[Federal Register Volume 75, Number 45 (Tuesday, March 9, 2010)]
[Notices]
[Pages 10761-10774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4986]
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DEPARTMENT OF COMMERCE
International Trade Administration
C-560-824
Certain Coated Paper from Indonesia: Preliminary Affirmative
Countervailing Duty Determination and Alignment of Final Countervailing
Duty Determination with Final Antidumping Duty Determination
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to
producers and exporters of certain coated paper suitable for high-
quality print graphics using sheet-fed presses (certain coated paper or
CCP) in Indonesia. For information on the estimated subsidy rates, see
the ``Suspension of Liquidation'' section of this notice.
EFFECTIVE DATE: March 9, 2010.
FOR FURTHER INFORMATION CONTACT: Myrna Lobo, Nicholas Czajkowski, or
Justin Neuman, AD/CVD Operations, Office 6, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, DC 20230; telephone:
(202) 482-2371, (202) 482-1395, and (202) 482-0486, respectively.
SUPPLEMENTARY INFORMATION:
Case History
On October 13, 2009, the Department initiated a countervailing duty
(CVD) investigation of certain coated paper from Indonesia. See Certain
Coated Paper from Indonesia: Initiation of Countervailing Duty
Investigation, 74 FR 53707 (October 20, 2009) (Initiation Notice).\1\
In the Initiation Notice, the Department set aside a period for all
interested parties to raise issues regarding product coverage. The
comments we received are discussed in the ``Scope Comments'' section
below.
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\1\ Petitioners in this investigation are Appleton Coated LLC,
NewPage Corporation, S.D. Warren Company d/b/a/ Sappi Fine Paper
North America, and the United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers
International Union (collectively, petitioners).
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In the Initiation Notice, the Department identified the Asia Pulp &
Paper/Sinar Mas Group (APP/SMG), through the Indonesian paper mills it
operates, as the mandatory company respondent in this investigation.
Respondent APP/SMG companies identified in this investigation are PT.
Pabrik Kertas Tjiwi Kimia Tbk. (Tjiwi Kimia or TK), PT. Pindo Deli Pulp
and Paper Mills (Pindo Deli or PD), and PT. Indah Kiat Pulp & Paper,
Tbk. (Indah Kiat or IK) (hereinafter designated as respondents, APP/
SMG, or by their individual company names).
On November 3, 2009, the Department issued the questionnaire
(including government and company sections) to the Government of
Indonesia (GOI). On the same day, the Department also provided a copy
of the questionnaire to APP/SMG. On December 29, 2009, APP/SMG and the
GOI submitted their questionnaire responses. (APP/SMG Initial
Questionnaire Response and GOI Initial Questionnaire Response) On
January 11 and January 14, 2010, the Department received comments from
petitioners regarding these questionnaire responses. On January 28 and
29, 2010, the Department issued supplemental questionnaires to APP/SMG
and the GOI, respectively (Supplemental Questionnaire to APP/SMG and
Supplemental Questionnaire to the GOI, respectively). Responses to
these questionnaires were received on February 16, and 22, 2010, and
March 1, 2010 (APP/SMG Supplemental Questionnaire Response and GOI
Supplemental Questionnaire Response). The Department notes that the
March 1 questionnaire response was received too late to be considered
for this preliminary determination.
On February 16, 2010, petitioners submitted comments for the
Department to consider for purposes of the preliminary determination.
On February 23, 2010, petitioners submitted additional comments for the
Department's consideration. On February 26, 2010, respondents submitted
comments for the Department's preliminary determination. However, the
most recent comments from petitioners and respondents did not reach the
Department in time for sufficient consideration to be given for
purposes of the preliminary determination. The Department will
therefore consider these submissions in its analysis for the final
determination.
On February 17, 2010, the Department issued a memorandum finding
that petitioners' original allegation that APP/SMG was uncreditworthy
from 2001 to April 2005 was sufficient and timely, and stating that we
would cover creditworthiness in our analysis. See Memorandum to File
from Justin M. Neuman, International Trade Analyst, AD/CVD Operations,
Office 6, Countervailing Duty Investigation of Certain Coated Paper
from Indonesia: Allegation of Uncreditworthiness, dated February 17,
2010 (Creditworthiness Memorandum). On that same day, we issued a
questionnaire to respondents regarding creditworthiness. Respondents
submitted their response on February 22, 2010 (Creditworthiness
Questionnaire Response).
On December 3, 2009, the Department postponed the preliminary
determination until February 20, 2010. However, since February 20, 2010
fell on a Saturday, the Department stated its determination would be
issued on the next business day, February 22, 2010. See Certain Coated
Paper from Indonesia: Postponement of Preliminary
[[Page 10762]]
Determination in the Countervailing Duty Investigation, 74 FR 63391
(December 3, 2010). Subsequently, on February 12, 2010, the Department
issued a memorandum revising all case deadlines. As explained in the
memorandum from the Deputy Assistant Secretary for Import
Administration, the Department exercised its discretion to toll
deadlines for the duration of the closure of the Federal Government
from February 5 through February 12, 2010. See Memorandum to the Record
from Ronald Lorentzen, DAS for Import Administration, Tolling of
Administrative Deadlines As a Result of the Government Closure During
the Recent Snowstorm, dated February 12, 2010, a public document on
file in the Department's Central Records Unit (CRU) in Room 1117 of the
main Department building. Thus, all deadlines in this segment of the
proceeding have been extended by seven days. The revised deadline for
the preliminary determination of this investigation was February 27,
2010. Since this date fell on a Saturday, the actual signature date is
March 1, 2010.
On February 26, 2010, petitioners requested that the final
determination of this countervailing duty investigation be aligned with
the final determination in the companion antidumping duty investigation
in accordance with section 705(a)(1) of the Act.
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination
On the same day the Department initiated this countervailing duty
investigation, see Initiation Notice, the Department also initiated the
antidumping duty investigations of certain coated paper from Indonesia
and the People's Republic of China (PRC). See Certain Coated Paper
Suitable for High-Quality Print Graphics Using Sheet-Fed Presses From
Indonesia and the People's Republic of China: Initiation of Antidumping
Duty Investigations, 74 FR 53710 (October 20, 2009). The countervailing
duty investigation and the antidumping duty investigation have the same
scope with regard to the merchandise covered. On February 26, 2010, in
accordance with section 705(a)(1) of the Act, petitioners requested
alignment of the final countervailing duty determination with the final
antidumping duty determination of certain coated paper from Indonesia.
Therefore, in accordance with section 705(a)(1) of the Act and 19 CFR
351.210(b)(4), we are aligning the final countervailing duty
determination with the final antidumping duty determination.
Consequently, the final countervailing duty determination will be
issued on the same date as the final antidumping duty determination,
which is currently scheduled to be issued no later than July 12, 2010,
unless postponed.
Injury Test
Because Indonesia is a ``Subsidies Agreement Country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from Indonesia materially injure, or threaten
material injury to, a U.S. industry. On November 23, 2009, the ITC
published its affirmative preliminary determination that there is a
reasonable indication that an industry in the United States is
materially injured by reason of imports from the PRC and Indonesia of
subject merchandise. See Certain Coated Paper Suitable for High-Quality
Print Graphics Using Sheet-Fed Presses from China and Indonesia, 74 FR
61174; and USITC Publication 4108 entitled Certain Coated Paper
Suitable for High-Quality Print Graphics Using Sheet-Fed Presses from
China and Indonesia: Investigation Nos. 701-TA-470-471 and 731-TA-1169-
1170 (Preliminary) (November 2009).
Scope of the Investigation
The scope of this investigation consists of Coated Paper, which are
certain coated paper and paperboard\2\ in sheets suitable for high
quality print graphics using sheet-fed presses; coated on one or both
sides with kaolin (China or other clay), calcium carbonate, titanium
dioxide, and/or other inorganic substances; with or without a binder;
having a GE brightness level of 80 or higher;\3\ weighing not more than
340 grams per square meter; whether gloss grade, satin grade, matte
grade, dull grade, or any other grade of finish; whether or not
surface-colored, surface-decorated, printed (except as described
below), embossed, or perforated; and irrespective of dimensions.
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\2\ ``'Paperboard' refers to Coated Paper that is heavier,
thicker and more rigid than coated paper which otherwise meets the
product description. In the context of Coated Paper, paperboard
typically is referred to as `cover,' to distinguish it from
`text.'''
\3\ One of the key measurements of any grade of paper is
brightness. Generally speaking, the brighter the paper the better
the contrast between the paper and the ink. Brightness is measured
using a GE Reflectance Scale, which measures the reflection of light
off of a grade of paper. One is the lowest reflection, or what would
be given to a totally black grade, and 100 is the brightest measured
grade.
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Coated Paper includes: (a) coated free sheet paper and paperboard
that meets this scope definition; (b) coated groundwood paper and
paperboard produced from bleached chemi-thermo-mechanical pulp
(``BCTMP'') that meets this scope definition; and (c) any other coated
paper and paperboard that meets this scope definition.\4\
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\4\ As noted below in the ``Scope Comments'' section, we have
determined that the word ``paperboard'' was inadvertently left out
of the sentence in the Initiation Notice and have corrected it for
the preliminary determination.
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Coated Paper is typically (but not exclusively) used for printing
multi-colored graphics for catalogues, books, magazines, envelopes,
labels and wraps, greeting cards, and other commercial printing
applications requiring high quality print graphics.
Specifically excluded from the scope are imports of paper and
paperboard printed with final content printed text or graphics.
As of 2009, imports of the subject merchandise are provided for
under the following categories of the Harmonized Tariff Schedule of the
United States (``HTSUS''): 4810.14.11, 4810.14.1900, 4810.14.2010,
4810.14.2090, 4810.14.5000, 4810.14.6000, 4810.14.70, 4810.19.1100,
4810.19.1900, 4810.19.2010, 4810.19.2090, 4810.22.1000, 4810.22.50,
4810.22.6000, 4810.22.70, 4810.29.1000, 4810.29.5000, 4810.29.6000,
4810.29.70. While HTSUS subheadings are provided for convenience and
customs purposes, the written description of the scope of this
investigation is dispositive.
The HTSUS subheadings are provided for convenience and customs
purposes only, the written description of the scope of this
investigation is dispositive.
