we have subtracted the following unit costs from the U.S. log price benchmarks used for the B.C. Coast: • Tree-to-Truck • Hauling • Dump, Sort, Boom, and Rehaul • Crew Transportation Labor • Road Maintenance • Towing/Barging • Helicopter Logging • Camp Operations and Overhead • Road Construction • Head Office, General Administration • Logging Fees and Taxes • Forestry, Engineering, and Fire Protection. In these preliminary results, we have subtracted the following unit costs from the U.S. log price benchmarks used for the B.C. Interior: • Tree-to-Truck • Hauling • Dump, Sort, and Boom • Towing/Barging • On-Block Road and Bridge Maintenance • Mainline/Secondary Road and Bridge Maintenance • Post Logging Treatment • Administration/Overhead • Camp Operation • Depreciation, Depletion, and Amortization • Mainline/Secondary Road and Bridge Construction • Mainline/Secondary Road and Bridge Deactivation • On-Block Road and Bridge Construction • On-Block Road and Bridge Deactivation • Protection (Fire, Insect, and Disease Control) • Silviculture and Reforestation. In the final results of the first review, we subtracted a per unit profit component from the “derived market stumpage prices” used in the benefit calculations for the B.C. Coast and Interior. Our decision to include a profit component for the B.C. Coast and Interior was based on the assumption that our cost data from the PwC survey report of B.C. logging and forest management costs did not account for any profit that may have been incurred by independent harvesters. Therefore, based on a 2001 study entitled, “Ready for Change: Crisis and Opportunity in the Coast Forest Industry,” by Dr. Peter H. Pearse (Pearse Study), we estimated that half of the reported costs for the B.C. Coast was based on payments from integrated sawmills to independent contractors acting has harvesters. 25 Because the “fee for service” payments made by the sawmills already included the independent harvesters' profit, we only added a profit adjustment for half of the reported costs. In other words, we reduced the profit rate applied to the “derived market stumpage price” by 50 percent to reflect our finding that half of the reported survey costs on the B.C. Coast ( *e.g.* , those costs attributable to independent harvesters) already included a profit component. For the B.C. Interior, we treated the profit component in a similar manner. 25 The Pearse Study was placed on the record of this review by the GOBC in its November 11, 2004, questionnaire response at Volume 6, Exhibit BC-S-20. As for the profit rate applied to the “derived market stumpage prices,” in the final results of the first review, we calculated the adjustment through the average of two profit figures on the record in the first administrative review: a five
(5)percent profit figure for New Brunswick reported by the Atlantic Canada Opportunities Agency and a ten
(10)percent profit figure for Southeast Alaska that was included in a submission by the GOBC. *Id.* Information available on the record of the current review has led us to revise the profit methodology employed in the final results of the first review. In our initial questionnaire, we asked the GOBC to report for each of the ten largest tenure holders whether any of them hired independent contractors to conduct any basic silviculture, road building, forest management, or harvesting activities. *See* page IV-21 of the Department's September 8, 2004 questionnaire. In response, the GOBC stated: In British Columbia, the vast bulk of logging activity, including road construction, basic silviculture, and other forest management obligations, is undertaken by independent contractors. In the Interior, company crews are virtually non-existent—all work is done by contract and the tenure holders do not perform the work themselves. On the Coast, there are some company crews for some activities, but much of the work is done by contractors. Therefore, the cost report prepared by PricewaterhouseCoopers
(PwC). . . already reflects contractor costs for the Interior and contractor and some limited company costs for the Coast. *See* page BC-VI-22, Volume I of the GOBC's November 22, 2004 questionnaire response. Based on the GOBC's statements ( *e.g.* , that all work is done by contract and that the tenure holders do not perform the work themselves), we find that the cost data contained in the PwC's survey of the B.C. Interior reflect “fee for service” costs and, thus, already include a profit component. Therefore, we preliminarily determine that no profit adjustment is appropriate for U.S. log benchmark prices used in the benefit calculation of the B.C. Interior. As for the B.C. Coast, we note that the Pearse Study states that the “Forest Act requires licensees to employ contractors to log at least 50 percent of their harvests under Tree Farm Licenses and a variable percentage—usually 50 percent also—under Forest Licenses.” *See Pearse Study* at 15. Further, the GOBC stated in its initial questionnaire response that logging and harvesting costs attributable to company crews are “limited” and that “. . .much of the work is done by contractors.” *See* GOBC's November 22, 2004 questionnaire response. Based on the fact the Forest Act dictates that at least 50 percent of the harvesting activities must be conducted by independent contractors on the Coast, and in light of the GOBC's statements that company crew costs for logging activities on the B.C. Coast are limited (information that was not on the record of the first administrative review), we preliminarily determine that it is no longer appropriate to assume that tenure holders harvested half of the logs on the B.C. Coast. Lacking any other information and, based on the GOBC's characterization of company crew harvesting costs as being “limited,” we preliminarily determine that in-house company crews employed by tenure holders are used 25 percent of the time on the B.C. Coast and that the remaining amount is performed by independent contractors. Accordingly, we are assuming that 75 percent of the costs contained in the PwC survey for the B.C. Coast already contain a profit component and, thus, no profit adjustment is necessary for those costs. We have, however, applied a profit component to the remaining 25 percent of the costs contained in the PwC survey for the B.C. Coast. Based on new information not available on the record of the first review, we have revised the manner in which we calculated the profit amount. In our initial questionnaire, we asked the GOBC to provide the allowance for profit and risk for each tenure arrangement in effect which utilizes an appraisal system. *See* pages IV-12 and IV-13 of our September 8, 2004 initial questionnaire. In response, the GOBC stated: There is no allowance for profit and risk in the CVP system. All tables and formulas used for estimating costs are based upon average experienced licensee costs, without any additions for profit or risk. There is no allowance for profit and risk in the MPS. The system is based on bids from auction sales. *See* page BC-IV-26 of the GOBC's November 22, 2004 questionnaire response. Further in the Log Export Restraint section of our initial questionnaire, for both domestic and export sales of softwood logs, we asked the GOBC to provide: . . . a weighted average value for each of the costs associated with harvesting and selling the logs during the POR ( *i.e.* , logging costs, inventory, selling expenses, administrative and general expenses, transportation, marketing, etc.). In addition, what is the weighted average profit on the sale of softwood logs? *See* pages 3—4 of the Log Export Ban Appendix of our September 8, 2004 initial questionnaire. In response, the GOBC stated that, “the ministry does not have information on the average profit on the sale of softwood sawlogs.” However, in spite of the GOBC's apparent inability to obtain any information on logging profit, we have managed to obtain publicly available profit data for the B.C. logging industry from “Industry Canada,” a department of the Canadian federal government, through its business and consumer site entitled “strategis.gc.ca.” 26 Specifically, we obtained a 3.7 percent profit figure for the B.C. logging industry. This profit figure is an average calculated from financial data for the year 2002 (the most recent year for which data is available) from all small businesses (incorporated and unincorporated) in the B.C. logging industry. 27 Given that the data are specific to the industry and province in question, we find it more appropriate to use the profit data from Industry Canada rather than continuing to use the profit figures from Southeast Alaska and New Brunswick. Thus, in keeping with the approach described above, we have multiplied the per unit B.C. logging profit figure from Industry Canada by 25 percent and subtracted the resulting product from the per unit “derived market stumpage price” for the B.C. Coast. 26 Strategis (www.strategis.gc.ca) offers interactive financial applications, *e.g.* , building industry profiles for specific provinces via Performance Plus, a software tool. 27 Logging: industry classification # 1133 under the North American Industry Classification System (NAICS). c. Calculation of the Benefit To calculate the unit benefit per species conferred under the GOBC's administered stumpage program, we subtracted from the cost-adjusted, “derived market stumpage prices” the corresponding average administered stumpage prices. Consistent with our approach in the final results of the first review, we reduced the total Crown harvest to capture that volume of logs destined to sawmills. Specifically, we multiplied the Coast and Interior Crown volumes by their respective percentage of logs entering sawmills for the calendar year 2003, *i.e.* , 58.1 percent and 85.2 percent, respectively. *See* GOBC's November 22, 2004 questionnaire response at BC-I-5. Next, we multiplied the species-specific unit benefit by the Crown volume destined to sawmills. We then summed the species-specific benefits for the Coast and the Interior to calculate the provincial benefit. d. Calculation of Provincial and Country-Wide Rate To calculate the province-specific subsidy rate, we divided the total stumpage benefit for British Columbia by the POR stumpage program denominator. For a discussion of the denominator used to derive the provincial rate for stumpage programs, *see* “Numerator and Denominator Used for Calculating the Stumpage Programs' Net Subsidy Rates.” As explained in “Aggregate Subsidy Rate Calculation,” we weight-averaged the benefit from this provincial subsidy program by British Columbia's relative share of total exports of softwood lumber to the United States during the POR. The total countervailable subsidy for the provincial stumpage programs can be found in “Country-Wide Rate for Stumpage.” Country-Wide Rate for Stumpage The preliminary country-wide subsidy rate for the provincial stumpage programs is 7.97 percent *ad valorem* . II. Other Programs Determined to Confer Subsidies Non-Stumpage Programs Determined To Confer Subsidies Programs Administered by the Government of Canada 1. Western Economic Diversification Program: Grants and Conditionally Repayable Contributions Introduced in 1987, the Western Economic Diversification program
