Notice of Preliminary Results and Extension of Final Result of Countervailing Duty Administrative Review: Certain Softwood Lumber Products From Canada, 33932-33961 [06-5221]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 71, Number 112 (Monday, June 12, 2006)]
[Notices]
[Pages 33932-33961]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5221]



[[Page 33931]]

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Part V





Department of Commerce





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International Trade Administration



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Notice of Preliminary Results and Extension of Final Result of 
Countervailing Duty Administrative Review: Certain Softwood Lumber 
Products From Canada; Notice

Federal Register / Vol. 71, No. 112 / Monday, June 12, 2006 / 
Notices

[[Page 33932]]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-839]


Notice of Preliminary Results and Extension of Final Result 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, 2004, 
through March 31, 2005. 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.)

DATES: Effective Date: June 12, 2006.

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 2, 2005, 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, 70 FR 22631 (May 2, 2005).\1\ 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 256 individual companies.\2\ On June 
30, 2005, we initiated the review covering the period April 1, 2004, 
through March 31, 2005. See 70 FR 37749.
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    \1\ In the notice of opportunity to request an administrative 
review of this CVD order, we inadvertently listed an incorrect 
period of review. We corrected this error in a subsequent notice of 
opportunity to request an administrative review. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity to Request Administrative Review, 70 FR 31422 (June 1, 
2005).
    \2\ Of these 256 company-specific requests, 145 were for zero/de 
minimis rate reviews under 19 CFR 351.213(k)(1).
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    On July 8, 2005, 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 
Joseph A. Spetrini, Acting Assistant Secretary for Import 
Administration, from Barbara E. Tillman, Acting Deputy Assistant 
Secretary for Import Administration, entitled, ``Methodology for 
Conducting the Review,'' dated July 8, 2005, 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 July 11, 2005, 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 August 31, 2005, we extended the period for completion of these 
preliminary results until May 31, 2006, pursuant to section 
751(a)(3)(A) of the Act. See Notice of Extension of Time Limit for 
Final Results of Countervailing Duty Administrative Review: Certain 
Softwood Lumber from Canada, 70 FR 51751 (August 31, 2005).
    On October 3, 2005, the GOC, GOA, GOBC, GOM, GONB, GON, GONS, GOO, 
GOPEI, GOQ, and GOS submitted their initial questionnaire responses. 
From January through May 2006, we issued a series of supplemental 
questionnaires to the Federal and Provincial Governments of Canada.
    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 December 6, 2005, and that the due 
date for submitting rebuttal and/or clarifying information would be 
extended to December 22, 2005. Both petitioners and the Canadian 
parties submitted factual information by the established deadlines.

Extension of Final Results

    Extension of Time Limit for Final Results of Review Section 
751(a)(3)(A) of the Tariff Act of 1930, as amended (the Act), requires 
the Department to issue final results within 120 days after the date on 
which the preliminary determination is published. However, if it is not 
practicable to complete the final results of review within this time 
period, section 751(a)(3)(A) of the Act allows the Department to extend 
that 120-day period to 180 days. We determine that completion of the 
final results of the instant review within the 120-day period is not 
practicable as there are a large number of programs to be considered 
and analyzed by the Department. In order to complete our analysis, the 
Department required additional and/or clarifying information after the 
publication of the preliminary results, and now needs time to review 
the responses to these requests as well. Given the complexity of these 
issues, and in accordance with section 751(a)(3)(A) of the Act, we are 
extending the time period for issuing the preliminary results of 
reviews by 60 days to 180 days. Thus, the final results of review are 
due on or about December 4, 2006, which is the next business day after 
180 days from the publication date of the preliminary results.

Period of Review

    The period of review (POR) for which we are measuring subsidies is 
April 1, 2004, through March 31, 2005.