Scope Comments
In accordance with the preamble to the Department's regulations, we
set aside a period of time in our Initiation Notice for parties to
raise issues regarding product coverage, and encouraged all parties to
submit comments within 20 calendar days of publication of that notice.
See Antidumping Duties; Countervailing Duties, 62 FR 27296, 27323 (May
19, 1997), and Initiation Notice, 74 FR at 53703. We received comments
concerning the scope of the antidumping duty (AD) and countervailing
duty (CVD) investigations of coated paper from the PRC and Indonesia.
Timely comments were filed collectively by Gold East Paper
(Jiangsu) Co., Ltd., Gold Huasheng Paper Co., Ltd., PD, and TK
(collectively, ``the scope respondents'') on November 6, 2009. These
parties asked the Department to clarify the scope of these
[[Page 10763]]
investigations by inserting language stating that multi-ply coated
paperboard is not covered. According to the scope respondents, multi-
ply coated paperboard is not the same as subject coated paper and
paperboard. First, the scope respondents claim its end-use is not for
graphic printing purposes or as a cover for graphic applications as
stated in the petition, but primarily for packaging functions (e.g.,
cosmetics, cigarettes, etc.). Moreover, the physical characteristics of
this product and its production process differ from those of subject
coated paper. In addition, the scope respondents note the Harmonized
Tariff Schedule (HTS) number for multi-ply coated paper products was
not included in the scope by petitioners and, thus, it was not their
intention to consider this product subject to the investigations.
Finally, the scope respondents claim that including multi-ply coated
paperboard would call into question the Department's industry standing
analysis.
In response to the scope respondents' submission, petitioners
submitted comments on November 16, 2009. Petitioners assert the scope
provides clear, specific criteria (e.g., sheets, suitable for high
quality print graphics, using sheet-fed press, coated, 80 or higher GE
brightness level, weight no more than 340 gsm, etc.) for determining
covered merchandise. Petitioners also point out that neither the
petitions nor the initiation documents indicate that plies are a
relevant physical characteristic. Furthermore, multi-ply products
produced by the scope respondents are suitable for more than a single
use. Thus, if the coated paper product, including multi-ply coated
paperboard, meets the criteria stated in the scope, the product is
subject to these investigations and the arguments provided by the scope
respondents (e.g., characteristics, production process, HTS numbers,
etc.) are immaterial. Finally, petitioners claim that there is no
reason to re-examine the analysis conducted at the initiation phase of
the investigation regarding petitioners' standing.
On December 16, 2009, the scope respondents requested that the
Department revisit its determination regarding industry support. While
acknowledging that the deadline had passed, the scope respondents
claimed that neither the statute nor the Department's regulations
preclude it from extending the deadline and revisiting its industry
support determination.
On December 28, 2009, petitioners responded that the statute and
Statement of Administrative Action are clear that an industry support
determination cannot be reconsidered in the context of the
investigation. On February 19, 2010, representatives of the scope
respondents met with Department officials to discuss their scope
comments. See Memorandum to the File from Nancy Decker, regarding ``Ex-
Parte Meeting with Counsel to Respondents'' (March 1, 2010). On
February 23, 2010, the scope respondents filed documents and
photographs of items presented to the Department at this ex parte
meeting. On February 22, 2010, representatives of petitioners met with
Department officials to discuss their scope comments. See Memorandum to
the File from Nancy Decker, regarding ``Ex-Parte Meeting with Counsel
to Petitioners'' (March 1, 2010). On February 23, 2010, petitioners
filed a submission in which they included a calculation presented to
the Department during this ex parte meeting.
On February 25, 2010, petitioners filed additional comments
rebutting the documents filed by the scope respondents and restating
their prior claims. In response to a question the Department posed
during the ex parte meeting, petitioners stated that the phrase
``suitable for high quality print graphics'' could be stricken from the
description of the subject merchandise without altering the scope of
these investigations.
Based on our review of the scope, we agree with petitioners that
the number of plies is not among the specific physical characteristics
(e.g., brightness, coated, weight, etc.) defining the subject
merchandise. Accordingly, we preliminarily find that multi-ply coated
paper is covered by the scope of these investigations, to the extent
that it meets the description of the merchandise in the scope.
Given that petitioners' most recent submission regarding the
suitability language was received shortly before these preliminary
determinations, we have not had sufficient time to analyze this issue.
Accordingly, we have not amended the scope and we invite parties to
further comment with respect to whether the phrase ``suitable for high
quality print graphics'' can be stricken from the description of the
subject merchandise without altering the scope of these investigations.
These scope comments must be filed within 20 calendar days of
publication of this notice, and they must be filed on the record of
this investigation, as well as the records of the concurrent AD
investigations on coated paper from Indonesia and the PRC and the CVD
investigation of coated paper from the PRC.
In their February 25, 2010 submission, petitioners also stated that
the phrase in the scope, ``(c) any other coated paper that meets the
scope definition'' should also include the word ``paperboard.'' We
agree that the word ``paperboard'' was inadvertently omitted (e.g., it
is already explicitly included in the first sentence of the scope
language and in ``(b)'' of the second paragraph) and have corrected the
scope language to read ``(c) any other coated paper and paperboard that
meets this scope definition.''
Period of Investigation
The period for which we are measuring subsidies, i.e., the period
of investigation (POI), is January 1, 2008 through December 31, 2008.
Subsidies Valuation Information
Cross-Ownership
The Asia Pulp and Paper Company/Sinar Mas Group is comprised of a
group of companies including forestry/logging companies, pulp
producers, and paper pro\5\ducers linked by varying degrees of common
ownership involving the Widjaja family. The producers/exporters of
subject merchandise, TK, PD, and IK, have reported affiliations with
each other through a parent holding company, PT. Purinusa Ekapersada
(Purinusa); with pulp producer PT. Lontar Papyrus Pulp and Paper
Industry (Lontar); with six forestry/logging companies PT. Arara Abadi
(AA), PT. Wirakarya Sakti (WKS), PT. Satria Perkasa Agung (SPA), PT.
Riau Abadi Lestari (RAL), PT. Finnantara Intiga (FI), and PT. Murini
Timber (MT); and with domestic trading company PT. Cakrawala Megah
Indah (CMI).
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\5\ We note that respondent company IK is also a pulp producer
and supplier, in addition to being a producer of the subject
merchandise.
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The Department's regulations at 19 CFR 351.525(b)(6)(vi) state that
cross-ownership exists between two or more corporations where one
corporation can use or direct the individual assets of the other
corporation(s) in essentially the same ways it can use its own assets.
This section of the Department's regulations states that this standard
will normally be met where there is a majority voting ownership
interest between two corporations or through common ownership of two
(or more) corporations. The Preamble to the Department's regulations
further clarifies the Department's cross-ownership standard. See
Countervailing Duties 63 FR 65347, 65401 (CVD Preamble). According to
the CVD Preamble, relationships captured by the
[[Page 10764]]
cross-ownership definition include those where the interests of two
corporations have merged to such a degree that one corporation can use
or direct the individual assets (including subsidy benefits) of the
other corporation in essentially the same way it can use its own assets
(including subsidy benefits). The cross-ownership standard does not
require one corporation to own 100 percent of the other corporation. In
certain circumstances, a large minority voting interest (for example,
40 percent) or a ``golden share'' may also result in cross-ownership.
See CVD Preamble at 65401.
As such, the Department's regulations make it clear that we must
examine the facts presented in each case in order to determine whether
cross-ownership exists. If we find that cross-ownership exists and if
one or more of the relationships identified in 19 CFR 351.525(b)(6)(i)
- (v) exists, we treat all cross-owned companies, to which at least one
of those relationships apply, as one company, and calculate a single
rate for any countervailable subsidies that we identify and measure, in
accordance with 19 CFR 351.525(b)(6).
Further, in accordance with 19 CFR 351.525(b)(6)(iv), if the
Department determines that the suppliers of inputs primarily dedicated
to the production of the downstream product are cross-owned with the
producers/exporters under investigation, then the Department will treat
subsidies provided to the input producers as subsidies attributable to
the production of the downstream product.
In this investigation, we are examining whether the three
producers/exporters of the subject merchandise, TK, PD, and IK, are
cross-owned with one another, and with their input suppliers, as
outlined in 19 CFR 351.352(b)(6)(iv). The alleged subsidies pertaining
to stumpage that we are investigating are conferred on the forestry/
logging companies which harvest standing timber and sell pulpwood to
the pulp producers that supply pulp to the paper producers/exporters.
Therefore, we must examine whether cross-ownership exists among and
across the suppliers of pulpwood, the pulp producers, and the CCP
producers/exporters.
Based on information on the record, we preliminarily determine that
cross-ownership exists, in accordance with 19 CFR 351.525(b)(6)(vi),
among and across the following companies involved in the production and
sale of the subject merchandise: respondent paper producers/exporters,
TK, PD, and IK; pulp producers, Lontar and IK; forestry and logging
companies, AA, WKS, RAL, SPA, FI, and MT; and domestic trading company,
CMI. In addition, we find that the input products in question, pulp
logs, are primarily dedicated to the production of CCP in accordance
with 19 CFR 351.525(b)(6)(iv).
Since much of our analysis supporting our finding on cross-
ownership involves business proprietary information, a full discussion
of the bases for our preliminary determination is set forth in the
Memorandum to Barbara E. Tillman, Director, AD/CVD Operations, Office
6, from Myrna Lobo, International Trade Compliance Analyst,
Countervailing Duty Investigation: Certain Coated Paper from Indonesia
- Cross-Ownership, dated March 1, 2010 (Cross-Ownership Memorandum), a
public version of which is on file in the CRU.
In addition to the six cross-owned forestry/logging companies
identified above, APP/SMG reported ten additional forestry/logging
companies from whom material quantities of timber were purchased during
the POI and with whom APP/SMG entered into cooperation agreements.
However, APP/SMG has reported that it has no affiliation with these
companies other than a business arrangement. Accordingly, we
preliminarily determine that these companies are not cross-owned with
APP/SMG, but will continue examining this issue during the course of
this investigation.