(WDP)is administered by the GOC's Department of Western Economic Diversification headquartered in Edmonton, Alberta, whose jurisdiction encompasses the four western provinces of B.C., Alberta, Saskatchewan and Manitoba. The program supports commercial and non-commercial projects that promote economic development and diversification in the region. In the first administrative review, we found that the provision of grants under the WDP constitutes a government financial contribution and confers a benefit within the meaning of sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. *See Preliminary Results of 1st Review* , 69 FR at 33228 and “Western Economic Diversification Program Grants and Conditionally Repayable Contributions” section of the *Final Results of 1st Review Decision Memorandum* . Further, we determined that the WDP is specific under section 771(5A)(D)(iv) of the Act, because assistance under the program is limited to designated regions in Canada. On this basis, we found recurring and non-recurring grants provided to softwood lumber producers under the WDP to be countervailable subsidies. No new information has been placed on the record of this review to warrant a change in our finding that the WDP is countervailable. During the current POR, the WDP provided grants to softwood lumber producers or associations under two “sub-programs,” the International Trade Personnel Program
(ITPP)and “Other WDP Projects.” 28 Under the ITPP and “Other WDP Projects,” companies were reimbursed for certain salary expenses in Alberta, British Columbia, Manitoba, Saskatchewan. 28 These are the same two sub-programs analyzed in the first administrative review. Consistent with our approach in the first administrative review, where the employee's activities were directed towards exports of softwood lumber to all markets, we attributed the subsidy to total softwood lumber exports. *See Final Results of 1st Review Decision Memorandum* at Comment 46 and “Western Economic Diversification Program Grants and Conditionally Repayable Contributions.” Where the employee's activities were directed towards exports of softwood lumber to the United States, we attributed the subsidy to U.S. exports. *Id.* Where the personnel promoted exports to non-U.S. markets, we did not attribute any of the benefit to U.S. sales. *Id.* In accordance with 19 CFR 351.524(b)(2), we determine that all ITPP and “Other WDP Project” grants were less than 0.5 percent of their corresponding denominator in the year of receipt. 29 Therefore, we are expensing all grants received during the POR under this program to the year of receipt. 29 We reduced these denominators, where appropriate, to account for any excluded company sales. To calculate the countervailable subsidy rate for this program, we summed the rates for the ITPP and “Other WDP” sub-projects. Next, as explained in “Aggregate Subsidy Rate Calculation,” we multiplied this amount by the four provinces' relative share of total exports of softwood lumber to the United States. We adjusted the provinces' total exports of softwood lumber to the United States to account for any excluded company sales. Using this methodology, we determine the countervailable subsidy from this program to be less than 0.005 percent *ad valorem* . 2. Natural Resources Canada (NRCAN) Softwood Marketing Subsidies In 2002, the GOC approved a total of C$75 million in grants to target new and existing export markets for wood products and to provide increased research and development to supplement innovation in the forest products sector. This total was allocated to three sub-programs: Canada Wood Export Program (Canada Wood), Value to Wood Program (VWP), and the National Research Institutes Initiative (NRII). The programs were placed under the administration of NRCAN, a part of the Canadian Forest Service. 30 30 We found the Canada Wood program to be not countervailable in the first administrative review. *See Preliminary Results of 1st Review* , 69 FR at 33229. The VWP is a five-year research and technology transfer initiative supporting the value-added wood sector, specifically through partnerships with academic and private non-profit entities. In particular, during the POR, NRCAN entered into research contribution agreements with Forintek Canada Corp. (Forintek) to do research on efficient resource use, manufacturing process improvements, product development, and product access improvement. In the first administrative review, we found that grants provided to Forintek under the VWP constitute a government financial contribution and confer a benefit to softwood lumber producers within the meaning of sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. *See Preliminary Results of 1st Review* , 69 FR at 33229 and “Natural Resources Canada (NRCAN) Softwood Marketing Subsidies” in the *Final Results of 1st Review Decision Memorandum* . We also determined that, because VWP grants are limited to Forintek, which conducted research related to softwood lumber and manufactured wood products, the program is specific within the meaning of section 771(5A)(D)(i) of the Act. *Id.* Consequently, we found the grants under the NRCAN program to be countervailable. The NRII is a two-year program that provides salary support to three national research institutes: the Forest Engineering Research Institute of Canada (FERIC), Forintek, and the Pulp & Paper Research Institute of Canada (PAPRICAN). In the first administrative review, we found that research undertaken by FERIC constitutes a government financial contribution to commercial users of Canada's forests within the meaning of section 771(5)(D)(i) of the Act. *Id.* Further, we found that FERIC's research covers harvesting, processing, and transportation of forest products, silviculture operations, and small-scale operations and, thus, we determined that government-funded R&D by FERIC benefits, *inter alia* , producers of softwood lumber within the meaning of section 771(5)(E) of the Act. Similarly, we found that Forintek's NRII operations, which pertain to resource utilization, tree and wood quality, and wood physics, also constitute a government financial contribution and confer a benefit, *inter alia* , upon the softwood lumber industry within the meaning of sections 771(5)(D)(i) and 771(5)(E) of the Act. *Id.* In the first administrative review, we determined that because grants offered under the NRII are limited to Forintek and FERIC, institutions that conducted research related to the forestry and logging industry, the wood products manufacturing industry, and the paper manufacturing industry, the program is specific within the meaning of 771(5A)(D)(i) of the Act. *Id.* On this basis, we found the Forintek and FERIC grants offered under the NRII are countervailable. 31 No new information has been placed on the record of this review to warrant a change in our finding that grants under the VWP and NRII programs are countervailable. 31 We found NRII's support of PAPRICAN to be not countervailable in the first administrative review. *See Preliminary Results of 1st Review* , 69 FR at 33229. Consistent with our approach in the first administrative review and in accordance with section 19 CFR 351.524(b)(2), we first examined whether the non-recurring grants under the VWP and NRII programs should be expensed to the year of receipt. *Id.* , 69 FR 33229. We summed the funding approved for Forintek during the POR under the VWP and NRII programs, and divided this sum by the total sales of the wood products manufacturing industry during the POR. We also divided the funding approved for FERIC under the NRII program during the POR by the total sales of the wood products manufacturing and paper industries during the POR. In both cases, we adjusted the denominators to account for sales of excluded companies. Combining these two amounts, we preliminarily determine that the benefit under the NRCAN softwood marketing subsidies program should be expensed in the year of receipt. Consistent with our approach in the first administrative review, we then calculated the countervailable subsidy rate during the POR by dividing the amounts received by Forintek during the POR under the VWP and NRII programs by Canada's total sales of the wood products manufacturing industry during the POR. We also divided the funding received by FERIC under the NRII during the POR by Canada's total sales of the wood products manufacturing and paper industries during the POR. We adjusted these sales amounts to account for any excluded company sales. *See Preliminary Results of 1st Review* , 69 FR at 33229. Combining these two amounts, we preliminarily determine the net subsidy rate from the NRCAN softwood marketing subsidies program to be 0.02 percent *ad valorem* . Programs Administered by the Government of British Columbia 1. Forestry Innovation Investment Program