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 sub-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

[[Page 33933]]

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 
U.S. 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 https://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 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,\3\ 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:
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    \3\ 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.
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    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 CVD 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

[[Page 33934]]

softwood lumber scope.\4\ The presumption of non-subject status can, 
however, be rebutted by evidence demonstrating that the merchandise was 
substantially transformed in Canada.
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    \4\ See the scope clarification message ( 3034202), 
dated February 3, 2003, to CBP, regarding treatment of U.S.-origin 
lumber on file in the CRU.
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    On March 3, 2006, the Department issued a scope ruling that any 
product entering under HTSUS 4409.10.05 which is continually shaped 
along its end and/or side edges which otherwise conforms to the written 
definition of the scope is within the scope of the order.\5\
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    \5\ See Memorandum from Constance Handley, Program Manager to 
Stephen J. Claeys, Deputy Assistant Secretary regarding Scope 
Request by the Petitioner Regarding Entries Made Under HTSUS 
4409.10.05, dated March 3, 2006.
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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 30, 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 that accompanied the Final Determination (Final 
Determination Decision Memorandum); see also ``Recurring and Non-
Recurring Benefits'' section of the December 5, 2005, Issues and 
Decision Memorandum (Final Results of 2nd Review Decision Memorandum) 
that accompanied the Notice of Final Results of Countervailing Duty 
Administrative Review: Certain Softwood Lumber Products from Canada, 70 
FR 73448, (December 12, 2005) (Final Results of 2nd 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 examining non-stumpage 
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).

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, long-term benchmark interest 
rate, we used for these preliminary results the national average 
interest rates on commercial long-term Canadian dollar-denominated 
loans as reported by the GOC.
    The information submitted by the GOC was for fixed-rate long-term 
debt. For long-term debt, the GOC provided quarterly rates using data 
from Statistics Canada's (STATCAN) Quarterly Survey of Financial 
Statistics for Enterprises. We used the information from this survey as 
the basis for our long-term loan benchmark.
    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.
    As stated above, the Department is examining non-stumpage programs 
that confer non-recurring benefits. For those non-stumpage programs 
that require the allocation of the benefit over time, we have employed 
the allocation methodology described under 19 CFR 351.524(d). As our 
discount rate, we have used 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, the 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), and the 
Final Results of 2nd 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

[[Page 33935]]

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 subsequent 
reviews, these weighted-averages of the subject merchandise do not 
include exports from the Maritime Provinces or sales of companies 
excluded from the CVD order.\6\ We then summed these weighted-average 
subsidy rates to determine the country-wide rate for all provincial 
Crown stumpage programs.
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    \6\ The Maritime provinces are Nova Scotia, New Brunswick, 
Newfoundland, and Prince Edward Island.
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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 and second administrative 
reviews. 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 CVD rate.

Numerator and Denominator Used for Calculating the Stumpage Programs' 
Net Subsidy Rates \7\
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    \7\ The denominators used for non-stumpage programs are 
discussed below in the individual program write-ups.
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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 second administrative 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 ``Aggregate Numerator and 
Denominator'' section and Comment 9 of the Final Results of 2nd 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 second review.\8\
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    \8\ 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.
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    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, e.g., Comment 16 of the December 13, 2004, 
Issues and Decision Memorandum that accompanied the Final Results of 
1st Review (Final Results of 1st Review Decision Memorandum). See also 
Comment 9 of the Final Results of 2nd Review Decision Memorandum.

2. Adjustments to Account for Companies Excluded From the CVD Order

    In the investigation, we deducted from the denominator sales by 
companies that were excluded from the CVD 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 CVD 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 second review, the GOC, GOO, and GOQ indicated 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. 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. The respective governments were also unable to provide POR 
sales data of the excluded companies. See, e.g., ``Adjustments to 
Account for Companies Excluded from the CVD Order'' section of the 
Final Results of 2nd Review Decision

[[Page 33936]]

Memorandum. Thus, pursuant to our prior practice, in the second review, 
we 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. Further, consistent with our approach in 
the first review, because we lacked POR sales data, we 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. Id. In addition, because Canadian parties 
stated that the excluded companies did not acquire Crown timber during 
the POR and because they did not provide any other additional benefit 
data from the companies, in the second review we did not adjust the 
aggregate numerator data from the relevant provinces. Id.
    In keeping with our prior findings, we have continued the approach 
adopted in the second review. Thus, we have indexed the sales of the 
excluded companies to the POR using province-specific lumber price 
indices obtained from STATCAN. We then subtracted the sales of the 
excluded companies from the corresponding provincial denominators. As 
in the prior review, we have not made any adjustments to the aggregate 
numerator data from the relevant provinces.