Allocation Period
Under 19 CFR 351.524(d)(2)(i), we presume the allocation period for
non-recurring subsidies to be the average useful life (AUL) prescribed
by the Internal Revenue Service (IRS) for renewable physical assets of
the industry under consideration (as listed in the IRS's 1977 Class
Life Asset Depreciation Range System, and as updated by the Department
of the Treasury). This presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets of the company or industry under
investigation. Specifically, the party must establish that the
difference between the AUL from the tables and the company-specific AUL
or country-wide AUL for the industry under investigation is
significant, pursuant to 19 CFR 351.524(d)(2)(i) and (ii). For assets
used to manufacture certain coated paper, the IRS tables prescribe an
AUL of 13 years. Neither APP/SMG nor the GOI has disputed the AUL of 13
years in this investigation. Therefore, the Department is using an AUL
of 13 years in this investigation.
Creditworthiness
In its petition, petitioners included an allegation that APP/SMG
was uncreditworthy from 2001 through April 2005.\6\ As the basis for
its allegation, petitioners relied on an earlier Department
determination of uncreditworthiness for the same years with respect to
APP/SMG. See Coated Free Sheet Paper from Indonesia: Final Affirmative
Countervailing Duty Determination, 72 FR 60642 (October 25, 2007)
(Indonesia CFS Final Determination) and the accompanying Issues and
Decision Memorandum (CFS IDM) at 16.\7\ In the CFS investigation, the
Department examined the following factors in determining the
creditworthiness of APP/SMG: (1) the receipt by respondent companies of
commercial long-term loans (as stated in 19 CFR 351.505(a)(4)(i)(A));
and (2) respondent companies' recent past and present ability to meet
their costs and fixed financial obligations with their cash flow (as
stated in 19 CFR 351.505(a)(4)(i)(C)). Based on this analysis, we found
APP/SMG to be uncreditworthy from 2001 through April 2005. See
Memorandum to File from Barbara E. Tillman, Director, Office 6, AD/CVD
Operations, Countervailing Duty Investigation: Coated Free Sheet Paper
from Indonesia: Post-Preliminary Analysis of Two New Subsidy
Allegations, dated September 7, 2007 (Indonesia CFS Post-Preliminary
[[Page 10765]]
Analysis Memorandum), on this record as Exhibit 14 of Petition Volume
V, dated September 23, 2007; unchanged in Indonesia CFS Final
Determination.
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\6\ Although the Department did not address this allegation in
the Initiation Checklist (See Countervailing Duty Investigation
Initiation Checklist: Certain Coated Paper from Indonesia, 74 FR
53707 (October 20, 2009) (Initiation Checklist), we subsequently
issued a memorandum confirming that this was a timely and sufficient
allegation of uncreditworthiness which we would be examining during
the course of the investigation. See Creditworthiness Memorandum.
\7\ In the coated free sheet paper investigation (hereinafter
referred to as the CFS investigation or CFS), APP/SMG was also the
sole respondent, and all of the used programs examined in the CFS
investigation were alleged in the current investigation of CCP. The
POI in CFS was calendar year 2005. Because the programs and company
in this investigation mirror the programs and company under
investigation in CFS, we requested that the GOI and APP/SMG place on
the record of this investigation the following documents from the
CFS investigation: all verification reports as well as certain
verification exhibits (on the record as Exhibits 32-33 of GOI
Initial Questionnaire Response, dated December 29, 2009 and Exhibits
2-9 of APP/SMG Supplemental Questionnaire Response, dated February
16, 2010); business proprietary memoranda pertaining to cross-
ownership and the subsidy calculations, including benchmarks (on the
record as Exhibit 65 of APP/SMG Initial Questionnaire Response,
dated December 29, 2009 and Exhibit 1 of APP/SMG Supplemental
Questionnaire Response, dated February 16, 2010). Where appropriate
and necessary, we have relied on these documents as well as all of
the other information in the GOI's questionnaire responses to reach
this preliminary determination.
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In March 2001, APP/SMG declared a standstill on its obligations
(principal and interest) to its creditors. See Indonesia CFS Final
Determination and CFS IDM at 16. APP/SMG began negotiating with its
creditors to restructure its debt; however, the ``Master Restructuring
Agreements'' (MRAs), which finalized the debt restructuring, did not go
into effect until April 2005. See id. at 16. In the time between the
announcement of the debt standstill and the effective date of the MRAs,
none of the four Principal Indonesian Operating Companies (PIOCs) in
the APP/SMG group (IK, Lontar, TK, and PD) made any payment of
principal or interest on their multi-billion dollar debt obligations
except for a $90 million payment that was made to repay a portion of
IK's debt in June 2002. See id. at 16. Additionally, none of the PIOCs
were able to secure long-term loans during this time period due to the
debt standstill and the ongoing debt restructuring discussions with
their creditors. See id. at 16.
In Indonesia CFS Final Determination, due to their inability to
meet their debt payments and financial obligations in accordance with
19 CFR 351.505(a)(4)(i)(D) or to obtain any long-term loans in
accordance with 19 CFR 351.505(a)(4)(i)(A) during this time period, we
found that companies in the APP/SMG group were uncreditworthy at the
time the government forgave debt through the acceptance of Certificates
of Entitlement (COEs) as debt repayment and at the time the GOI forgave
debt through the sale of APP/SMG's debt to Orleans Offshore Investment
Limited (Orleans). See Indonesia CFS Final Determination and CFS IDM at
16. See also Indonesia CFS Post-Preliminary Analysis Memorandum at 13-
14.
In the instant investigation, we issued a supplemental
questionnaire regarding the issue of creditworthiness to APP/SMG on
February 17, 2010. In that questionnaire, we instructed APP/SMG that,
if it disagreed with our determination in Indonesia CFS Final
Determination, it should respond to a series of questions in the
questionnaire so that the Department could conduct a meaningful
analysis of any information APP/SMG presented regarding its
creditworthiness status from 2001 to April 2005. In response to this
questionnaire, APP/SMG stated that it would not contest the
Department's previous determination of APP/SMG's creditworthiness
status in Indonesia CFS Final Determination. See Creditworthiness
Questionnaire Response at 2.
Therefore, we are continuing to find that APP/SMG was
uncreditworthy from 2001 through April 2005. Therefore, in accordance
with the methodology described in 19 CFR 351.505(a)(3)(iii), a risk
premium has been included in the discount rate used to calculate the
debt forgiveness benefits for both the ``Debt Forgiveness through the
Indonesian Government's Acceptance of Financial Instruments with No
Market Value'' and the ``Debt Forgiveness through APP/SMG's Buyback of
Its Own Debt from the Indonesian Government'' programs.
Analysis of Programs
I. Programs Preliminarily Determined To Be Countervailable
A. Provision of Standing Timber for Less Than Adequate Remuneration
Petitioners alleged that the GOI provides a countervailable subsidy
to pulp and paper producers through the provision of standing timber
for less than adequate remuneration. As support for their allegation,
they relied on Indonesia CFS Final Determination. In Indonesia CFS
Final Determination, the Department found that the ``provision of
standing timber'' (also referred to as stumpage) by the GOI was
countervailable because the provision: (1) provided a financial
contribution under section 771(5)(D)(iii) of the Act (provision of
goods or services other than general infrastructure); (2) provided a
benefit under section 771(5)(E)(iv) of the Act (goods or services are
provided for less than adequate remuneration); and (3) was specific
under section 771(5A)(D)(iii) of the Act (limited to a group of
industries).
In the CFS investigation, the GOI reported that virtually all
harvestable forest land is owned by the GOI. See Indonesia CFS Final
Determination and CFS IDM at 18. We found that the GOI allows timber to
be harvested from government-owned land under two main types of
licenses: (1) HPH licenses to harvest timber in the natural forest; and
(2) HTI licenses to establish and harvest timber from plantations. HTI
license holders pay ``cash stumpage fees'' known as PSDH royalty fees,
which are paid per unit of timber harvested. In addition to paying PSDH
fees, HPH license holders pay a per-unit Rehabilitation Fee (dana
reboisasi or DR) for timber harvested from natural forests. License
holders in Jambi province also pay a PSDA fee for harvest from
plantations. See id. at 18. We also found that all of the stumpage fees
are administratively set by the GOI. See id. at 69.
In the November 3, 2009 questionnaire issued by the Department, we
asked the GOI and APP/SMG to provide any new information or evidence of
changed circumstances with respect to the administration of this
program since December 2005 (the end of the POI in the Indonesia CFS
Final Determination) that would warrant a reconsideration of the
Department's prior countervailability finding that the GOI provided
standing timber for less than adequate remuneration to a specific group
of industries. See Certain Pasta from Italy: Final Results of the
Seventh Countervailing Duty Administrative Review, 69 FR 70657 (Dec. 7,
2004), and the accompanying Issues and Decision Memorandum at Comment 2
(``It is the Department's practice not to revisit past findings unless
new factual information or evidence of changed circumstances has been
placed on the record of the proceeding that would cause the Department
to deviate from past practice.''); see also PPG Industries, Inc. v.
United States, 14 C.I.T. 522, 539-40 (1990) (upholding the Department's
determination not to reinvestigate program absent sufficient new
evidence). The GOI reported that several laws and decrees have been
issued since December 2005 which have affected the forest industry. See
GOI Initial Questionnaire Response, dated December 29, 2009 at 7-8.
However, none of these changes materially alter the procedures through
which the GOI provides standing timber or how it prices standing
timber. The GOI did not provide any updated information on the quantity
of forest land owned by the government; however, the GOI did report
that the harvest from private land was 2,007,156 m[bds3] of a total of
31,984,443 m[bds3] (or only 6.27 percent) of the total harvest during
the POI. See GOI Initial Questionnaire Response, dated December 29,
2009 at 18. Therefore, we preliminarily determine that the provision of
standing timber by the GOI constitutes a financial contribution in
accordance with section 771(5)(D)(iii) of the Act.
In addition, in a letter dated February 4, 2010, the Department
requested that the GOI provide information on the number of industries
to which it provided standing timber during the POI, as well as the
total number of industries in Indonesia. Information provided by the
GOI indicates the government recognizes 23 industry categories. Of
these 23 categories, standing timber was provided by the GOI to five
industries during the POI,
[[Page 10766]]
including the paper industry. See GOI Supplemental Questionnaire
Response, dated February 22, 2010 at 40. As such, we preliminarily
determine that the provision of stumpage is specific in accordance with
section 771(5A)(D)(iii) of the Act, because it is limited to a group of
industries.