(FIIP)The Forestry Innovation Investment Program came into effect on April 1, 2002. On March 31, 2003, FIIP was incorporated as Forestry Innovation Investment Ltd. (FII). FII funds are used to support the activities of universities, research and educational organizations, and industry associations producing a wide range of wood products. FII's strategic objectives are implemented through three sub-programs addressing: research, product development and international marketing. In the first administrative review, we determined that the FII grants provided to support product development and international marketing and, thus, constitute a government financial contribution and confer a benefit within the meaning of sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. *See Preliminary Results of 1st Review* , 69 FR at 33230. Further, we found that the grants are specific within the meaning of section 771(5A)(D)(i) of the Act because they are limited to institutions and associations conducting projects related to wood products generally and softwood lumber, in particular. *Id.* No new information has been placed on the record of this review to warrant a change in our finding that grants FIIP are countervailable. To calculate the benefit from this program, we first determined whether these non-recurring subsidies should be expensed in the year of receipt. *See* 19 CFR 351.524(b)(2). For grants given to support product development for softwood lumber, we divided the amounts approved by total sales of softwood lumber ( *i.e.* , lumber from primary and secondary mills as well as “residual” products from primary mills) for B.C. during the POR. For grants to support international marketing, we divided the grants approved by exports of softwood lumber from B.C. to the United States during the POR. *See* 19 CFR 351.525(b)(4). As explained in the first review, the GOBC did not report grants tied to other export markets. *See Preliminary Results of 1st Review* , 69 FR at 33230. For research grants, we divided the grants approved by total sales of the wood products manufacturing and paper industries from B.C. during the POR. Combining these three amounts, we have preliminarily determined that the FII benefit should be expensed in the POR. Consistent with our approach in the first administrative review, we then calculated the countervailable subsidy rate during the POR by dividing the amounts disbursed during the POR by their corresponding sales denominator. For grants given to support product development for softwood lumber, we divided the amounts disbursed by total sales of softwood lumber for B.C. during the POR. For grants to support international marketing, we divided the amounts disbursed by exports of softwood lumber from B.C. to the United States during the POR. For research grants, we divided the amounts disbursed by total sales of the wood products manufacturing and paper industries for B.C. during the POR. *See Preliminary Results of 1st Review* , 69 FR at 33230-33231. We combined these three amounts and, as explained in “Aggregate Subsidy Rate Calculation,” we multiplied this total by B.C.'s relative share of total exports to the United States. On this basis, we have preliminarily determined the countervailable subsidy from the FIIP to be 0.08 percent *ad valorem* . 2. British Columbia Private Forest Property Tax Program B.C.'s property tax system has two classes of private forest land—class 3, “unmanaged forest land,” and Class 7, “managed forest land” that incurred different tax rates in the 1990s through the POR. In the first review, we found that property tax rates for Class 7 were generally lower than for Class 3 land at all levels of tax authority for most, though not all, taxes. *See* “British Columbia Private Forest Property Tax Program” section of *Final Results of 1st Review Decision Memorandum* . We further found that the various municipal and district (a.k.a. regional) level authorities imposed generally lower rates for Class 7 than for Class 3 land. *Id.* The tax program is codified in several laws, of which the most salient is the 1996 Assessment Act (and subsequent amendments). Section 24(1) of the Assessment Act contains forest land classification language expressly requiring that, *inter alia* , Class 7 land be “used for the production and harvesting of timber.” Additionally, Section 24(3) or 24(4) of the *Assessment Act* , depending on the edition of the statute, requires the assessor to declassify all or part of Class 7 land if “the assessor is not satisfied. . .that the land meets all requirements” for managed forest land classification. Amendments to the provision, enacted from 1996 through 2003, retained the same language stating these two conditions. Thus, the law as published during the POR required that, for private forest land to be classified and remain classified as managed forest land, it had to be “used for the production and harvesting of timber.” In the first review, we found that because the tax authorities impose two different tax rates on private forest land, the governments are foregoing revenue when they collect taxes at the lower rate, and we therefore determined that the program constitutes a government financial contribution as defined in section 771(5)(D)(ii) of the Act. *Id.* We also determined that the program confers a benefit in the form of tax savings within the meaning of section 771(5)(E) of the Act. *Id.* Further, we determined that because the Assessment Act expressly requires that Class 7 land be “used for the production and harvesting of timber,” and additionally requires the assessor to declassify any Class 7 land not meeting all the Class 7 conditions (of which timber use was one), the B.C. private forest land tax program is specific as a matter of law ( *i.e.* , de jure specific) within the meaning of section 771(5A)(D)(i) of the Act. *Id.* No new information has been placed on the record of this review to warrant a change in our finding that the B.C. private forest land tax program is countervailable. Consistent with our approach in the first review, and in accordance with 19 CFR 351.509(a), we find that the benefit received under this program is the sum of the tax savings enjoyed by Class 7 sawmill landowners at the provincial, regional, and sub-provincial (or. local) levels of tax authority in B.C. *Id.* With regard to the provincial tax, the assessed value is calculated as the sum of the land value and a formulaic valuation of the timber harvested from the land in the prior year. The tax is levied by applying the tax rate to this assessed value. The GOBC did not submit data on the timber value. Accordingly, the Department calculated the tax benefit at the provincial level based solely on the tax savings conferred upon Class 7 land with sawmills. We determined the tax benefit at the local level using the data submitted by the GOBC on local tax rates, and on the value and acreage of Class 3 and Class 7 land held by sawmill landowners in the various jurisdictions. Only those jurisdictions with both Class 3 and Class 7 land in the assessment rolls for 2003 and 2004, and whose tax differential resulted in a tax savings for Class 7 sawmill landowners, were included in the benefit calculation. With regard to a number of regional and hospital district jurisdictions that are between the provincial and local levels, in the first review we explained that the GOBC submitted data on their Class 3 and Class 7 tax rates, but did not provide assessment data on land value and acreage. *Id.* Consequently, in the first review, to the extent that any benefit may have accrued at that level, we did not include it in our calculation. *Id.* We went on to state that we would re-examine this aspect of the program in any subsequent review. In this review, we have sought and obtained assessment data on land value and acreage for the relevant regions that are between the provincial and local levels. Using this data, we have determined the benefit at the regional and hospital districts. However, while the GOBC was able to provide Class 3 and Class 7 tax rates and the value for Class 7 land value for the relevant regional and hospital districts, it was unable to provide the land values for Class land 7 with sawmills within those areas. Therefore, we derived the share of value of Class 7 land with sawmills at the provincial level for 2003 and 2004 and applied the ratios to the corresponding Class 7 land values of the regional and hospital districts. In this manner, we derived the portion of benefit attributable to Class 7 land with sawmills in the regional and hospital districts during the POR. The provincial, regional, and local level benefit amounts were summed to produce an overall POR benefit amount. Consistent with our approach in the first review, we used the POR total value of B.C. sawmill softwood product shipments ( *i.e.* , lumber, co-products, and “residual” products from primary sawmills) as the denominator, and, adjusting for B.C.'s share of the total exports to the United States, we determined the countervailable subsidy under this program to be 0.11 percent ad valorem during the POR. Programs Administered by the Government of Quebec Private Forest Development Program In the first administrative review, we determined that the provision of grants to producers of softwood lumber under the Private Forest Development Program
(PFDP)constitutes a government financial contribution and confers a benefit under sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. *See* “Private Forest Development Program” in *Final Results of 1st Review Decision Memorandum* . In addition, we determined that assistance provided under this program is specific under section 771(5A)(D)(i) of the Act because assistance is limited to private woodlot owners. *Id.* Every holder of a wood processing plant operating permit must pay the fee of C$1.20 for every cubic meter of timber acquired from a private forest. These fees fund, in part, the PFDP. The recipients of payments under the PFDP are owners of private forest land. Thus, the sawmill operators that received assistance under the PFDP received assistance because they owned private forest land. Therefore, in the first administrative review, we determined that the fees paid to harvest timber from private land do not qualify as an offset to the grants received under the PFDP pursuant to section 771(6) of the Act. *Id.* Section 771(6) of the Act specifically enumerates the only adjustments that can be made to the benefit conferred by a countervailable subsidy and fees paid by processing facilities do not qualify as an offset against benefits received by private woodlot owners. *Id.* Consistent with our treatment of the PFDP in the first administrative review, we treated these payments as recurring in accordance with 19 CFR 351.524(c). *Id.* Consistent with our approach in the first administrative review, to calculate the countervailable subsidy under the PFDP, we first summed the reported amount of grants provided to sawmills that produce softwood lumber (and other products) during the POR. Next, we reduced the total benefit amount to account for any PFDP benefits received by companies in Quebec that have been excluded from the countervailing duty order. We then divided the net benefit amount by total sales of softwood lumber ( *i.e.* , lumber from primary mills and in-scope lumber from remanufacturers), hardwood lumber, and softwood co-products. *Id.* We adjusted the sales denominator to account for sales of excluded companies from Quebec. Next, as explained in “Aggregate Subsidy Rate Calculation,” we multiplied this amount by Quebec's relative share of exports to the United States, adjusted for sales of excluded companies. On this basis, we preliminary determine the countervailable subsidy from this program to be less than 0.005 percent *ad valorem* . Programs Determined Not to Confer a Benefit Government of Canada 1. Federal Economic Development Initiative in Northern Ontario (FEDNOR) FEDNOR is an agency of Industry Canada, a department of the GOC, which encourages investment, innovation, and trade in Northern Ontario. A considerable portion of the GOC assistance under FEDNOR is provided to Community Futures Development Corporations (CFDCs), non-profit community organizations providing small business advisory services and offering commercial loans to small and medium enterprises (SMEs). Assistance in the form of grants is also provided under the FEDNOR program. In the underlying investigation and first administrative review, we determined that grants and loans under the FEDNOR program constitute government financial contributions to softwood lumber producers within the meaning of section 771(5)(D)(i) of the Act. *See Preliminary Results of 1st Review* , 69 FR at 33228. In addition, we found that grants under the program confer a benefit to softwood lumber producers under section 771(5)(E) of the Act and that CFDC loans confer a benefit to softwood lumber producers under section 771(5)(E)(ii) of the Act to the extent that the amount they pay on CFDC loans are less than the amount they would pay on a comparable commercial loan that they could actually obtain on the market. *Id.