3. Pass-Through

    In the second 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. The GOO, GOBC, British Columbia Lumber Trade Council 
(BCLTC), GOM, GOS, and GOA based their claims on aggregate data which 
they argued indicate that subsidy benefits on specified volumes of 
Crown timber did not pass through to the purchasing sawmills. In the 
second administrative review, the Ontario Lumber Manufacturing 
Association and the Ontario Forest Industries Association (OLMA/OFIA) 
separately submitted company-specific data for several companies in 
Ontario and Manitoba. The information provided by the OLMA/OFIA 
included transaction-specific data, statements and certification of 
non-affiliation, and additional supporting documentation.
    In the second administrative review, we employed a two-part test to 
evaluate the Canadian parties' pass-through claims. First, we examined 
whether the claims involved log transactions between mills and 
independent harvesters that were conducted at arm's length between 
unrelated parties. See Comment 5 of Final Results of 2nd Review 
Decision Memorandum. We further specified that the identity of the 
party that pays the stumpage fee is crucial in determining whether the 
second part of the analysis is warranted. Id. at Comment 4. The 
identity of the party paying the stumpage is important because, in 
instances in which the sawmill pays the stumpage fee to the Crown, the 
subsidy benefits accrue directly to the sawmill just as if it were 
drawing from its own tenure and contracting out for harvesting and 
hauling services. Id.
    In the second administrative review, we further explained that the 
second part of the pass-through test examines whether the sawmill 
received a competitive benefit from the purchase of the subsidized 
logs. Id. at Comment 5. The competitive benefit analysis is guided by 
the provisions of the Department's regulations 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. To conduct the competitive benefit test, we require 
specific information on each transaction for which parties request a 
pass-through analysis, which necessitates that they provide more than 
just aggregate data and more than self-selected sample data. This 
approach follows from the very nature of the competitive benefit test, 
an analysis in which the price of subsidized logs sold in individual 
transactions are compared to a market-determined benchmark price. 
Specifically, we require the volume and the unit price, by species, for 
each of the log sales for which Canadian parties sought a pass-through 
analysis--so that we can compare these sales to our benchmark price. 
Furthermore, to ensure that the competitive benefit test is accurate 
and meaningful, we require specific data (e.g., species, size, grade, 
quality, discount, delivery terms, and payment terms) on the logs sold 
in the transactions under analysis. These data are necessary in order 
to further ensure that we conduct our competitive benefit test on an 
``apples-to-apples'' basis relative to our benchmark prices. Id.
    In the second administrative review, we determined that, based on 
the criteria described above, the GOO, GOBC, BCLTC, GOM, GOS, and GOA 
each failed to substantiate their respective ``aggregate'' claims. See 
``Pass-Through'' section and Comments 3 through 5 of the Final Results 
of 2nd Review Decision Memorandum. However, based on our analysis of 
the company-specific data submitted by the OLMA/OFIA, we determined 
that a reduction in the Ontario subsidy benefits was warranted. See 
``Pass-Through'' section and Comments 6 through 7 of the Final Results 
of 2nd Review Decision Memorandum.
    In anticipation of a similar claim in this administrative review, 
we explained in the initial questionnaire that if the Canadian 
provinces wished to claim that any portion of the reported volume of 
Crown harvest was sold in arm's-length transactions and that subsidies 
provided for that portion of the Crown harvest did not pass through to 
the purchasing sawmill, they must provide such information as (1) a 
breakdown, by species, of the total volume and value that purportedly 
did not pass through, excluding sales of logs for which sawmills paid 
the stumpage fees directly to the Crown and (2) documentation regarding 
the corporate affiliation of each of the parties involved in their 
pass-through claim, including the identities of affiliated parties of 
the purchasing sawmills, the harvesters, and the tenure holders of the 
tenures from which the logs were harvested. See, e.g., pages III-18 and 
III-19 of the Department's July 11, 2005, initial questionnaire. In 
response to the Department's original questionnaire, the Canadian 
parties provided various sets of information for analysis.
    In their October 3, 2005, initial questionnaire response, the GOA 
and the GOBC/BCLTC each provided an aggregate pass-through claim (with 
accompanying information) of the amount of Crown timber in the 
respective provinces that was obtained by sawmills through arm's-length 
transactions.\9\ The GOBC/BCLTC provided company-specific data based on 
a survey conducted by PriceWaterhouseCoopers (PWC) that contained the 
total volume and value of logs purchased by 42 sawmills