The provision of standing timber provides a benefit as described in
section 771(5)(E)(iv) of the Act, to the extent that the GOI received
less than adequate remuneration, when measured against a market
benchmark for stumpage. The Department's regulations at 19 CFR
351.511(a)(2) set forth the basis for identifying benchmarks to
determine whether a government good or service is provided for less
than adequate remuneration. These potential benchmarks are listed in
hierarchical order by preference: (1) market prices from actual
transactions within the country under investigation; (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. This hierarchy reflects a logical
preference for achieving the objectives of the statute. The most direct
means of determining whether the government required adequate
remuneration is by comparison with private transactions for a
comparable good or service in the country. Thus, the preferred
benchmark in the hierarchy is an observed market price for the good, in
the country under investigation, from a private supplier (or, in some
cases, from a competitive government auction) located either within the
country or outside the country (the latter transaction would be in the
form of an import). This is because such prices generally would be
expected to reflect most closely the commercial environment of the
purchaser under investigation.
In accordance with the first preference in the hierarchy, to
determine the existence and extent of the benefit, we would need to
identify an observed market stumpage price from a private supplier in
Indonesia. As noted above, the GOI reported private forests accounted
for only 6.27 percent of the total harvest in 2008 (2,007,156 m[bds3]
of a total of 31,984,443 m[bds3]). See GOI Initial Questionnaire
Response, dated December 29, 2009 at 18 and Exhibit 27. Additionally,
in Indonesia CFS Final Determination, the Department found that there
were only 233,811 hectares of private forest land out of 57 million
hectares in Indonesia. See Indonesia CFS Final Determination and CFS
IDM at 18. The GOI did not provide any updated information on the
percentage of government ownership of forest land. Thus, the GOI
clearly plays a predominant role in the market for standing timber. As
such, we preliminarily determine that there are no market-determined
stumpage fees in Indonesia upon which to base a ``first tier''
benchmark. Furthermore, because standing timber cannot be imported,
there are no actual stumpage import prices to consider. This is
consistent with our finding in Indonesia CFS Final Determination.
A ``second tier'' benchmark, according to the regulations, relies
on world market prices that would be available to the purchasers in the
country in question, though not necessarily reflecting prices of actual
transactions involving the particular producer. In selecting a world
market price under this second approach, the Department examines the
facts on the record regarding the nature and scope of the market for
that good to determine if that market price would be available to an
in-country purchaser. As discussed in the CVD Preamble, the Department
will consider whether the market conditions in the country are such
that it is reasonable to conclude that a purchaser in the country could
obtain the good or service on the world market. For example, a European
price for electricity normally would not be an acceptable comparison
price for electricity provided by a Latin American government, because
electricity from Europe in all likelihood would not be available to
consumers in Latin America. However, as another example, the world
market price for commodity products, such as certain metals and ores,
or for certain industrial and electronic goods commonly traded across
borders, could be an acceptable comparison price for a government-
provided good, provided that it is reasonable to conclude from record
evidence that the purchaser would have access to such internationally
traded goods. See CVD Preamble at 65377. There are no world market
prices for stumpage that we could use because standing timber cannot be
traded across borders; only the logs produced from the standing timber
can be traded. Thus, we cannot apply a ``second tier'' benchmark.
Since we are not able to conduct our analysis under the ``second
tier'' of the regulations, consistent with the hierarchy, we are
preliminarily measuring the adequacy of remuneration by assessing
whether the government price is consistent with market principles
(i.e., the ``third tier'' as described in the Department's
regulations). This approach is set forth in 19 CFR 351.511(a)(2)(iii)
and is explained further in the CVD Preamble at 65378: ``Where the
government is the sole provider of a good or service, and there are no
world market prices available or accessible to the purchaser, we will
assess whether the government price was set in accordance with market
principles through an analysis of such factors as the government's
price-setting philosophy, costs (including rates of return sufficient
to ensure future operations), or possible price discrimination.'' The
regulations do not specify how the Department is to conduct such a
market principles analysis. By its nature, the analysis depends upon
available information concerning the market sector at issue and,
therefore, must be developed on a case-by-case basis.
The GOI has not provided information or documentation to
demonstrate that the stumpage fees it charges are established in
accordance with market principles. Although the PSDH fees are
established as a percentage of the reference price of logs, we cannot
conclude that the log reference price is reflective of market
principles or is a market-determined price. The GOI reported that the
reference price is normally determined by a weighted-average of both
the Indonesian domestic and export prices for logs. However, since a
log export ban is in place (see further discussion below), the
reference price is currently determined solely from domestic prices.
Through its ownership of virtually all of Indonesia's harvestable
forests, the GOI has almost complete control over access to the timber
supply. In addition, the ban on the export of logs affects the price
for logs. As such, the reference prices for logs cannot be considered
to be market-based. Furthermore, the percentage that is applied to the
reference price to calculate the PSDH fees is administratively set by
the GOI. Thus, we preliminarily determine that the stumpage fees,
charged by the GOI as a percentage of a non-market-determined reference
price, are not based on market principles.
Since the government price is not set in accordance with market
principles, we looked for an appropriate proxy to determine a market-
based stumpage benchmark. It is generally accepted that the market
value of timber is derivative of the value of the downstream products.
The species, dimension, and growing condition of a tree largely
determine the downstream products that can be produced from a tree; the
value of a standing tree is derived from the demand for logs produced
from that tree and the demand for logs is, in turn,
[[Page 10767]]
derived from the demand for the products produced from those logs. See,
e.g., 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),
and the accompanying Issues and Decision Memorandum at 16-18.
Both petitioners and respondents have made recommendations for the
appropriate basis for calculating benchmark prices. Petitioners have
placed Malaysian export prices for acacia pulpwood and mixed tropical
hardwood (MTH) pulpwood from the World Trade Atlas (WTA) on the record
of this review. See Petition Volume V, dated September 23, 2009 at
Exhibit 11. The Department used WTA export prices as the basis for its
benchmark price in Indonesia CFS Final Determination.
Respondents provided a number of alternatives to the WTA data. See
APP/SMG Initial Questionnaire Response, dated December 29, 2009 at 34-
41. These include: (1) pulpwood exports from the Malaysian state of
Sabah collected by an industrial consultant; (2) specific transactions
of Malaysian acacia exports to Indonesia; (3) export data from the
Sabah Forestry Department; (4) pulpwood prices in the U.S. published in
World Resources Quarterly (WRQ); (5) pulpwood prices in Chile and
Russia published in WRQ; and (6) global pulpwood prices published in
WRQ.
For the purposes of this preliminary determination, the Department
finds that a species-specific benchmark is the most appropriate basis
for calculating a stumpage benefit. Based on the information provided
by both the GOI and APP/SMG, stumpage fees are assessed on a species-
specific basis. For example, acacia, MTH, and meranti logs are all
assessed different PSDH fees. See APP/SMG Initial Questionnaire
Response, dated December 29, 2009 at 29. This is consistent with the
Department's finding in the CFS investigation. See Indonesia CFS Final
Determination and CFS IDM at 22.
In reviewing the benchmark alternatives suggested, the data from
the Sabah Forestry Department and the WRQ are not species specific.
Therefore, we are not using data from these sources as the basis of our
benchmark. We also are not using individual transaction prices for
pulpwood between a Malaysian exporter and an Indonesian importer as a
starting point. First, these individual transactions were self-selected
by respondents. In addition, because the GOI dominates the Indonesian
stumpage market and because stumpage and pulpwood markets are
inextricably intertwined, we find it inappropriate to use import prices
into Indonesia for pulpwood as a starting point to determine whether
Indonesian stumpage prices reflect market prices. Finally, although the
Sabah pulpwood export data provided by the industrial consultant are
species specific, we do not find them preferable to the Malaysian
export statistics because: (1) they were prepared for purposes of this
investigation; and (2) they cannot be checked against any official
export data, including data from the Sabah Forestry Department, which
is not presented on a species-specific basis.
As a result of the geographic proximity and the similarities of
forest conditions, climate, and tree species between Indonesia and
Malaysia, we preliminarily determine that Malaysian pulp log export
prices as reported in the WTA are the most appropriate source to use in
our analysis. We have relied on these export prices to derive a market-
based stumpage benchmark, which we have compared to GOI stumpage fees
in order to determine whether the GOI is providing standing timber for
less than adequate remuneration. To calculate the benchmark, where
possible we have removed exports to Indonesia from these statistics. As
discussed above, we find that it is not appropriate to use imports into
Indonesia as a benchmark source. However, for one of the species, the
only exports in the Malaysian statistics are exports to Indonesia.
Therefore, for purposes of this preliminary determination, we are using
the statistics for this species to calculate the benchmark. However, we
will further evaluate this approach for the final determination and we
intend to gather additional information with respect to a benchmark
source that does not reflect prices into Indonesia.
Respondents have argued that, if the Department does use export
prices from either Malaysia or Sabah, a deduction for export royalty
payments must be made from the benchmark price. Respondents argue that
these payments are reflected in the export prices and therefore should
be deducted to calculate an accurate benchmark. We do not necessarily
agree with respondents that such royalty fees should be deducted from
the starting price, but we need not reach that issue in this
preliminary determination. While respondents have provided information
that export royalty payments are to be collected on log exports from
Malaysia, they have not provided any evidence on the record for this
investigation demonstrating that these royalties are reflected in the
values reported in the export statistics of Malaysia. Furthermore, the
Malaysian transactions of acacia pulp logs exported to Indonesia,
placed on the record by respondents, do not include export royalty
payments. According to respondents, timber harvested from private
village territory in Malaysia is not subject to an export royalty. See
APP/SMG Supplemental Questionnaire Response, dated February 16, 2010 at
12. Therefore, we are not making any deductions from the export values
for export royalty payments.