* Furthermore, we found that the grants and loans provided under the FEDNOR program are specific within the meaning of section 771(5A)(D)(iv) of the Act, because assistance under the program is limited to certain regions in Ontario. *Id.* On this basis, we found the program to be countervailable. No new information has been placed on the record of this review to warrant a change in our findings. In this administrative review, the GOC claims that no grants were disbursed during the POR. However, it reported several long and short-term CFDC loans that were outstanding during the POR. Consistent with our approach in the first administrative review, to determine the benefit attributable to loans offered under the FEDNOR program, we compared the long-term and short-term interest rates charged on these loans during the POR to the long-term and short-term benchmark interest rates. *Id.* Our benchmark interest rates are described in “Benchmarks for Loans & Discount Rates.” As the interest amounts paid on the loans under the FEDNOR program were greater than what would have been paid on a comparable commercial loan, as indicated by our benchmark interest rate, we preliminarily determine that this program did not confer a benefit upon softwood lumber producers in accordance with section 771(5)(E)(ii) of the Act during the POR. 2. Payments to the Canadian Lumber Trade Alliance
(CLTA)& Independent Lumber Remanufacturing Association
(ILRA)In March 2003, the GOC's Department of Foreign Affairs and International Trade (DFAIT) approved a total of C$15 million in grants under separate agreements with the CLTA and ILRA to underwrite the administrative and communications costs incurred by these forest products industry associations as a result of the Canada-U.S. softwood lumber dispute. The GOC reports that the CLTA is composed of companies located in Alberta, B.C., Ontario and Quebec, which produce not only lumber but all types of forest products, while the membership of the ILRA is made up entirely of value-added wood product manufacturers in B.C. Of the approved sums, the DFAIT disbursed C$14.85 million to the CLTA and C$75,000 to the ILRA during the POR. In the first administrative review, we determined that grants under this program constitute a government financial contribution and confer a benefit within the meaning of sections 771(5)(D)(i) and 771(5)(E) of the Act, respectively. Further, because the program provided grants to two associations, CLTA and ILRA, we determined that it was specific within the meaning of section 771(5A)(D)(i) of the Act. *See Preliminary Results of 1st Review* , 69 FR at 33229. Accordingly, we determined that the GOC grants to CLTA and ILRA provided a countervailable subsidy to the softwood lumber industry. *Id.* No new information has been placed on the record of this review to warrant a change in our finding that grants under the CLTA and ILRA programs are countervailable. According to the GOC, all grants bestowed under the CLTA and ILRA were received prior to the POR of the current review. Therefore, we first examined whether the non-recurring grants should be expensed to the year of receipt. *See* 19 CFR 351.524(b)(2). Consistent with the first administrative review, because the grants underwrote the associations' costs related to the softwood lumber dispute, we preliminarily determine that the benefit is tied to anticipated exports to the United States. *See* 19 CFR 351.514(a); *see also Preliminary Results of 1st Review* , 69 FR at 33229. Therefore, we divided the amount approved by total exports of softwood lumber to the United States during the year of approval. We adjusted this sales amount to account for any exports of softwood lumber to the United States during the POR by excluded companies. *See* 19 CFR 351.525(b)(4). Because the resulting amount was less than 0.5 percent, we have expensed the benefit in the year of receipt, which prior to the POR. On this basis, we preliminary determine that the CLTA and ILRA programs did not confer provide countervailable benefits during the POR of the instant review. Government of British Columbia Forest Renewal B.C. Program The Forest Renewal program was enacted by the GOBC in the Forest Renewal Act in June 1994 to renew the forest economy of British Columbia by, among other things, improving forest management of Crown lands, supporting training for displaced forestry workers, and promoting enhanced community and First Nations involvement in the forestry sector. To achieve these goals, the Forest Renewal Act created Forest Renewal B.C., a Crown corporation. The corporation's strategic objectives were implemented through three business units: the Forests and Environment Business Unit, the Value-Added Business Unit, and the Communities and Workforce Business Unit. The Forest Renewal B.C. program provides funds to community groups and independent financial institutions, which may in turn provide loans and loan guarantees to companies involved in softwood lumber production. 32 Effective March 31, 2002, the B.C. legislature terminated the Forest Renewal B.C. program. However, during the POR, there remained active Forest Renewal B.C. loans, with interest payments outstanding during the POR. 32 Grants have also been provided directly to softwood lumber producers. However, the GOBC has reported that no such grants were provided during the POR. According to the GOBC, Forest Renewal B.C. provided blanket guarantees with respect to all loans outstanding under the program during the POR. *See* page BC-FRBC-19, Volume 33 of the GOBC's November 22, 2004 questionnaire response. Accordingly, we find that the loan guarantees provided under the program constitutes a government financial contribution within the meaning of section 771(5)(D)(i) of the Act. Further, in the first administrative review we found that because assistance under the Forest Renewal B.C. program was limited to the forest products industry, the program was specific within the meaning of section 771(5A)(D) of the Act. No new information has been placed on the record of this review to warrant a change in our findings. To determine whether the active Forest Renewal loans provided benefits to the softwood lumber industry, in accordance with section 771(5)(E)(ii) of the Act, we compared the interest rates charged on the Forest Renewal loans to the benchmark interest rates described in “Benchmarks for Loans and Discount Rates.” Using this methodology, we have preliminarily determined that no benefit was provided by the Forest Renewal loans because the interest rates charged under this program were equal to or higher than the interest rates charged on comparable commercial loans. Government of Quebec 1. Assistance Under Article 28 of Investment Quebec Assistance under Article 28 is administered by Investissement Quebec, a government corporation. In the underlying investigation, the Department investigated assistance from the GOQ under Article 7, which was administered by the Societe de Developpement Industriel du Quebec (SDI). Article 28 supplanted Article 7 in 1998. Under Article 7, SDI provided financial assistance in the form of loans, loan guarantees, grants, assumption of interest expenses, and equity investments to projects that would significantly promote the development of Quebec's economy. According to the GOQ's response, prior to authorizing assistance, SDI would review a project to ensure that it had strong profit potential and that the recipient business possessed the necessary financial structure, adequate technical and management personnel, and the means of production and marketing required to complete the proposed project. The Article 28 program operates fundamentally in the same manner as Article 7. During the POR, there was one outstanding loan under Article 28. There were no outstanding loans under Article 7. No other assistance was provided to softwood lumber companies under Article 7 or Article 28. To determine whether this loan provided a benefit to the softwood lumber industry, in accordance with section 771(5)(E)(ii) of the Act, we compared the interest rates charged on the Article 28 loan to the benchmark interest rates described in “Benchmarks for Loans and Discount Rates.” Using this methodology, we have preliminarily determined that no benefit was provided by this loan because the interest rates and fees charged under this program were equal to or higher than the interest rates charged on comparable commercial loans. 2. Assistance from the Societe de Recuperation d'Exploitation et de Developpement Forestiers du Quebec (Rexfor) SGF Rexfor, Inc. (Rexfor) is a corporation all of whose shares are owned by the Societe Generale de Financement du Quebec (SGF). SGF is an industrial and financial holding company that finances economic development projects in cooperation with industrial partners. Rexfor is SGF's vehicle for investment in the forest products industry. Rexfor receives and analyzes investment opportunities and determines whether to become an investor either through equity or participative subordinated debentures. Debentures are used as an investment vehicle when Rexfor determines that a project is worthwhile, but is not large enough to necessitate more complex equity arrangements. Consistent with our approach in the underlying investigation, we have not analyzed equity investments by Rexfor because
(1)there was no allegation that Rexfor's equity investments were inconsistent with the usual investment practice of private investors, and