[[Page 33937]]

throughout the B.C. interior. See Exhibits 3 and 4 of the BCLTC's 
December 6, 2005, factual submission for the results of the PWC survey. 
The GOBC/BCLTC submitted revised PWC survey data in Exhibits A and B of 
the GOBC's March 30, 2006, supplemental questionnaire response. The GOO 
and the OLMA/OFIA submitted company-specific/transaction-specific data 
and supporting information for us to analyze with respect to certain 
sawmills in Ontario and Manitoba. See OFIA/OLMA Volume I, Exhibits 
OFIA/OLMA 1 to OFIA/OLMA 11 of the GOO's October 3, 2005, questionnaire 
response. On March 2, 2006, we issued a supplemental questionnaire to 
the GOC and the provincial governments in which we requested that they 
respond to the pass-through appendix included in the Department's July 
11, 2005, initial questionnaire. In their March 30 and April 3, 2006, 
supplemental questionnaire responses, Canadian parties reiterated their 
arguments that the pass-through claims made in their initial 
questionnaire response were sufficient for the Department to find that 
alleged subsidy benefits on certain volumes of Crown-origin logs did 
not pass through to the purchasing sawmill and, thus, any such benefits 
should not be included in the numerators of the provincial benefit 
calculations. On May 2, 2006, we issued a supplemental questionnaire to 
the OLMA/OFIA, in which we requested clarification of the data 
provided. The OLMA/OFIA provided a response on May 12, 2006. See OFIA/
OLMA's Supplemental Questionnaire Response.
---------------------------------------------------------------------------

    \9\ The GOQ, GOM, and GOS did not make any pass-through claims 
in this segment of the proceeding. However, the OLMA/OFIA submitted 
a pass-through claim on behalf of a company with operations in 
Manitoba. See TEM(Manitoba) Volume I, Pass-through questionnaire 
response of the GOO's October 3, 2005 submission and the May 12, 
2006 OFIA/OLMA Supplemental Questionnaire Response. For this 
particular mill, we analyzed its pass-through claim pursuant to the 
pass-through analysis described in this section of the preliminary 
results.
---------------------------------------------------------------------------

    We have reviewed and considered all of the information provided on 
the record of this administrative review. We find that the GOA and 
GOBC/BCLTC each failed to provide the information necessary for us to 
examine whether the claims were with respect to log transactions 
conducted at arm's length, and whether a competitive benefit was 
received by the alleged buyer. Regarding the data submitted by the GOO, 
while the GOO submitted information for each company, it did not 
provide price data on a transaction-specific basis as requested by the 
Department and, thus, we lack the information required for the 
competitive benefit test that is the second part of our pass-through 
analysis. However, for purposes of these preliminary results, we 
determine that, based on our analysis of the company-specific/
transaction-specific data and information provided by the OLMA/OFIA, 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
    The GOA claims 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.\10\ The GOA 
asserts that, on the basis of its pass-through claim, at least 1.5 
million m\3\ of softwood logs should be removed from the numerator of 
the provincial subsidy rate calculation. See page XII-1 of the GOA's 
October 3, 2005, questionnaire response. The GOA bases its claim on a 
survey of Timber Damage Assessment (TDA) data that was conducted by a 
private consulting firm hired by the GOA. The survey is an updated 
version of the TDA survey upon which the GOA based its pass-through 
claim in the second administrative review. As explained in the second 
administrative review, the TDA survey lacks the company-specific and 
transaction-specific data we require to perform the two steps of our 
pass-through analysis (i.e., the arm's-length test and the competitive 
benefit test). See Comment 5 of the Final Results of 2nd Review 
Decision Memorandum.
---------------------------------------------------------------------------