After removing exports to Indonesia from the statistics, where
possible, we have calculated four unit values: one for acacia pulp
logs; one for MTH chipwood; one for eucalyptus; and one for logs
(timber over 30 cm in diameter). We have also adjusted the Malaysian
export log prices to remove the Indonesian costs of extraction
(harvesting) of the standing timber. To determine the Indonesian
harvesting costs (including a reasonable amount for profit associated
with extraction), we used information contained in ``Addicted to Rent:
Corporate and Spatial Distribution of Forest Resources in Indonesia;
Implications of Forest Sustainability and Government Policy.'' See
Petition Volume V, dated September 23, 2009, Exhibit 9. This study
provides the only independent source on the record that specifies
extraction costs and profit in Indonesia. The amounts in this report
are $17 for extraction costs and $5 for profit in connection with
extraction.
Respondents have argued that the Department could use the forestry/
logging companies' reported actual costs for harvesting to adjust the
Malaysian log export prices. However, for purposes of this preliminary
determination, we have decided not to use these actual costs. We may
consider using these actual costs for the final determination if the
GOI can demonstrate: that it has a system in place to evaluate exactly
which costs are legitimately considered to be harvesting and extraction
costs, that it has evaluated how to distinguish the types of costs
relevant to harvesting from plantations versus the natural forest, and
that it has a system in place to distinguish the costs of extraction
from plantations versus other plantation development and maintenance
costs.
The deduction of the harvesting costs, and profit associated with
harvesting, from the unit values results in a derived benchmark
stumpage price for each species. We compared these derived benchmark
prices for each type or species of standing timber to the Indonesian
stumpage fees and found the
[[Page 10768]]
GOI's stumpage fees to be lower than the market benchmark prices.
Accordingly, we preliminarily determine that a benefit is provided in
accordance with section 771(5)(E)(iv) of the Act because the GOI
provides standing timber for less than adequate remuneration.
To calculate the benefit received under this program, we first
multiplied the benchmark prices for each type of timber by the
appropriate harvest quantity. According to the questionnaire responses,
the GOI charges PSDH and DR fees on both a cubic meter and metric ton
basis, depending on the species. See APP/SMG Initial Questionnaire
Response, dated December 29, 2009 at 29. The quantities of pulp log
exports from Malaysia that are associated with the total value of
exports from Malaysia are reported by the WTA in cubic meters. Thus,
the per cubic meter export price is the starting point for our
benchmark calculation. Therefore, to calculate the benefit, the
Department must convert from metric tons to cubic meters on a
consistent basis.
In Indonesia CFS Final Determination, where necessary, the
Department converted harvest and purchase quantities using the
conversion factor in a report of the Food and Agriculture Organization
of the United Nation (FAO) to convert metric tons to cubic meters. The
Department found that the FAO conversion factor for tropical pulpwood
(1 metric ton to 1.33 cubic meters) was the most appropriate conversion
factor to apply.
In its questionnaire response, APP/SMG provided a set of conversion
factors developed through a research project authorized by the Ministry
of Forestry. See APP/SMG Initial Questionnaire Response, dated December
29, 2009 at Exhibit 61. These factors were based on a field study
conducted by the Study Team of the Center for Research and Development
of Forest Products (hereinafter referred to as field study). In this
study, smaller diameter logs of acacia that are grown and harvested on
plantations were evaluated. The GOI argues that, based on this study,
the more accurate conversion factor for metric tons to cubic meters for
smaller diameter acacia is 1.0.
The Department preliminarily finds that the conversion factors
developed in the study by the Ministry of Forestry provide a more
appropriate basis for the conversion factors for the acacia species
harvested by APP/SMG. Based on the information currently on the record,
this study appears to be an objective field study of actual conditions
in Indonesia. Furthermore, it was not developed for purposes of this
investigation. While the Department is using this conversion factor for
acacia in the preliminary determination, we do have some concerns
regarding this factor. We intend to solicit additional information from
the GOI about the purpose of the study and any parameters the GOI set
for the study team. Further, the GOI and/or APP/SMG will need to
demonstrate that this conversion factor is applicable to the acacia
entering the APP/SMG inventory.
We recognize that, in addition to acacia conversion factors, this
study also contains conversion factors for multiple species of
eucalyptus. However, we are unable to establish, based on record
information, which species of eucalyptus APP/SMG harvested. Therefore,
for the purposes of this preliminary determination, we have used the
conversion factors in the FAO report, where appropriate, for
eucalyptus. We will collect additional information regarding the
eucalyptus conversion factor for the final determination. If we find
that the data in the study is reliable and that there is a conversion
factor applicable to the eucalyptus entering the APP/SMG inventory, we
will consider using one of the Ministry of Forest's conversion factors
for eucalyptus in the final determination.
The field study does not address MTH chipwood and logs (over 30 cm
in diameter); therefore, for MTH chipwood and logs (over 30 cm in
diameter), the Department has used the conversion factors in the FAO
report in this preliminary determination.
To calculate the benefit conferred through stumpage fees charges
for acacia, we multiplied each benchmark price by the sum of each
forestry company's acacia harvest during the POI. To calculate the
benefit conferred through stumpage fees charged for MTH chipwood, we
multiplied the benchmark price by the sum of each forestry company's
MTH chipwood timber harvest during the POI. To calculate the benefit
conferred through stumpage fees charged for eucalyptus, we multiplied
the benchmark price by the sum of each forestry company's eucalyptus
timber harvest during the POI.
In determining the benefit for logs (i.e., harvested timber over 30
cm in diameter that was sold to the APP/SMG pulp producers for pulp
production), the Department is using the volume of logs sold by IK and
Lontar as the quantity for which to measure the benefit. We are using
log sales to the APP/SMG pulp producers rather than total harvest
quantity because we are only capturing in our calculation benefits
attributable to the pulp and paper production of the APP/SMG pulp and
paper producers.
After multiplying each stumpage benchmark by the appropriate
harvest quantities, we summed all the values to calculate the total
amount of fees that should have been paid at the market-based benchmark
stumpage rate. We then subtracted the total of the actual PSDH and DR
fees, plus the PSDA fees, paid by the APP/SMG forestry companies during
the POI, from the total amount of stumpage fees that should have been
paid.
We then divided the benefit by the total external sales of the APP/
SMG pulp and paper producers, including external sales made through
CMI, respondents' affiliated reseller and trading company (i.e., the
total FOB sales values of the pulp and paper producers minus any cross-
owned inter-company sales) to calculate a net countervailable subsidy
rate of 10.30 percent ad valorem for this program. See Memorandum to
the File from Nicholas Czajkowski, International Trade Analyst,
Calculations for the Preliminary Determination of Certain Coated Paper
from Indonesia, dated concurrently with this notice (CCP Preliminary
Calculation Memorandum).
B. Government Prohibition of Log Exports
Petitioners alleged that the GOI provides a countervailable subsidy
to pulp and paper producers through the GOI's ban on log exports. As
support for their allegation, they relied on Indonesia CFS Final
Determination in which the Department found that the GOI's imposition
of a log export ban on logs and chipwood provided a countervailable
subsidy to downstream wood processing industries, including the pulp
and paper producing industries. See Indonesia CFS Final Determination
and CFS IDM at 32.
In CFS, the Department determined that the log export ban provided
a financial contribution in accordance with sections 771(5)(B)(iii) and
771(5)(D)(iii) of the Act. Specifically, the Department found that the
GOI, through the log export ban, entrusted or directed forestry/
harvesting companies to provide lower price inputs (logs and chipwood)
to companies in the pulp and paper producing industries. The Department
determined that the log export ban provided a benefit in accordance
with section 771(5)(E)(iv) of the Act. Specifically, the GOI's log
export ban allowed the forestry companies in the APP/SMG group to
[[Page 10769]]
purchase inputs (logs and chipwood) from unaffiliated forestry
companies below market log prices.
Finally, the Department determined that the log export ban was
specific under section 771(5A)(D)(i) of the Act. Specifically, the
Department found the GOI's decree banning the exports of logs and
chipwood to be de jure specific within the meaning of section
771(5A)(D)(i) of the Act, since it is restricted by law to only a
limited group of industries and because it covers only a small number
of products within each of these seven industries.
In the November 3, 2009 questionnaire issued by the Department, we
asked the GOI and APP/SMG to provide any new information or evidence of
changed circumstances with respect to the administration of this
program that would warrant a reconsideration of the Department's prior
countervailability finding regarding the log export ban. In their
questionnaire responses for the current investigation, both the GOI and
APP/SMG have objected to the Department's finding in CFS. The GOI and
APP/SMG state that the World Trade Organization (WTO) has ruled that
this type of government action cannot constitute a subsidy program. See
WT/DS 194 United States -- Measures Treating Export Restraints As
Subsidies (adopted by WTO DSB August 23, 2001). Our finding here and
our countervailing duty law are consistent with our WTO commitments.
Moreover, as discussed in CFS, WTO panel reports are not binding on the
United States and do ``not have any power to change U.S. law or to
order such a change.'' See Statement of Administrative Action (SAA)
accompanying the Uruguay Round Agreements Act, H.R. Doc. 103-316, Vol.
1 at 659. See also Indonesia CFS Final Determination and CFS IDM at 97.
The Department is obligated to follow U.S. law in reaching its
countervailing duty determinations, and, as discussed below, the GOI's
log export ban constitutes a countervailable subsidy under U.S. law. In
its questionnaire response, the GOI also reported that it has begun the
process of legalizing the export of forest products. See GOI Initial
Questionnaire Response, dated December 29, 2009 at Exhibit 8,
``Government Regulation No.6 of 2007.'' While the GOI may have begun
the process legalizing exports of certain forest products, the GOI
confirmed that a ban on the exportation of logs was still in effect
during the POI of this investigation. See id. at 25.
As explained in Indonesia CFS Final Determination, one of the
purposes of the GOI's ban was to develop the downstream industries,
which was a basis on which the Department determined that the GOI
entrusts or directs domestic log suppliers to sell logs at suppressed
prices to domestic consumers, thus providing a good to pulp and paper
producers for less than adequate remuneration. See Indonesia CFS Final
Determination and CFS IDM at 27. Neither the GOI nor APP/SMG has placed
any additional information on the record that causes us to reconsider
our prior finding. As such, we preliminarily determine that the log
export ban continues to provide a countervailable subsidy to pulp and
paper producers. The ban constitutes a financial contribution in
accordance with sections 771(5)(B)(iii) and 771(5)(D)(iii) of the Act
through the GOI's entrustment or direction of forestry/harvesting
companies to provide goods (i.e., logs and chipwood). It provides a
benefit in accordance with section 771(5)(E)(iv) of the Act to the
extent that the prices paid by APP/SMG to unaffiliated forestry/
harvesting companies for its purchases of logs and chipwood are less
than the benchmark price. Our benefit analysis is discussed in detail
below. Furthermore, the log export ban is de facto specific pursuant to
section 771(5A)(D)(iii)(I) of the Act because the industries receiving
subsidies from the operation of the ban are limited in number.