(2)there is no evidence on the record indicating that Rexfor's equity investments conferred a benefit. Also, consistent with our approach in the underlying investigation, we examined whether Rexfor's participative subordinated debentures, *i.e.* , loans, conferred a subsidy. Because assistance from Rexfor is limited to companies in the forest products industry, we have preliminarily determined that this program is specific under section 771(5A)(D)(i) of the Act. The long-term loans provided by Rexfor qualify as a financial contribution under section 771(5)(D)(i) of the Act. To determine whether the single loan outstanding to a softwood lumber producer during the POR provided a benefit, we compared the interest rates on the loan from Rexfor to the benchmark interest rates as described in “Benchmarks for Loans and Discount Rates.” *See* 771(5)(E)(ii) of the Act. Using this methodology, we have preliminarily determined that no benefit was provided by this loan because the interest rates charged under this program were higher than the interest rates charged on comparable commercial loans. On this basis, we have preliminarily found that the debt forgiveness by Rexfor did not confer a benefit in the POR and, thus, provides no countervailable subsidy. Preliminary Results of Review In accordance with 777A(e)(2)(B) of the Act, we have calculated a single country-wide subsidy rate to be applied to all producers and exporters of the subject merchandise from Canada, other than those producers that have been excluded from this order. This rate is summarized in the table below: Producer/Exporter Net Subsidy Rate All Producers/Exporters 8.18 percent ad valorem If the final results of this review remain the same as these preliminary results, the Department intends to instruct CBP to assess countervailing duties as indicated above. The Department also intends to instruct CBP to collect cash deposits of estimated countervailing duties of 8.18 percent of the f.o.b. invoice price on all shipments of the subject merchandise from reviewed companies, entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. Public Comment Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of publication of this notice. Pursuant to 19 CFR 351.309, interested parties may submit written comments in response to these preliminary results. Case briefs must be submitted within 30 days after the date of publication of this notice, and rebuttal briefs, limited to arguments raised in case briefs, must be submitted no later than seven days after the time limit for filing case briefs. Parties who submit argument in this proceeding are requested to submit with the argument:
(1)a statement of the issues, and
(2)a brief summary of the argument. Case and rebuttal briefs must be served on interested parties in accordance with 19 CFR 351.303(f). Please note that an interested party may still submit case and/or rebuttal briefs even though the party is not going to participate in the hearing. In accordance with 19 CFR 351.310, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on these preliminary results. Any requested hearing will be held at the U.S. Department of Commerce, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Individuals who wish to request a hearing must submit a written request within 30 days of the publication of this notice in the **Federal Register** to the Assistant Secretary for Import Administration, U.S. Department of Commerce, Room 1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. Requests for a public hearing should contain:
(1)The party's name, address, and telephone number;
(2)the number of participants; and,
(3)to the extent practicable, an identification of the arguments to be raised at the hearing. An interested party may make an affirmative presentation only on arguments included in that party's case or rebuttal briefs. This administrative review is issued and published in accordance with section 751(a)(1) and 777(i)(1) of the Act. Dated: May 31, 2005. Susan Kuhbach, Acting Assistant Secretary for Import Administration. [FR Doc. E5-2884 Filed 6-6-05; 8:45 am] BILLING CODE 3510-DS-S DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration [Docket No. 040511147-5142-02; I.D. 042804B] Listing Endangered and Threatened Species and Designating Critical Habitat: 12-Month Finding on Petition to List the Cherry Point Stock of Pacific Herring as an Endangered or Threatened Species AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Notice of 12-month petition finding. SUMMARY: We
(NMFS)have completed an updated Endangered Species Act
(ESA)status review of Pacific herring ( *Clupea pallasi* ), inclusive of the Cherry Point herring stock (Strait of Georgia, Washington). We initiated this status review update in response to a petition received on May 14, 2004, to list the Cherry Point stock of Pacific herring as a threatened or endangered species. We have determined that the Cherry Point herring stock does not qualify as a “species” for consideration under the ESA. Based upon the best available scientific and commercial information, we conclude that the petitioned action to list the Cherry Point Pacific herring stock as a threatened or endangered species is not warranted. We find that the Cherry Point stock is part of the previously defined Georgia Basin distinct population segment
(DPS)composed of inshore Pacific herring stocks from Puget Sound (Washington) and the Strait of Georgia (Washington and British Columbia). We have determined that the Georgia Basin DPS of Pacific herring is not in danger of extinction or likely to become endangered in the foreseeable future throughout all or a significant portion of its range, and therefore does not warrant ESA listing at this time. DATES: The finding announced in this notice was made on June 1, 2005. ADDRESSES: The status review update for Pacific herring and the list of references cited in this notice are available upon request from Chief, NMFS, Protected Resources Division, 1201 NE Lloyd Avenue, Suite 1100, Portland, OR, 97232. These materials are also available on the Internet at: *http://www.nwr.noaa.gov* . FOR FURTHER INFORMATION CONTACT: For further information regarding this notice contact Garth Griffin, NMFS, Northwest Region,
(503)231-2005, or Marta Nammack, NMFS, Office of Protected Resources,
(301)713-1401. SUPPLEMENTARY INFORMATION: Background ESA Statutory Provisions and Policy Considerations Under the ESA, a listing determination may address a species, subspecies, or a DPS of any vertebrate species which interbreeds when mature (16 U.S.C. 1532(15)). On February 7, 1996, the U.S. Fish and Wildlife Service and NMFS adopted a policy to clarify the agencies' interpretation of the phrase “distinct population segment of any species of vertebrate fish or wildlife” (ESA section 3(15)) for the purposes of listing, delisting, and reclassifying a species under the ESA (51 FR 4722). The joint DPS policy identified two elements that must be considered when making DPS determinations:
(1)the discreteness of the population segment in relation to the remainder of the species (or subspecies) to which it belongs; and
(2)the significance of the population segment to the remainder of the species (or subspecies) to which it belongs. Section 3 of the ESA defines an endangered species as “any species which is in danger of extinction throughout all or a significant portion of its range,” and a threatened species as one “which is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” The statute lists factors that may cause a species to be threatened or endangered (ESA section 4(a)(1)):
(a)the present or threatened destruction, modification, or curtailment of its habitat or range;
(b)overutilization for commercial, recreational, scientific, or educational purposes;
(c)disease or predation;
(d)the inadequacy of existing regulatory mechanisms; or
(e)other natural or manmade factors affecting its continued existence. Section 4(b)(1)(A) of the ESA requires NMFS to make listing determinations based solely on the best scientific and commercial data available after conducting a review of the status of the species and after taking into account efforts being made to protect the species. In making listing determinations under the ESA we first determine whether a population or group of populations constitutes a DPS (i.e., whether the populations(s) should be considered a “species” within the meaning of the ESA), and if so we assess the level of extinction risk faced by the DPS and any factors that have led to its decline. If it is determined that the DPS' survival is at risk throughout all or a significant portion of its range, we then assess efforts being made to protect the species, determining if these efforts are adequate to mitigate threats to the species. Based on the foregoing information and the factors identified in ESA section 4(a)(1), we then make a listing determination of whether the species is threatened, the species is endangered, or listing is not warranted. Life History of Pacific Herring Pacific herring in the Eastern Pacific Ocean range from northern Baja California north to at least the Mackenzie Delta in the Beaufort Sea. They are also found in the Russian Arctic from the Chukchi Sea in the east to the White Sea in the west, although the boundary between Atlantic and Pacific herring is unclear in this region (Hay *et al.* , 2001b). In the Northwestern Pacific they are found throughout the Western Bering Sea, the east coast of Kamchatka, and the Sea of Okhotsk; on the east and west coasts of Hokkaido, Japan; and south and west to the Yellow Sea off the Korean Peninsula (Haegele and Schweigert, 1985; Hay *et al.* , 2001b). Adult herring in the Eastern Pacific move inshore during winter and early spring and reside in holding areas before moving to adjacent spawning grounds (Hay, 1985). Spawning grounds are typically in sheltered inlets, sounds, bays, and estuaries (Haegele and Schweigert, 1985). Pacific herring usually spawn intertidally or in shallow subtidal zones, depositing adhesive eggs over algae, vegetation, or other substrates (Hay, 1985). The location and timing of spawning for individual stocks are generally consistent and predictable from year to year (Hay et al., 1989; O'Toole *et al.