    \10\ As explained in the ``Calculation of Provincial Benefits'' 
section of these preliminary results, the numerator of the 
provincial subsidy rate calculation is the product of the adjusted 
unit benefit and the total volume of softwood Crown logs that 
entered and were processed by sawmills during the POR.
---------------------------------------------------------------------------

    As explained above, on March 2, 2006, we provided the GOA with an 
opportunity to respond to the pass-through appendix, which was included 
in the Department's July 11, 2005, initial questionnaire. In its 
response, the GOA argued that, while it had stated its willingness in 
the initial questionnaire to provide any additional useful information 
that it could regarding its pass-through claim, ``the Department is now 
asking for a massive expenditure of time, resources, and effort that is 
not feasible, and, in fact is not necessary, in light of reliable 
information already provided.'' See the GOA's March 30, 2006, 
supplemental questionnaire response. It further argued that the 
Department should instead conduct its pass-through analysis using the 
data in the TDA survey. Id.\11\
---------------------------------------------------------------------------

    \11\ The GOA made the same argument concerning the Department's 
request for a response to its pass-through appendix in the second 
administrative review. See, Comment 5 of the Final Results of 2nd 
Review Decision Memorandum.
---------------------------------------------------------------------------

    Based on the GOA's questionnaire responses and in keeping with the 
approach employed in the second administrative review, we preliminarily 
determine that we are unable to rely on the TDA survey as a basis for 
the GOA's pass-through claim because it lacks the information we 
require to perform the two steps of our pass-through analysis. 
Accordingly, we preliminarily determine that the GOA has failed to 
substantiate its pass-through claim and, therefore, we have not reduced 
the numerator of Alberta's provincial subsidy rate calculation, as 
requested by the GOA.
b. British Columbia
    The GOBC claims that the numerator of British Columbia's provincial 
subsidy rate calculation should be reduced to account for fair-market, 
arm's-length sales of Crown logs between unrelated parties. Using 
aggregate data from Interior and Coastal British Columbia, the GOBC 
estimates that at least 15.6 million m\3\ of softwood logs were 
acquired by sawmills in arm's-length transactions and, thus, the volume 
of these logs should be removed from the numerator of the provincial 
subsidy rate calculation. See page BC-XIV-2 of the GOBC's October 3, 
2005, and page 3 of the GOBC's March 30, 2006, supplemental 
questionnaire response. In support of this aggregate claim the GOBC 
provided data from a survey commissioned by the BCLTC and conducted by 
PWC on what were purported to be arm's-length log purchases by B.C. 
sawmills. See Exhibits 3 and 4 of the BCLTC's December 6, 2005, factual 
submission for the results of the PWC survey. The GOBC submitted a 
revised PWC survey in Exhibits A and B of the GOBC's March 30, 2006, 
supplemental questionnaire response. This survey covered 42 sawmills 
and, according to the GOBC, accounted for 78 percent of the logs 
consumed in the B.C. interior. See page 3 of the GOBC's March 30, 2006, 
supplemental questionnaire response. According to the GOBC and BCLTC, 
the survey provides company- and species-specific data concerning the 
volume of Crown-origin logs purchased by sawmills from unaffiliated 
sawmills and log sellers. They further claim the survey separately 
lists the volume of Crown-origin logs acquired from private lands and 
affiliated parties by each of the surveyed sawmills. To the extent the 
Department does not accept their aggregate pass-through claim, the GOBC 
and BCLTC argue that the Department should, at the very least, conduct 
its pass-through analysis using the data from the PWC survey. The GOBC 
and BCLTC contend that the data in the PWC survey demonstrate that a 
substantial portion of the alleged subsidy benefit attributable to the 
Crown-origin logs harvested during the

[[Page 33938]]