To determine whether the log export ban provided a benefit to APP/
SMG during the POI, the Department compared the price paid by APP/SMG
for the logs it purchased during the POI from unaffiliated forestry/
harvesting companies to a benchmark price based on the criteria
stipulated in 19 CFR 351.511(a)(2).
The Department's regulations at 19 CFR 351.511(a)(2) set forth the
basis for identifying comparative benchmarks for determining whether a
government good or service is provided for less than adequate
remuneration. These potential benchmarks are listed in hierarchical
order by preference: (1) market prices from actual transactions within
the country under investigation; (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. This hierarchy reflects a logical preference for achieving
the objectives of the statute. The most direct means of determining
whether the government required adequate remuneration is by comparison
with private transactions for a comparable good or service in the
country. Thus, the preferred benchmark in the hierarchy is an observed
market price for the good, in the country under investigation, from a
private supplier (or, in some cases, from a competitive government
auction) located either within the country, or outside the country (the
latter transaction would be in the form of an import). This is because
such prices generally would be expected to reflect most closely the
commercial environment of the purchaser under investigation.
In the instant case, there are no meaningful or usable private
domestic prices for logs or actual import prices to evaluate for
purposes of identifying a ``first tier'' benchmark (i.e., market prices
from actual transactions within the country under investigation). As
discussed above, the GOI did not place any updated information on the
record concerning the fact that the GOI owns 99 percent of the
harvestable forest land in Indonesia. See Indonesia CFS Final
Determination and CFS IDM at 18. Furthermore, the GOI reported that the
harvest from privately owned forest lands is 2,007,156 m[bds3] out of a
total of 31,984,443 m[bds3] (or only 6.27 percent) of the total
harvest. See GOI Initial Questionnaire Response, dated December 29,
2009 at 18. We also note that all logs, including logs harvested from
private land, are subject to the export ban. Therefore, because of the
GOI's predominant role in the Indonesian market for logs, we find that
it is not possible to determine a private domestic log benchmark price
in Indonesia, pursuant to 19 CFR 351.511(a)(2)(i), for the GOI's log
export ban. Accordingly, Indonesian import prices likewise would not
reflect market prices.
Because there are no market prices from actual transactions in the
country to use as a benchmark, we next looked for a ``second tier''
benchmark which, according to the regulations, relies on world market
prices that would be available to the purchasers in the country in
question, though not necessarily reflecting prices of actual
transactions involving that particular producer. In selecting a world
market price under this second approach, the Department examines the
facts on the record regarding the nature and scope of the market for
that good to determine if that market price would be available to an
in-country purchaser. The Department finds that the public export
statistics of Malaysian pulpwood reported in the World Trade Atlas are
reliable for establishing a benchmark under the ``second tier'' as a
world market price that would be available in Indonesia.
As we noted in CFS, Indonesia and Malaysia share the same
geographic
[[Page 10770]]
proximity and similarities of forest conditions, climate, and tree
species. See Indonesia CFS Final Determination and CFS IDM at 20.
During the POI, both pulpwood and logs were exported from Malaysia to a
number of countries. Accordingly, we have selected as our ``second
tier'' benchmark species-specific Malaysian export prices, as published
in the World Trade Atlas, as representative of market-determined prices
for pulpwood and logs. Although respondents submitted a number of
alternative sources for pulpwood prices (see discussion above in the
``Provision of Standing Timber for Less than Adequate Remuneration''
section), we do not find these alternative benchmark sources to be
appropriate to establish a world market price because they are not
species specific, and the prices reported by APP/SMG for its purchases
of logs from unaffiliated forestry/harvesting companies appear to be
species specific. The other reasons why the Department is not using the
proposed alternative benchmark sources are discussed in the ``Provision
of Standing Timber for Less than Adequate Remuneration'' section above.
Therefore, we are using the species-specific Malaysian export
statistics as the starting point for calculating the benchmark price
for pulpwood and logs. For the reasons discussed above, where
appropriate, we are deducting from these statistics exports to
Indonesia. See CCP Preliminary Calculation Memorandum. However, we will
further evaluate this approach for the final determination and we
intend to gather additional information with respect to a benchmark
source that does not reflect prices into Indonesia. We also note that
under the Department's regulations, applicable ocean and inland
freight, import duties, and any other taxes should be added to the
benchmark price before determining whether the Indonesian price for
pulpwood confers a benefit. See 19 CFR 351.511(a)(2); see also U.S.
Steel Corp. v. United States, Slip Op. 2009-152 at 17-18 (CIT Dec. 30,
2009). We currently do not have this information on the record;
however, we plan to gather it prior to the final determination.
When we compare the revised Malaysian export prices to the prices
APP/SMG paid to the unaffiliated pulpwood suppliers on a per-unit
basis, we find that there is a benefit conferred through the GOI's
provision of logs to pulp and paper producers. To calculate the
subsidy, we first calculated a per cubic meter benefit for each species
of logs. We then multiplied the volume of each species purchased by
APP/SMG from unaffiliated forestry/harvesting companies in order to
calculate the total benefit.
We capped the quantity for each type of log used in the benefit
calculation by the lower of the total quantity, by species, purchased
by IK and Lontar during the POI (after deducting the harvest quantity
by the cross-owned APP/SMG forestry companies used in the stumpage
calculation) or the total quantity, by species, purchased by the APP/
SMG forestry companies from unaffiliated suppliers during the POI. We
consider the application of this cap appropriate because, based on the
reported pulpwood and log purchase and sales information, there is
insufficient information to include in the benefit calculation any
quantity beyond what the APP/SMG forestry companies purchased from
unaffiliated suppliers. We will continue to gather information to
ensure that the application of this cap is appropriate.
We then summed the benefit for each species and divided this amount
by the total FOB external sales values of the APP/SMG pulp and paper
producers. We have not included in the denominator any external sales
by the APP/SMG forestry companies because, just as with stumpage, we
are capturing in our benefit calculation only pulpwood sold to APP/SMG
pulp and paper companies. Furthermore, we have not included in this log
export ban calculation any APP/SMG forestry companies' harvested
pulpwood, since we have captured any benefit they receive from the log
export ban in the stumpage benefit calculation. On this basis, we
calculate a net countervailable subsidy rate of 4.39 percent ad valorem
for TK/PD/IK. See CCP Preliminary Calculation Memorandum.
C. Debt Forgiveness through the Indonesian Government's Acceptance of
Financial Instruments with No Market Value
Petitioners alleged that, in the CFS investigation, the Department
found that the GOI provided countervailable debt forgiveness by
accepting COEs, which had no value, as payment for a portion of APP/
SMG's debt. In Indonesia CFS Final Determination, the Department
determined that the GOI's acceptance in 2002 of COEs as partial
repayment of APP/SMG's debt constituted a financial contribution, in
the form of debt forgiveness, in accordance with section 771(5)(D)(i)
of the Act because the GOI allowed APP/SMG's shareholders to repay
debts with COEs that had no market or commercial value. The Department
also determined that the GOI's acceptance of COEs as partial repayment
of APP/SMG's debt provided a benefit in accordance with section
771(5)(E) of the Act and 19 CFR 351.508(a) in the amount of the debt
repaid with the valueless COEs. The Department determined that the
GOI's acceptance of COEs as partial repayment of APP/SMG's debt was
specific under section 771(5A)(D)(iii) of the Act. See Indonesia CFS
Final Determination and CFS IDM at 38.
In 1999, the Indonesia Bank Restructuring Agency (IBRA), the GOI
agency responsible for the restructuring of the Indonesian banking
sector, assumed non-performing loans of Bank Internasional Indonesia
(BII), which had previously been controlled by APP/SMG. When IBRA
assumed a bank's loans, it issued COEs to the bank's former
shareholders. See id. at 38. COEs were financial instruments that
represented a bank's former shareholders' right to repurchase bank
shares. The COEs functioned as options that, if exercised, required
these shareholders to repurchase their shares in the bank from IBRA
using the proceeds of IBRA's sale of the bank's loan assets which were
distributed to the shareholders. Although, in the CFS investigation,
APP/SMG reported that COEs had not been used to reduce the debt of any
companies in the APP/SMG group, at verification in that investigation
the Department learned that such debt was in fact repaid with COEs in
2002. See id. at 38. Therefore, the Department found the reported non-
use of COEs by cross-owned companies to repay debt was unverifiable,
forcing the Department to rely upon facts available for its analysis of
this program in accordance with sections 776(a) and (b) of the Act. See
id. at 38-39. Record information from the verification report shows
that the COEs were non-transferable, non-negotiable, and had no market
or commercial value. See Memorandum to the File from the Verification
Team, Countervailing Duty Investigation of Coated Free Sheet (CFS)
Paper from Indonesia: Verification of the Questionnaire Responses
Submitted by the Ministry of Forestry and the Ministry of Finance,
dated August 24, 2007 (CFS Verification Report) at 27, on the record as
Exhibit 32 of GOI Initial Questionnaire Response, dated December 29,
2009. According to the Department's analysis in Indonesia CFS Final
Determination, COEs only had value to the extent they were used to
repurchase previously-owned bank shares back from IBRA. See Indonesia
CFS Final Determination and CFS IDM at 39. Therefore, holding companies
with shareholdings in companies in APP/SMG were able to use COEs to pay
[[Page 10771]]
off some of the debt owed to its affiliated bank, BII, which had been
assumed by the GOI. As a result, APP/SMG's creditor, the GOI, in turn
allowed APP/SMG to repay a portion of its debt with COEs that had no
market value. Accordingly, the Department found that the GOI's
acceptance of valueless COEs as debt repayment provided a
countervailable subsidy to APP/SMG.