* , 2000). Pacific herring spawn timing varies with latitude, with earlier spawning (i.e., early-winter) occurring in the more southern latitudes of the species' range, and later spawning (i.e., mid-summer) occurring toward the northern limit of the species' range (Hay, 1985). In Puget Sound, spawning generally occurs from January to April, with peak spawning activity in February and March; however, Pacific herring at Cherry Point spawn from late-March to mid-June (Bargmann, 1998). Pacific herring larvae drift in ocean currents after hatching and are abundant in shallow nearshore waters (Lassuy, 1989; Hay and McCarter, 1997). After 2 to 3 months, larvae metamorphose into juveniles that form large schools and remain primarily in nearshore shallow-water areas during the first summer. After their first summer, juveniles may disperse to deeper offshore waters to mature or reside year-round in nearshore waters (Hay, 1985). For example, some herring are nonmigratory or resident and spend their entire life within Puget Sound and the Strait of Georgia, while other more migratory herring spend their summers in the offshore waters of Washington and southern British Columbia (Hay et al., 2001a; Trumble, 1983). Pacific herring age at first maturity ranges from age-2 to age-5 (Hay, 1985). Along the west coast of North America, populations of Pacific herring exhibit a latitudinal cline in age at first maturity, such that herring in southern locations (i.e., California) mature at an earlier age and herring in the north (i.e., Bering Sea) mature at later ages (Hay, 1985). In Puget Sound, Pacific herring reach sexual maturity at age-2 to age-4 (Bargmann, 1998). Pacific herring in the Strait of Georgia and other major assessment areas in British Columbia reach sexual maturity at age-3 (Hay and McCarter, 1999). In general, populations of Pacific herring also exhibit a latitudinal cline in mean size-at-age, such that herring in southern locations (i.e., California) exhibit small size and herring in the north (i.e., Bering Sea) attain a far larger size at a similar age. Herring may spawn annually for several years (Hay, 1985), with overall fecundity increasing as body size increases (Ware, 1985; Hay, 1985). In the state of Washington there are 21 documented spawning stocks: 19 stocks in Puget Sound (including the Cherry Point stock and the recently re-discovered Wollochet Bay stock), and two on the Washington Coast (Bargmann, 1998; Stout *et al.* , 2001). The Cherry Point Pacific herring stock historically spawned along the Washington coastline from Hale Passage (between the north end of Bellingham Bay and the east coast of Lummi Island), north to Cherry Point, Birch Point, Point Roberts, and the border with Canada (Lemberg *et al.* , 1997). Since 1996, spawning of the Cherry Point stock has only occurred in the vicinity of Birch Point and along the Cherry Point Reach. Spawning at Cherry Point can begin as early as late-March and end as late as mid-June, although peak spawning activity occurs around May 10th (O'Toole et al., 2000). Spawning at all other Pacific herring locations in Puget Sound, Hood Canal, and the Strait of Juan de Fuca normally occurs from late-January through late-April (Trumble, 1983; Lemberg *et al.* , 1997; O'Toole *et al.* , 2000) with peak spawning starting the last week of February or the first week of March (O'Toole *et al.* , 2000). Since record keeping began in 1928, British Columbia Pacific herring have been observed to spawn at over 1,300 locations along the approximately 5,200 km of coastline that is classified as herring spawning habitat (Hay and McCarter, 2004). In any given year, between 450 and 600 km of the British Columbia coast receives herring spawn. The Canada Department of Fisheries and Oceans has identified six stock assessment regions and 101 sub-areas or “Herring Sections” characterized by consistent Pacific herring spawning activity. In general, Pacific herring spawn from January to May in southern British Columbia and from mid-January to June in northern British Columbia (Taylor, 1964; Hourston, 1980). As at Cherry Point, Pacific herring in several Herring Sections in British Columbia exhibit notably late spawn timing for their local region (e.g., Skidegate Inlet [Section 022] and Masset Inlet [Section 011] in the Queen Charlotte Islands Region and Burke Channel [Section 084] in the Central Coast Region) (Hay *et al.* , 1989). Previous Federal Actions Relating to Pacific Herring We completed a status review of Pacific Herring in 2001 (Stout *et al.* , 2001). This earlier review was initiated in response to a petition received in February 1999 to list 18 species of marine fishes in Puget Sound, including Pacific herring. We concluded that the Pacific herring stocks in Puget Sound do not constitute a DPS (and therefore do not qualify as a “species” under the ESA). We determined that these Puget Sound herring stocks, including the Cherry Point stock, belonged to a larger Georgia Basin Pacific herring DPS consisting of over 40 inshore stocks from Puget Sound and the Strait of Georgia in the United States and Canada (64 FR 17659; April 3, 2001). We concluded that the Georgia Basin DPS is not threatened or endangered throughout all or a significant portion of its range (64 FR 17659; April 3, 2001); however, we did note concern regarding two herring stocks within the Georgia Basin DPS (the Cherry Point and Discovery Bay stocks) that have shown marked declines in range and abundance. Although we recognized that these two declining stocks may be vulnerable to extirpation, we concluded that they represent a relatively small portion of the more than 40 stocks and assessment areas composing the DPS and do not confer significant risk to the DPS throughout all or a significant portion of its range. Summary of Petitions Received On January 22, 2004, NMFS received a petition from the Northwest Ecosystem Alliance, the Center for Biological Diversity, Ocean Advocates, People for Puget Sound, Public Employees for Environmental Responsibility, Sam Wright, and the Friends of the San Juans to find that the Cherry Point (Washington) stock of Pacific herring qualifies as a DPS and warrants listing as a threatened or endangered species under the ESA. Subsequently, on May 14, 2004, the same petitioners submitted additional information including new genetic information on the stock structure of Pacific herring in Puget Sound and the Strait of Georgia (Washington) that had become available since the initial petition was received on January 22, 2004. We considered the petitioners' supplemental submission (in conjunction with the January 22, 2004, submission) as a distinct petition received by the agency on May 14, 2004. On August 10, 2004, we issued our finding that the petition received on January 22, 2004, fails to present substantial scientific and commercial information indicating that the petitioned action may be warranted, but that the petition received on May 14, 2004, does present substantial scientific and commercial information indicating that the petitioned action may be warranted (69 FR 48455). For a summary of the specific information presented in the two petitions, the reader is referred to the above mentioned **Federal Register** notice describing the petition findings. Most significantly, the petition received on May 14, 2004, presented new genetic information (Small *et al.* , 2004) indicating that the Cherry Point herring stock may be “discrete” and “significant” with respect to the species, and may thereby qualify as a DPS for listing consideration under the ESA. The majority of the information provided by the petitioners regarding the viability of the Cherry Point herring stock was evaluated in our earlier 2001 status review. The Cherry Point herring stock has declined dramatically over the last three decades, with the spawning biomass in 2000 representing a 94 percent decline from historical observations. The 2001 status review noted that there was a 50 percent chance that the Cherry Point stock would decline to 1 ton or less in 100 years (Stout et al., 2001). The petitioners also provided additional biomass information from 2001-2004 for the period since the 2001 status review. Updated Status Review of Pacific Herring The ESA requires that, as a consequence of accepting the above petition, NMFS promptly commence a review of the species' status and make a finding within 12 months after receiving the petition, whether the petitioned action is warranted (ESA Section 4(b)(3)). To ensure that our review was based on the best available and most recent scientific information, we solicited information during a 60-day public comment period regarding the DPS structure and extinction risk of, and efforts being made to protect, the species (69 FR 48455; August 10, 2004). We convened a Biological Review Team
(BRT)(an expert panel of scientists from NMFS' Northwest and Alaska Fisheries Science Centers, and NOAA's National Ocean Service) to review the available information and determine:
(1)the DPS structure of Pacific herring, specifically whether the Cherry Point herring stock qualifies as a “species” for consideration under the ESA; and
(2)whether the identified DPS(s) are in danger of extinction or likely to become so in the foreseeable future throughout all or a significant portion of its range. The BRT's findings are presented in a January 24, 2005, memorandum “Summary of Scientific Conclusions of the Status of Cherry Point Pacific Herring (Clupea pallasii) and Update of the Status of the Georgia Basin Pacific Herring DPS,” and are summarized briefly below. Determination of “Species” Under the joint DPS policy (51 FR 4722; February 7, 1996) a population segment may be considered discrete if it satisfies either one of the following conditions:
(1)it is markedly separated from other populations of the same biological taxon as a consequence of physical, physiological, ecological, or behavioral factors (quantitative measures of genetic or morphological discontinuity may provide evidence of this separation); or
(2)it is delimited by international governmental boundaries across which there is a significant difference in exploitation control, habitat management or conservation status. Under the joint DPS policy, if a population is determined to be discrete, the agency must then consider whether it is significant to the taxon to which it belongs. Considerations in evaluating the significance of a discrete population include:
(1)persistence of the discrete population in an unusual or unique ecological setting for the taxon;
(2)evidence that the loss of the discrete population segment would cause a significant gap in the taxon's range;
(3)evidence that the discrete population segment represents the only surviving natural occurrence of a taxon that may be more abundant elsewhere outside its historical geographic range; or
(4)evidence that the discrete population has marked genetic differences from other populations of the species. The BRT considered several types of information in evaluating the DPS structure of Pacific herring, including whether the Cherry Point herring stock qualifies for listing consideration as an independent DPS. Information considered in evaluating the discreteness of stocks include:
(1)geographic variability in life-history characteristics and morphology;
(2)tagging and recapture studies indicating the level of migration among stocks; and
(3)genetic differentiation among stocks reflective of marked reproductive isolation. Relationship of Stock and DPS Concepts Pacific herring in the vicinity of Cherry Point (Washington) are considered to be a stock for management purposes in the state of Washington (Bargmann, 1998). There is no definition of the term “stock” that is generally accepted by fisheries biologists (Stout *et al.* , 2001). The term stock has been used to refer to:
(1)fish spawning in a particular place or time, separated to a substantial degree from fish spawning in a different place or time (Ricker, 1972);