POR did not pass through to the purchasing sawmills.
    Regarding the GOBC's aggregate estimation and PWC survey, we note 
that they fail to identify those transactions in which the sawmill pays 
the stumpage fee directly to the Crown as specified in our July 11, 
2005, initial questionnaire. As explained above, we have previously 
determined that the identity of the party paying the stumpage is 
important because, in instances in which the sawmill pays the stumpage 
fee to the Crown, the subsidy benefits accrue directly to the sawmill 
just as if it were drawing from its own tenure and contracting out for 
harvesting and hauling services. See Comment 5 of the Final Results of 
2nd Review Decision Memorandum. In addition, the data in the GOBC's 
aggregate pass-through claim as well as those of the PWC survey fail to 
document, as instructed by the Department in its initial questionnaire, 
the corporate relationships of each of the parties involved in the 
transactions associated with the GOBC's pass-through claim. 
Furthermore, the GOBC's aggregate estimation and the PWC survey do not 
contain the transaction-specific data we require in order to perform 
the competitive benefit test. For example, while the PWC survey 
provides company-specific log purchase data for 42 sawmills operating 
in the B.C. interior, these data are consolidated by supplier category 
(i.e., purchases from sawmills, purchases from sellers without 
sawmills, purchases from private land); they are not presented on a 
transaction-specific basis. As explained in the second administrative 
review, transaction-specific data are required in order for the 
Department to conduct the competitive benefit component of the pass-
through analysis. See Comment 5 of the Final Results of 2nd Review 
Decision Memorandum.
    In our March 2, 2006, supplemental questionnaire, we provided the 
GOBC an opportunity to respond to the pass-through appendix included in 
the Department's initial questionnaire. The GOBC refused to respond to 
the pass-through appendix, arguing that it was unduly burdensome and 
that the Department did not need the information solicited in the 
appendix for it to conduct a pass-through analysis. See page 1 of the 
GOBC's March 30, 2006, response. Instead, the GOBC submitted revised 
PWC survey data and reiterated its claim that the data it submitted 
were sufficient for purposes of the Department's pass-through analysis.
    Based on our approach in the prior administrative review and in 
light of the deficiencies in the data submitted by the GOBC and BCLTC, 
we preliminarily determine that we are unable to rely on the aggregate 
data submitted by the GOBC or on the PWC survey. On this basis, we 
preliminarily determine that the GOBC and BCLTC have failed to 
substantiate their respective pass-through claims and, therefore, we 
have not reduced the numerator of British Columbia's provincial subsidy 
rate calculation.
c. Ontario
    The GOO claims that the numerator of Ontario's provincial subsidy 
rate calculation should be reduced to account for fair-market, arm's-
length sales of Crown logs between unrelated parties. Specifically, the 
GOO claims that at least 2,501,472 m3 of softwood logs were 
acquired by sawmills in arm's-length transactions and, thus, the volume 
of logs should be removed from the numerator of the provincial subsidy 
rate calculation. See page ON-267 GOO's October 3, 2005, questionnaire 
response. In support of its claim, the GOO provided information on log 
purchases between the 25 largest sawmills in Ontario and tenure holders 
that do not own a sawmill. See Volume 20 of Exhibit ON-PASS-1 of the 
GOO's October 3, 2005, questionnaire response. In this exhibit, the GOO 
provided company-specific data indicating, by species, the volume and 
value of logs that sawmills acquired from each of their respective 
suppliers. The GOO also identified those sawmills that paid the 
stumpage fees on behalf of the harvester.\12\ See Exhibit ON-PASS-2 of 
the GOO's October 3, 2005, questionnaire response. The OLMA/OFIA 
separately submitted company-specific information for 11 companies 
covering numerous sawmills. See Volume I of the OFIA/OLMA's October 3, 
2005 questionnaire response and the OFIA/OLMA's May 12, 2006 response. 
The information from the OLMA/OFIA included transaction-specific data 
regarding sales between sawmills and harvesters, statements and 
certification of non-affiliation, and additional supporting 
documentation. The information from the OLMA/OFIA also identified those 
transactions in which the sawmill paid the stumpage fee to the Crown. 
See the OFIA/OLMA's May 12, 2006 questionnaire response.
---------------------------------------------------------------------------