In the November 3, 2009 questionnaire issued to the GOI, we asked
if there was any new information or evidence of changed circumstances
with respect to the GOI's administration of this program that would
warrant a reconsideration of the Department's prior countervailability
finding. We also requested that the GOI provide all of the relevant
information and documentation. The GOI stated that it disagreed with
the Department that the COEs had no value, and provided some documents
related to the valuation of the COEs. See GOI Initial Questionnaire
Response, dated December 29, 2009 at 27. The documents submitted only
showed that the GOI assigned a value to the COEs; they did not
demonstrate that the COEs had a market value as a financial instrument
that was equivalent to cash. See id. at Exhibits 31-32. In our January
29, 2010 supplemental questionnaire, we asked the GOI to provide
further documentation to support its claim that the COEs had value in a
secondary market or other commercial environment. In its February 16,
2010 response to that questionnaire, the GOI stated that, while it
still disagreed with the Department's determination that the COEs had
no value, it would not contest the Department's prior determination in
Indonesia CFS Final Determination due to the complexity of the issues,
the passage of time, and the impracticality of translating large
volumes of information. See GOI Supplemental Questionnaire Response,
dated February 16, 2009 at 8.
Because the GOI has not provided any new information that calls
into question our determination in Indonesia CFS Final Determination
that the GOI's acceptance in 2002 of valueless COEs as partial payment
for some of APP/SMG's debt was countervailable, we preliminarily
determine that the GOI's acceptance of COEs constituted a financial
contribution, in the form of debt forgiveness, within the meaning of
section 771(5)(D)(i) of the Act. A benefit was conferred upon
respondents equal to the value of the debt repaid with the valueless
COEs within the meaning of section 771(5)(E) of the Act and 19 CFR
351.508(a). We also determine that the GOI's acceptance of COEs as
partial debt repayment by APP/SMG was a company-specific action of the
GOI in accordance with section 771(5A)(D)(iii) of the Act.
To calculate the benefit received under this program, 19 CFR
351.508(a) provides that a benefit exists equal to the amount of the
principal and/or interest that the government has forgiven (i.e., the
amount of the debt repaid in 2002 with the valueless COEs), and that we
treat this benefit as a non-recurring subsidy in accordance with 19 CFR
351.508(c)(1). Under 19 CFR 351.508(b), in the case of debt
forgiveness, we normally will consider the benefit as having been
received on the date on which the debt was forgiven. Because this debt
was forgiven in 2002 and was allocated over time, there is a benefit
from this program attributable to the 2008 POI in this
investigation.\8\ Therefore, the calculation for this subsidy program
in the CFS investigation includes the benefit amount from this program
received during the POI in this investigation. At our request, APP/SMG
placed the calculation memorandum from Indonesia CFS Final
Determination on the record in the instant investigation. As explained
in Indonesia CFS Final Determination and Final CFS Calculation
Memorandum, to calculate the benefit, we applied the methodology set
forth in 19 CFR 351.524(d)(1) for non-recurring benefits. We allocated
the amount of the debt forgiven over an AUL of 13 years. See Final CFS
Calculation Memorandum and the ``Allocation Period'' section above.
Because APP/SMG was uncreditworthy at the time IBRA accepted the COEs
as partial repayment for its debt obligations, we have added a risk
premium to the discount rate used to allocate the debt forgiveness
benefit, calculated according to the methodology described in 19 CFR
351.505(a)(3)(iii). See ``Creditworthiness'' section above and Final
CFS Calculation Memorandum.
---------------------------------------------------------------------------
\8\ See APP/SMG Initial Questionnaire Response, dated December
29, 2009 at Exhibit 65: Final Affirmative Countervailing Duty
Determination: Coated Free Sheet Paper from Indonesia: Calculations
for PT. Pabrik Kertas Tjiwi Kimia Tbk and PT. Pindo Deli Pulp and
Paper Mills, dated October 17, 2007 (Final CFS Calculation
Memorandum).
---------------------------------------------------------------------------
Because we are making no changes to the methodology that was used
in the CFS investigation to calculate the benefit stream from this debt
forgiveness, we have taken the benefit amount attributable to the POI
from the Final CFS Calculation Memorandum and divided it by the total
external sales of the cross-owned APP/SMG group as discussed above in
the ``Cross-Ownership'' section. See also CCP Preliminary Calculation
Memorandum. On this basis, we preliminarily determine the net
countervailable subsidy rate to be 0.40 percent ad valorem for TK/PD/
IK.
D. Debt Forgiveness through APP/SMG's Buyback of Its Own Debt from the
Indonesian Government
Petitioners alleged that in Indonesia CFS Final Determination, the
Department found that the GOI provided countervailable debt forgiveness
when it sold approximately US $880 million worth of APP/SMG debt for US
$214 million to Orleans, a company which the Department determined was
affiliated with APP/SMG. See Petition Volume V, dated September 23,
2009 at 16. In Indonesia CFS Final Determination, the Department
determined that the GOI's 2003 sale of APP/SMG's debt to an affiliate
constituted a financial contribution, in the form of debt forgiveness,
within the meaning of section 771(5)(D)(i) of the Act. A benefit was
received equal to the difference between the value of the outstanding
debt and the amount Orleans paid for it, within the meaning of 19 CFR
351.508(a). Furthermore, we found the debt forgiveness to be specific
in accordance with 771(5A)(D)(iii) of the Act because a company's
repurchase of its own debt from the GOI at a steep discount, when such
a transaction was prohibited, means that this financial contribution
and benefit are specific to a company, APP/SMG. We further found that
because a special program, the Strategic Asset Sales Program, was
created, with special rules and obligations, to handle the debt sales
of five large and significant obligors, including APP/SMG, this sale
was limited to a group of enterprises in accordance with section
771(5A)(D)(iii)(I) of the Act.
In the CFS investigation, the Department found that, under the
GOI's Regulation SK-7/BPPN/0101 (Regulation SK-7), IBRA was prohibited
from selling assets that were under its control back to the original
owner, or to a company affiliated with the original owner. See
Indonesia CFS Final Determination and CFS IDM at 42. At verification,
the GOI did not provide crucial documentation that Orleans would have
provided to IBRA as a condition of the debt sale, and was necessary for
determining that Orleans was not affiliated with APP/SMG. This
information included Orleans' registration and bid documents, and
Orleans' articles of association, which
[[Page 10772]]
would have identified its shareholders. See id. at 42. See also CFS
Verification Report at 30. During verification, the GOI explained that
Orleans would have been required to submit such documentation, and that
IBRA would have reviewed a bidder's articles of association, which
would contain ownership information, as part of its bid package. See
CFS Verification Report at 51. See also Indonesia CFS Final
Determination and CFS IDM at 108 and 111, respectively. The GOI
informed the Department at verification that IBRA, as part of its due
diligence, would have received and reviewed information regarding a
bidder's ownership and access to financing to determine whether a
bidder was qualified. See Indonesia CFS Final Determination and CFS IDM
at 112. Thus, because IBRA's files reportedly would contain
documentation which would have identified Orleans' shareholders, access
to the complete file on the sale to Orleans was a crucial starting
point for the Department's attempt to verify the claim by APP/SMG that
Orleans was not affiliated with APP/SMG. See id. at 112. Due to the
absence of these documents from the record, in accordance with sections
776(a) and (b) of the Act, the Department determined that the GOI
withheld information that had been requested and did not cooperate to
the best of its ability in complying with the Department's request for
necessary documentation to determine whether Orleans was affiliated
with APP/SMG. See id. at 44. Therefore, as discussed above, we found
Orleans to be affiliated with APP/SMG and determined that the GOI had
provided countervailable debt forgiveness to APP/SMG.
In the November 3, 2009 questionnaire issued to the GOI, we asked
if there was any new information or evidence of changed circumstances
with respect to the GOI's administration of this program that would
warrant a reconsideration of the Department's prior countervailability
finding. We also requested that the GOI provide all of the relevant
information and documentation. On December 29, 2009, the GOI responded
that it believed the Department's finding in Indonesia CFS Final
Determination to be both factually and legally incorrect, but it
provided no new information with respect to the debt buyback program.
See GOI Initial Questionnaire Response, dated December 29, 2009 at 29-
30. The GOI also stated that it would continue to review archived
documents regarding this allegation and would provide any new
information that might develop. In the supplemental questionnaires
issued to the GOI on January 29, 2010, and to APP/SMG on January 30,
2010, we stated that if the GOI or APP/SMG disagreed with the
Department's determination in Indonesia CFS Final Determination, they
should provide complete information about the sale to Orleans and
provide documentation demonstrating that Orleans had no affiliation
with APP/SMG. In the questionnaire issued to the GOI, we instructed the
GOI to ``provide the Department with Orleans' registration and bid
package, including Orleans' articles of association showing Orleans'
shareholders.'' See Supplemental Questionnaire to the GOI, dated
January 29, 2010 at 10.
In its February 22, 2010 response, the GOI stated that IBRA
structured its bidding policy to ensure that only qualified parties
would be allowed to bid. Requirements for bidding included: (1) the
submission of a Letter of Compliance as part of the bid package,
confirming that the bidder was not affiliated with the original debtor;
(2) a contractual representation that served as a self-certification
from the bidder that it was not affiliated with the original debtor;
and (3) an opinion letter from outside counsel confirming the
eligibility of the bidder to bid on the assets. These three documents
were provided with GOI Supplemental Questionnaire Response, dated
February 22, 2010 as Exhibits 28, 29, and 27, respectively. The
Department has previously noted that Article 3 of Regulation SK-7
contains a provision for IBRA to conduct due diligence ``on the status
of its affiliation with the Original Owner.'' See Indonesia CFS Final
Determination and CFS IDM at 42. According to the GOI's February 22,
2010 questionnaire response, the GOI's due diligence consisted of
ensuring its ability to enforce the contractual obligations of the
asset sale, including the provision related to affiliation. See GOI
Supplemental Questionnaire Response, dated February 22, 2010 at 31-32.
The GOI also included the articles of association, as Exhibit 25,
which were not made available during the course of the Indonesia CFS
investigation. However, the GOI points out that the articles of
association, as with the other documents submitted by the GOI, does not
disclose, or contain any information about, Orleans' shareholders or
its ownership structure. See id. at 34. In this same response, the GOI
states that the officials who informed the Department at the Indonesia
CFS verification that the purchaser would be required, through the
documentation it submitted, to establish that it was not affiliated
with the company whose debt it was purchasing, did not have full
knowledge about all of the possible types of purchasers. See id. at 34.