(2)a population sharing a common environment that is sufficiently discrete to warrant consideration as a self-perpetuating system that can be managed separately (Larkin, 1972);
(3)a species group or population of fish that maintains and sustains itself over time in a definable area (Booke, 1981); and
(4)an intraspecific group of randomly mating individuals with temporal or spatial integrity (Ihssen et al., 1981). None of these definitions imply that a fish stock is ecologically, biologically, or physiologically significant in relation to the biological species as a whole. Hence, information establishing a group of fish as a stock, such as the Cherry Point stock of Pacific herring, does not necessarily qualify it as a DPS. A DPS may be composed of a group of related stocks, or in some cases (if the evidence warrants) a single stock, that form(s) a discrete population and are
(is)significant to the biological species as a whole. Pacific Herring as a Metapopulation A “metapopulation” is an aggregation of subpopulations linked by migration, and subject to periodic extinction and recolonization events (Levins, 1968, 1970). Observations of herring population structure in the Atlantic and Pacific are consistent with this metapopulation concept (McQuinn, 1997; Ware e *t al.* , 2000; Ware and Schweigert, 2001 ,2002; Ware and Tovey, 2004):
(1)local herring stocks are distributed across spatially fragmented spawning habitat;
(2)local stocks exhibit partially independent demographics and dynamics;
(3)there is appreciable straying and gene flow among local populations; and
(4)there is evidence of disappearance and recolonization events. Consistent with the consideration of Pacific herring as a metapopulation, local spawning stocks of herring may demonstrate distinctive demographic patterns and reproductive isolation over relatively short temporal scales, yet over longer time periods regularly exchange low levels of individuals or experience periodic waves of dispersal during years of abundant recruitment. DPS Determination for the Cherry Point Stock of Pacific Herring The BRT concluded that the Cherry Point stock of Pacific herring was “discrete” under the DPS policy (NMFS, 2005). The BRT determined that the Cherry Point stock is markedly separated from other Pacific herring populations as a consequence of physical, physiological, ecological, or behavioral factors due to:
(1)its locally unique late spawn timing;
(2)the locally unusual location of its spawning habitat on an exposed section of coastline;
(3)its consistently large size-at-age and continued growth after maturation relative to other local herring stocks; and
(4)its differential accumulation of toxic compounds relative to other local herring stocks, indicative of different rearing or migratory conditions for Cherry Point herring. Although the BRT determined that the Cherry Point stock represents a discrete population, the BRT concluded that the stock is not “significant” to the taxon, and hence does not constitute a DPS (NMFS, 2005). The BRT noted that:
(1)over the broad geographic range of Pacific herring, the local distinctiveness of the Cherry Point stock is not unusual;
(2)the late spawn timing of the Cherry Point stock is not exceptional for Pacific herring, as there are other Pacific herring stocks with similarly exceptionally late (as well as early) spawn timing for their local region;
(3)other Pacific herring stocks have spawning habitats located on exposed coastlines subject to high-energy wave action; and (4), given the level of genetic variability observed within and between herring stocks, the level of genetic differentiation exhibited by the Cherry Point stock was unlikely to indicate a marked or evolutionarily significant level of differentiation. Based on this information, the BRT concluded that the Cherry Point stock does not satisfy the applicable DPS criteria for significance: Cherry Point does not represent a unique or unusual ecological setting for Pacific herring; the loss of the Cherry Point herring stock would not result in a significant gap in the extensive range of Pacific herring; and the Cherry Point stock does not exhibit marked genetic differentiation relative to other Pacific herring populations. Petition Finding As summarized above, the May 14, 2004, petition submitted by the Northwest Ecosystem Alliance and co-petitioners sought a finding that the Cherry Point (Washington) stock of Pacific herring qualifies as a DPS and warrants listing as a threatened or endangered species under the ESA. In a **Federal Register** notice published on August 10, 2004 (69 FR 48455), we published the finding that the petition presented substantial scientific and commercial information indicating that the petitioned action may be warranted. As described in the preceding section, we have determined that the Cherry Point stock of Pacific herring is “discrete,” but is not “significant” under the joint NMFS/U.S. Fish and Wildlife Service DPS policy. Thus, the Cherry Point herring stock does not qualify as a DPS for listing consideration under the ESA. Accordingly, we find that the action sought by the May 14, 2004, Northwest Ecosystem Alliance et al. petition is not warranted. DPS Determination for Pacific Herring in the Georgia Basin The BRT considered a number of alternative DPS configurations for Pacific herring incorporating the Cherry Point herring stock, ranging from the previously identified Georgia Basin DPS to a DPS encompassing Pacific herring from San Diego (California) to Sitka (Alaska). Evidence suggesting a DPS configuration larger than the Georgia Basin includes:
(1)tagging studies indicating that straying among herring stocks occurs at spatial scales exceeding that of the Georgia Basin;
(2)information indicating relative genetic homogeneity of Pacific herring stocks in the Pacific Northwest, Strait of Georgia, and British Columbia; and
(3)evidence supporting the concept that local herring stocks are part of a larger Pacific herring metapopulation. Notwithstanding this information, the majority of the BRT favored the previous delineation of a Georgia Basin DPS of Pacific herring, finding that the available information is insufficient to warrant modification of the previous DPS delineation (NMFS, 2005). A variety of evidence supports the finding that Georgia Basin Pacific herring satisfy the criteria for discreteness and significance under the joint DPS policy, including: the similarity in age composition of herring stocks in the Strait of Georgia and Puget Sound supporting the discreteness of Georgia Basin Pacific herring, and the ecological uniqueness of the inshore waters of Puget Sound and the Strait of Georgia supporting the significance of the Pacific herring in the Georgia Basin to the taxon as-a-whole. (For a more detailed discussion of the information supporting the delineation of the Georgia Basin DPS of Pacific herring, the reader is referred to the Stout *et al.* , 2001, status review). The BRT delineated the Georgia Basin DPS as encompassing spawning stocks of Pacific herring in the marine waters of Puget Sound, the Strait of Georgia, and eastern Strait of Juan de Fuca in the United States and Canada. Review of the Species' Status The ESA defines an endangered species as any species in danger of extinction throughout all or a significant portion of its range, and a threatened species as any species likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range. Section 4(b)(1) of the ESA requires that the listing determination be based solely on the best scientific and commercial data available, after conducting a review of the status of the species and taking into account those efforts, if any, being made to protect such species. The BRT considered the best available biological information to assess the level of extinction risk for the Georgia Basin DPS of Pacific herring. The BRT evaluated the DPS's extinction risk based on risks to its abundance, productivity, spatial structure (including spatial distribution and connectivity), and diversity. These four “Viable Salmonid Population” (VSP; McElhany *et al.* , 2000) criteria were developed to provide a consistent and logical framework for assessing risks to populations and DPSs of West Coast salmon and steelhead. Although initially developed for application to salmonid metapopulations, the VSP criteria are well founded in the conservation biology literature. Threats to a species' long-term persistence are manifested demographically as risks to its abundance, productivity, spatial structure, and productivity. These demographic risks thus provide the most direct and robust biological indicators of extinction risk. The BRT's assessment of extinction risk did not include an evaluation of the likely or potential contribution of efforts being made to protect the species, but was based solely on the available biological information assuming that present conditions will continue, and recognizing that natural demographic and environmental variability is an inherent feature of present conditions. Below we summarize the BRT's assessment of demographic risks to the Georgia Basin DPS's abundance, productivity, spatial structure, and diversity, as well as the BRT's extinction risk assessment for the DPS based on these risks. Evaluation of Demographic Risks to the DPS The majority opinion of the BRT was that there is very low risk to the abundance of the Georgia Basin DPS, concluding that it is unlikely that the current trends and levels of abundance contribute significantly to the risk of extinction for the DPS, either by themselves or in combination with other factors. The BRT noted that the overall abundance of the DPS is at historically high levels since monitoring began in the 1930s, in terms of the estimated biomass (the recent abundance is well over 100,000 metric tons) and numbers of herring (estimated at more than half a billion mature herring). However, the BRT was concerned about the observed decline in the number of the Cherry Point herring spawners from an estimated 24 million fish in 2003 to 14 million fish in 2004. The majority opinion of the BRT was that there is low risk to the productivity of the DPS, concluding that it is unlikely to contribute significantly to the risk of extinction for the DPS by itself, but that there may be concern in combination with other factors. The BRT noted that the DPS as a whole is highly productive with the overall population trend and growth rate being highly positive. The BRT observed that the overall DPS appeared to be in steep decline in the 1960s. However, some stocks have exhibited high levels of productivity conferring resiliency to the DPS and reflecting an apparent ability to rebound from past declines. The recent short-term trend for the overall DPS is also very positive and recruitment levels remain high, despite an apparent