    \12\ The GOO refers to sawmills as an ``agent for the Crown'' 
for transactions between a harvester and a sawmill in which the 
sawmill pays the stumpage fee to the Provincial Government.
---------------------------------------------------------------------------

    As explained above, based on our approach in the second 
administrative review, we find that a competitive benefit analysis is 
not warranted in instances in which the sawmill purchasing the log pays 
the stumpage fee directly to the Crown. In addition, based on the 
methodology employed in the second administrative review, we find a 
competitive benefit analysis is not warranted where the Department 
lacks transaction-specific data. As a result, we have not utilized the 
data provided by the GOO for our pass-through analysis. However, with 
respect to the company-specific/transaction-specific information and 
data provided by the OLMA/OFIA, we accept the certifications by the 
companies that the transactions they reported were between unaffiliated 
parties and preliminarily determine that they are sufficient for 
purposes of conducting a competitive benefit analysis.
    For these transactions, we then performed the next step of our 
pass-through analysis by examining whether the sawmill received a 
competitive benefit from the purchase of the subsidized logs. Pursuant 
to 19 CFR 351.523(c), we sought actual or average prices for 
unsubsidized input products, including imports, or an appropriate 
surrogate as the benchmark input price. We previously determined in the 
first and second administrative reviews that there were no private 
prices in Ontario that were suitable for use as benchmarks to measure 
the adequacy of remuneration of stumpage fees charged for Crown-origin 
trees. See ``Private Provincial Market Prices'' section and Comments 20 
and 21 of the Final Results of 1st Review Decision Memorandum; see also 
Notice of Preliminary Results of Countervailing Duty Administrative 
Review: Certain Softwood Lumber Products from Canada, 70 FR 33088 at 
33102 (June 7, 2005) (Preliminary Results of 2nd Review), and Comment 
17 of the Final Results of 2nd Review Decision Memorandum. As explained 
in the ``Provincial Stumpage Programs'' section below, we have reached 
the same conclusion based on the record in this proceeding.
    We also explained in the second review that in Ontario Crown-origin 
timber supplies a dominant portion of the log market and, as a result, 
the unit cost of this supply effectively determines the market prices 
of logs in the province. See Preliminary Results of 2nd Review, 70 FR 
at 33096; see also Comment 6 and 17 of the Final Results of 2nd Review 
Decision Memorandum. As demonstrated in this review, as well as in the 
prior reviews, the prices harvesters charge for logs are effectively 
determined by the prices they pay for stumpage plus harvesting costs. 
Because

[[Page 33939]]

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. Id.
    Instead, we have turned to private stumpage prices in the 
Maritimes, which we have found 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/OFIA that we determined were eligible for a 
competitive benefit analysis based on 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 the province-specific per-unit stumpage 
benefit, 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 was calculated to 
have passed though in the transaction was never greater than the 
subsidy granted by the Crown. This approach is consistent with the 
approach utilized in the second administrative review. See Preliminary 
Results of 2nd Review, 70 FR at 33095-33096; see also, the ``Pass-
Through'' section of the Final Results of 2nd Review Decision 
Memorandum. 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.\13\ Accordingly, a small reduction in the Ontario subsidy 
benefit is warranted. The calculations are business proprietary. See 
the May 31, 2006, 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 fee for the log was paid directly to the 
provincial government by the sawmill), then we did not conduct a 
competitive benefit analysis and the corresponding volume associated 
with these transactions was not excluded from the numerator of the net 
subsidy calculation.
---------------------------------------------------------------------------