The GOI also states that it has identified senior officials involved in
the sale of APP/SMG's debt to Orleans who were not involved in the
prior verification and who will be made available to answer the
Department's questions at the verification of the current
investigation. See id. at 26. The GOI claims that the totality of
documents submitted in this investigation, when properly understood in
context, plus the expected availability of officials involved in the
debt sale, should have more probative weight than any factors the
Department relied on in Indonesia CFS Final Determination. See id. at
26.
The identification of Orleans' shareholders is pivotal to the
Department's ability to analyze the alleged affiliation between APP/SMG
and Orleans. The articles of association, which we understood would
reveal Orleans' shareholders, but which, in fact, do not contain
ownership information, do not constitute sufficient new factual
information to warrant changing our prior determination. Although the
GOI is now discounting statements made at the CFS verification by
former IBRA officials that ownership information would be part of a
purchaser's file,\9\ we find those statements from verification more
probative at this point in the investigation, because those officials
were discussing overall IBRA procedures with which they were familiar.
While they may have not been the officials responsible for the
Strategic Assets Sales Program, the GOI was unable at the CFS
verification to locate any officials who participated in the due
diligence determination with respect to APP/SMG's debt sale nor was the
Department able to examine the entire file on the APP/SMG debt sale.
See CFS Verification Report at 50 and 36-41, respectively. Furthermore,
there is other information on the record to indicate that Orleans is
affiliated with APP/SMG.\10\
---------------------------------------------------------------------------
\9\ See CFS Verification Report at 51.
\10\ See Memorandum to the File from Dana S. Mermelstein,
Program Manager: Countervailing Duty Investigation of Coated Free
Sheet Paper from Indonesia: Meeting with an Independent Expert,
dated August 24, 2007, on the record as Exhibit 52 of APP/SMG
Supplemental Questionnaire Response, dated February 22, 2010.
---------------------------------------------------------------------------
In addition, the documents filed by the GOI, which the Department
repeatedly requested in the CFS investigation three years ago and which
were again requested in this investigation, were only filed a week
[[Page 10773]]
before this preliminary determination. Based on our initial review of
the documents, there appear to be some gaps in the documentation and
they raise additional questions about how IBRA handled the APP/SMG
sale. Therefore, we preliminarily find that the documentation submitted
by the GOI concerning Orleans is not sufficient to overcome our prior
determination in Indonesia CFS Final Determination that in 2003 IBRA
sold APP/SMG's own debt back to it at a significant discount. We
therefore preliminarily determine that the GOI's sale of APP/SMG's debt
to an affiliate constituted a financial contribution, in the form of
debt forgiveness, within the meaning of section 771(5)(D) of the Act. A
benefit was received equal to the difference between the value of the
outstanding debt and the amount Orleans paid for it, within the meaning
of 19 CFR 351.508(a). Because we find Orleans to be affiliated with
APP/SMG, and because the GOI maintained a general prohibition against a
company, including its affiliates, buying back its own debt, we
preliminarily determine that the sale by IBRA of APP/SMG's debt to
Orleans was company-specific, consistent with section
771(5A)(D)(iii)(I) of the Act. Furthermore, because a special program
was created, with special rules and obligations, to handle the debt
sales of five large and significant obligors, including APP/SMG, we
also find that this sale was limited to a group of enterprises in
accordance with section 771(5A)(D)(i) of the Act.
To calculate the benefit received under this program, 19 CFR
351.508(a) provides that a benefit exists equal to the total value of
the debt sold, minus the amount Orleans paid for the debt (the
remainder is the value of the debt forgiven), and that we treat this
benefit as a non-recurring subsidy in accordance with 19 CFR
351.524(d). Under 19 CFR 351.508(b), in the case of debt forgiveness,
we normally will consider the benefit as having been received on the
date on which the debt was forgiven. Because this debt was forgiven in
2003 and was allocated over time, there is a benefit from this program
attributable to the 2008 POI in this investigation. Therefore, the
calculation performed for this subsidy program in the CFS investigation
includes the benefit amount from this program applicable in this
investigation. As explained in Indonesia CFS Final Determination and
Final CFS Calculation Memorandum, to calculate the benefit, we applied
the methodology set forth in 19 CFR 351.524(d)(1) for non-recurring
benefits. We allocated the amount of the debt forgiven over an AUL of
13 years. See Final CFS Calculation Memorandum and the ``Allocation
Period'' section above. Because APP/SMG was uncreditworthy at the time
IBRA accepted the COEs as partial repayment for its debt obligations,
we added a risk premium to the discount rate used to allocate the debt
forgiveness benefit, calculated according to the methodology described
in 19 CFR 351.505(a)(3)(iii). See ``Creditworthiness'' section above
and Final CFS Calculation Memorandum. Because we are making no changes
to the methodology that was used in the CFS investigation to calculate
the benefit stream from this debt forgiveness, we have taken the
benefit amount attributable to the POI from Final CFS Calculation
Memorandum and divided it by the total external sales of APP/SMG in the
POI, to determine a net countervailable subsidy rate of 2.39 percent ad
valorem for TK/PD/IK. See CCP Preliminary Calculation Memorandum.
II. Programs Preliminarily Determined To Be Not Used
We preliminarily determine that APP/SMG did not apply for or
receive any benefits during the POI under the following programs:
A. Government Provision of Interest-Free Reforestation Loans
Respondents stated that in Indonesia CFS Final Determination the
countervailable subsidy during 2005 was only 0.01 percent. Information
on the record indicates that the loans to cross-owned APP/SMG companies
were repaid prior to 2008 and respondents did not have any outstanding
loans under this program during the POI. We therefore preliminarily
determine that this program was not used during the POI.
B. Government Forgiveness of Stumpage Obligations
C. Tax Incentives for Investment in Priority Business Lines and
Designated Regions
a. Corporate Income Tax Deduction
b. Accelerated Depreciation and Amortization
c. Extension of Loss Carryforward
d. Reduced Withholding Tax on Dividends
Verification
In accordance with section 782(i)(1) of the Act, we intend to
verify the information submitted by the GOI and respondents prior to
making our final determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated a single subsidy rate for TK, PD, and IK, the three cross-
owned producers/exporters of the subject merchandise. Sections 703(d)
and 705(c)(5)(A) of the Act state that, for companies not investigated,
we will determine an all others rate by weighting the individual
company subsidy rate of each of the companies investigated by each
company's exports of subject merchandise to the United States. However,
the all others rate may not include zero and de minimis rates or any
rates based solely on the facts available.\11\ In this investigation,
the single rate calculated for TK/PD/IK meets the criteria for the all
others rate. Therefore, we have assigned this rate to all other
producers and exporters. We preliminarily determine the total estimated
net countervailable subsidy rates to be:
---------------------------------------------------------------------------
\11\ Pursuant to 19 CFR 351.204(d)(3), the Department must also
exclude the countervailable subsidy rate calculated for a voluntary
respondent. In this investigation, we had no producers or exporters
request to be voluntary respondents.
------------------------------------------------------------------------
Manufacturer/Exporter Net Subsidy Rate
------------------------------------------------------------------------
PT. Pabrik Kertas Tjiwi Kimia, Tbk./ PT. Pindo Deli 17.48 percent ad
Pulp and Paper Mills/ PT. Indah Kiat Pulp and valorem
Paper, Tbk.........................................
All Others.......................................... 17.48 percent ad
valorem
------------------------------------------------------------------------
In accordance with sections 703(d)(1)(B) and (2) of the Act, we are
directing U.S. Customs and Border Protection to suspend liquidation of
all entries of certain coated paper from Indonesia that are entered, or
withdrawn from warehouse, for consumption on or after the date of the
publication of this notice in the Federal Register, and to require a
cash deposit or bond for such entries of merchandise in the amounts
indicated above.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and non-proprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative
[[Page 10774]]
protective order, without the written consent of the Assistant
Secretary for Import Administration. In accordance with section
705(b)(2)(B) of the Act, if our final determination is affirmative, the
ITC will make its final determination within 45 days after the
Department makes its final determination.
Disclosure and Public Comment
In accordance with 19 CFR 351.224(b), we will disclose to the
parties the calculations for this preliminary determination within five
days of its announcement. Unless otherwise notified by the Department,
case briefs for this investigation must be submitted no later than 50
days after the date of publication of the preliminary determination.
See 19 CFR 351.309(c) (for a further discussion of case briefs).
Rebuttal briefs must be filed within five days after the deadline for
submission of case briefs, pursuant to 19 CFR 351.309(d)(1). A list of
authorities relied upon, a table of contents, and an executive summary
of issues should accompany any briefs submitted to the Department.
Executive summaries should be limited to five pages total, including
footnotes. Section 774 of the Act provides that the Department will
hold a public hearing to afford interested parties an opportunity to
comment on arguments raised in case or rebuttal briefs, provided that
such a hearing is requested by an interested party. If a request for a
hearing is made in this investigation, the hearing will tentatively be
held two days after the deadline for submission of the rebuttal briefs,
pursuant to 19 CFR 351.310(d). Any such hearing will be held at the
U.S. Department of Commerce, 14th Street and Constitution Avenue, NW,
Washington, DC 20230. Parties should confirm, by telephone, the date,
time, and place of the hearing 48 hours before the scheduled time.
Interested parties who wish to request a hearing, or to participate
if one is requested, must submit a written request to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, within 30 days of the publication of this notice, pursuant to 19
CFR 351.310(c). Requests should contain: (1) the party's name, address,
and telephone number; (2) the number of participants; and (3) a list of
the issues to be discussed. Oral presentations will be limited to
issues raised in the briefs.
This determination is issued and published pursuant to sections
703(f) and 777(i) of the Act and 19 CFR 351.221(b)(4).
Dated: March 1, 2010.
Carole A. Showers,
Acting Deputy Assistant Secretary for Import Administration.
[FR Doc. 2010-4986 Filed 3-8-10; 8:45 am]
BILLING CODE 3510-DS-S