increase in adult mortality, possibly due to predation by seals, disease factors, and other risk factors. The BRT's appraisal of risk to the spatial structure of the DPS ranged from very low risk to increasing risk. The majority opinion of the BRT was that the DPS faces low risk to its spatial structure, concluding that it is unlikely that spatial distribution and connectivity contribute significantly to the risk of extinction by themselves, and that there is some concern that they may in combination with other factors. The BRT noted that the DPS remains well distributed, with no gaps in the geographic range of spawning within the DPS. All, or nearly all, of the historically occupied areas continue to support spawning, and moderate migration rates based on tagging information indicate little loss of connectivity among stocks within the DPS. The BRT noted that increasing trends in the DPS are not uniformly distributed among stocks or spawning areas, with the Central and Northeastern portions of the DPS exhibiting declines. The BRT was concerned that the bulk of the spawning distribution and abundance and productivity in the DPS has become spatially compacted, particularly in the northern half of the DPS. However, the BRT felt that declining trends in some parts of the DPS are not a major concern in the context of a herring metapopulation, particularly in light of observations of high connectivity among stocks, and evidence of disappearance and subsequent recolonization events in the British Columbia portion of the DPS. The BRT also felt that the spatial compaction of the most abundant and productive spawning stocks may be a natural phenomenon. The majority opinion of the BRT was that there is low risk to the diversity of the DPS, concluding that it is unlikely that diversity contributes significantly to the risk of extinction for the DPS, but that it may in combination with other factors. The BRT noted that the DPS continues to exhibit diversity in spawn timing and migratory behavior both within and among spawning stocks. Although there is limited long-term data regarding the genetic diversity of the DPS, the BRT concluded that there has been no apparent genetic loss as compared to other marine species. The BRT noted concern that the life-history diversity of the DPS has apparently declined with the compression of population age structure (a much smaller proportion of older age classes), the decline of late-spawning herring (principally the Cherry Point herring stock), and an apparent decline in nonmigratory inlet herring stocks on the eastern side of the Strait of Georgia. The BRT was uncertain whether the migratory/nonmigratory life-history types are specific to certain populations, or are present to some degree in most or all spawning stocks in the Strait of Georgia and Puget Sound. Assessment of the Risk of Extinction Informed by its assessment of demographic risks to the DPS, and a consideration of the interactions among demographic risks, the BRT concluded that the Georgia Basin DPS of Pacific herring is not at risk of extinction in all or a significant portion of its range, nor likely to become so in the foreseeable future. The BRT noted that the overall abundance of the DPS is at historically high levels, and that the linear extent of coastline used for spawning has been increasing. The BRT concluded that the available information suggests that spawning stocks in the Georgia Basin DPS operate as a “mixed structure” metapopulation (Harrison and Taylor, 1997) in which all subpopulations are connected by migration, but some are relatively discrete with weaker demographic linkages to other subpopulations in the DPS. It is expected in a viable metapopulation that some local subpopulations will be in decline, other subpopulations will be increasing, and some suitable habitat patches may be unoccupied. Accordingly, the observation that some local stocks are declining (principally the Cherry Point stock, and the nonmigratory inlet stocks in the eastern Strait of Georgia) is not by itself cause for concern about the long-term viability of the DPS. Additionally, given the metapopulation structure of the DPS, the BRT did not feel that the low demographic risks (described in the previous section) collectively represent a risk to the long-term viability of the DPS. The few declining stocks represent a small proportion of the more than 40 stocks and assessment areas that compose the Georgia Basin DPS. Evidence of significant migration among stocks, high levels of gene flow, and disappearance and subsequent recolonization events for Georgia Basin Pacific herring suggest that local extirpations or stock declines confer little risk to the overall DPS. The specific stocks exhibiting decline, however, appear to exhibit greater demographic independence on generational time scales relative to other stocks within the DPS. It is possible, given their weaker connectivity with other spawning stocks in the DPS, that if these declining stocks were lost, recolonization might take longer than it might for a classical metapopulation in which subpopulations are connected by higher rates of exchange. Nonetheless, the BRT did not feel that the current risks to these declining stocks posed risks to the DPS as a whole, or to any significant portion of the DPS. The BRT considered whether recent factors have disrupted the function of the metapopulation such that its long-term viability is compromised. The BRT concluded that the patterns of abundance and distribution within the Georgia Basin DPS appear to be typical of what is seen in other herring metapopulations throughout northwestern North America, including metapopulations in relatively pristine areas in southeastern Alaska and British Columbia. The BRT noted, however, that if habitat areas were lost or permanently degraded to the point that they lacked the potential to support a spawning subpopulation, this could seriously impair the function of the entire metapopulation. The BRT concluded that the declining Cherry Point and eastern Strait of Georgia inlet stocks do not appear to be limited by habitat factors. The BRT concluded that the available evidence does not suggest unusual levels of risk to the DPS as a whole, nor to any significant portion of the DPS. Consideration of “Significant Portion of its Range” The ESA defines endangered and threatened species in terms of the level of extinction risk “throughout all or a significant portion of its range” (sections 3(6) and 3(20)). If it is determined that the defined species is not in danger of extinction or likely to become so throughout all of its range, but there are major geographic areas where the species is no longer viable, the statute directs that we must address whether such areas represent a significant portion of the species' range. As mentioned above, the BRT expressed concern regarding declines in the Cherry Point stock and the non-migratory inlet stocks in the eastern Strait of Georgia, but concluded that these stocks do not represent a significant portion of the Georgia Basin DPS's range. The BRT recognized that the Cherry Point stock is characterized by late spawn timing, but noted that this timing represents the tail of the distribution of run timing for the DPS as a whole and overlaps with the range of spawn timing exhibited by other stocks in the DPS. The BRT noted that the Cherry Point stock represents only one of about 40 recognized herring stocks and management areas within the DPS. Although at peak abundance (in the early 1970s) the Cherry Point stock possibly represented about 11 percent of the DPS's total biomass, other historically large stocks were severely depressed at the time due to over-harvesting and poor recruitment conditions. Thus, it is speculative to conclude that the Cherry Point stock historically represented a substantial portion of the ESU's biomass. With respect to the declining inlet stocks in the eastern Strait of Georgia, the BRT concluded that it is unclear whether their nonmigratory life history represents a biologically significant portion of the DPS. Pentilla
(1986)suggested that some proportion of adult herring in Puget Sound are nonmigratory as well. The BRT observed that it is unclear whether the nonmigratory life-history type is specific to certain stocks or is present to some degree in all herring stocks. Based on the above information, the BRT concluded that the declining Cherry Point and eastern Strait of Georgia inlet herring stocks individually and collectively do not represent a significant portion of the Georgia Basin DPS's range. Efforts Being Made to Protect the Species Section 4(b)(1)(A) of the ESA requires the Secretary to make listing determinations solely on the basis of the best scientific and commercial data available after taking into account efforts being made to protect a species (emphasis added). Therefore, in making listing determinations we first assess the defined species' level of extinction risk, and identify factors that have led to its decline. If it is determined that the species' survival is at risk, we then assess existing efforts being made to protect the species to determine if those measures ameliorate the risks faced by the species. As described above, the BRT concluded that the defined species' (the Georgia Basin DPS of Pacific herring) survival is not at risk. It is not necessary to assess whether protective efforts reduce risks to a DPS that has been determined to be viable. Listing Determination Informed by NMFS' findings that:
(1)the spawning stocks of Pacific herring in the Georgia Basin (including the marine waters of Puget Sound, the Strait of Georgia, and eastern Juan de Fuca Strait in the United States and Canada) constitute a DPS; and
(2)the DPS is not in danger of extinction or likely to become endangered in the foreseeable future throughout all or a significant portion of its range, we conclude that the Georgia Basin DPS of Pacific herring does not warrant listing as threatened or endangered under the ESA. References Copies of the BRT's Status Review Update report, the petition, and related materials are available on the Internet at *http://www.nwr.noaa.gov* , or upon request (see ADDRESSES section above). Authority: 16 U.S.C. 1531 *et seq.* Dated: June 1, 2005. Rebecca Lent, Deputy Assistant Administrator for Regulatory Programs, National Marine Fisheries Service. [FR Doc. 05-11210 Filed 6-6-05; 8:45 am]
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  • 37 F.3d 1373
  • 19 CFR 351.111(a)(2)(i)
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Notices
Notice of 12-month petition finding
C.F.R.§ 351.213
C.F.R.§ 351.401
C.F.R.§ 351.410
C.F.R.§ 351.224
C.F.R.§ 351.310
C.F.R.§ 351.212
C.F.R.§ 351.402
C.F.R.§ 351.303
C.F.R.§ 351.301
F. App'x37 F.3d 1373
Cite19 CFR 351.111(a)(2)(i)
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