    \13\ We performed the same analysis for the data pertaining to 
the company with operations in Manitoba. See the May 31, 2006, 
Preliminary Calculations Memorandum for Manitoba.
---------------------------------------------------------------------------

d. Quebec
    There are two tenure licenses, Forest Management Contracts (FMCs) 
and Forest Management Agreements (FMAs), that in past reviews the 
Department has addressed in the context of the pass-through issue. 
While claiming in its initial questionnaire response that the volume of 
Crown timber harvested under FMCs and FMAs and subsequently sold in 
open market transactions are ``undoubtedly arm's length transactions,'' 
the GOQ did not make a formal pass-through claim with respect to log 
volumes harvested under these licenses. See page QC-144 of its October 
3, 2005, questionnaire response. Our treatment of these types of tenure 
in these preliminary results are discussed below.
FMC Licenses
    As explained in the prior review, pursuant to section 102 of the 
Forestry Act, the GOQ may grant an FMC license to any ``person.'' See 
Preliminary Results of 2nd Review, 70 FR at 33097. Thus, FMC license 
holders may include companies owning/operating sawmills. We further 
explained in the prior review that the GOQ often grants FMCs to 
municipalities in the province. Id.; see also page QC-144 of the GOC's 
October 3, 2005, questionnaire response of the current review in which 
the GOQ states that the majority of FMC holders are municipalities. In 
addition, in the second review we explained that sections 104.2 and 
104.3 of the Forestry Act stipulate that the holder of an 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 and that this stipulation was also reflected in the 
standard language of the FMC contract. See Preliminary Results of 2nd 
Review, 70 FR at 33097. Based on this information, in the second review 
we determined that the FMC volume reported by the GOQ included 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. Id.
    In the current review, the GOQ claims that no sawmills held FMCs 
during the POR and, thus, were not in the position to purchase Crown 
timber directly from the Provincial Government under an FMC license. 
See page QC-144 and Exhibit 56 of the GOQ's October 3, 2005, 
questionnaire response. The GOQ also failed to submit a response to our 
March 20, 2006, pass-through questionnaire appendix in which it was 
provided another opportunity to provide information concerning volumes 
harvested under FMC licenses. As explained in the second administrative 
review, the volume of timber harvest sold by municipalities to sawmills 
does not involve an ``indirect'' subsidy and, thus, such transactions 
are not eligible for the arm's-length analysis because they are no 
different from instances in which the Provincial Government itself 
sells the timber to sawmills. See Preliminary Results of 2nd Review, 70 
FR at 33097. In keeping with the precedent established in the previous 
review, we preliminarily determine that, with respect to Crown timber 
sold under FMC licenses, an arm's-length analysis is not warranted. 
Therefore, we have included all of the FMC harvest volume in the 
numerator of Quebec's net subsidy calculation.
    Regarding the FMC harvest volumes included in the numerator of 
Quebec's net subsidy calculation, we note that certain volumes lack 
corresponding value amounts. In the prior review, we explained that 
these volumes reflected the amount sold by municipalities and that 
lacking price information for these volumes, as facts available, we 
applied the unit prices that the GOQ reported for either the remaining 
amount of FMC volume or for TSFMA volume as appropriate. See 70 FR at 
33097-33098. See also, the May 31, 2006, Preliminary Calculations 
Memorandum for Quebec. For these preliminary results, we have utilized 
the same approach. See the May 31, 2006, Preliminary Calculations 
Memorandum for Quebec.
FMA Licenses
    We are not including the timber volumes harvested under FMA 
licenses in the numerator of Quebec's net subsidy calculation. Under 
section 84.1 of the Forestry Act, an FMA licensee may not be the holder 
of a wood processing permit or be affiliated with the holder of a wood 
processing permit. Although the record does not contain the prices 
which the FMA holders charge their customers for Crown logs, even if 
the full amount of the subsidy is assumed to pass through to the

[[Page 33940]]

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. 
This approach is consistent with that employed in the prior review. 
See, e.g., Preliminary Results of 2nd Review, 70 FR at 33098.

Analysis of Programs

Programs Preliminarily Determined To Confer Subsidies

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,\14\ 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 Notice of Preliminary Results of 
Countervailing Duty Administrative Review: Certain Softwood Lumber 
Products from Canada, 69 FR 33204 at 33219-33227 (Preliminary Results 
of 1st Review). Changes to British Columbia administered stumpage 
system are discussed below.
---------------------------------------------------------------------------

    \14\ 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 and 
second reviews 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 Fin