C-560-829 POR: 06/29/2015 - 12/31/2016

Public Document ADCVDOpsII: DJG/MVT

DATE: October 9, 2018

MEMORANDUM TO: Gary Taverman

Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, performing the non-exclusive functions and duties of the

Assistant Secretary for Enforcement and Compliance

FROM: James Maeder Associate Deputy Assistant Secretary

for Antidumping and Countervailing Duty Operations performing the duties of Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations

SUBJECT: Issues and Decision Memorandum for the Final Results of 2015-

2016 Countervailing Duty Administrative Review: Certain Uncoated Paper from Indonesia

I. Summary

There is one respondent in the 2015-2016 administrative review of the countervailing duty (CVD) order on certain uncoated paper (uncoated paper) from Indonesia: PT Anugrah Kertas Utama (AKU), PT Riau Andalan Kertas (RAK), APRIL Fine Paper Macao Commercial Offshore Limited, and their cross-owned affiliates (collectively, APRIL). For these final results, we analyzed the case and rebuttal briefs submitted by interested parties. As a result of our analysis, we made changes to the Preliminary Results and determine that APRIL received 11.71 percent (2015) and 5.13 percent (2016) ad valorem net countervailable subsidy rates during the period of review (POR).1 We address the issues raised in the “Analysis of Comments” section below. II. Background On April 10, 2018, the Department of Commerce (Commerce) published the Preliminary Results of this review. On May 2, 2018, Commerce postponed the final results of review until

1 See Certain Uncoated Paper from Indonesia: Preliminary Results of Countervailing Duty Administrative Review; 2015-2016, 83 FR 15370 (April 10, 2018) (Preliminary Results), and accompanying Preliminary Decision Memorandum (PDM). The POR is June 29, 2015, through December 31, 2016.

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October 9, 2018.2 Also in May 2018, Commerce conducted verification of APRIL and the Government of Indonesia (GOI).3 We invited parties to comment on the Preliminary Results. On July 13, 2018, the petitioners,4 and APRIL and the GOI submitted timely-filed case briefs, and on July 27, 2018, the petitioners, and APRIL and the GOI submitted timely filed rebuttal briefs.5 The “Subsidy Valuation Information” and “Analysis of Programs” sections, below, describe the subsidy programs and the methodologies used to calculate the subsidy rates for these final results. Additionally, the “Analysis of Comments” section, below, contains our analysis of the comments submitted by interested parties in their case and rebuttal briefs and Commerce’s responses to these issues. Based on the comments received, we made modifications to the Preliminary Results. Comment 1: Whether Commerce Should Apply Adverse Facts Available to a Loan from Bank

Rakyat Indonesia (BRI) to PT Sateri Viscose International (SVI) Comment 2: Whether Commerce Should Exclude the Sales of PT ITCI Hutani Manunggal

(IHM) in the Sales Denominator for PT Riau Andalan Pulp & Paper (RAPP) Comment 3: Which Benchmark is Appropriate for Mixed Hardwood Logs Comment 4: Which Benchmark is Appropriate for Valuing Acacia Logs under the Log Export

Ban Program Comment 5: Whether Commerce Should Deduct Cost Items Inherent to Plantation Operations

as Part of Harvesting Costs for the Stumpage Program Comment 6: Whether Commerce Should Deduct Transportation-Related Costs from Mill-

Delivered Prices for the Stumpage Program Comment 7: What is the Appropriate Adjustment for Logging Profit Comment 8: Using APRIL’s Corrected Data Obtained at Verification in the Subsidy Rate

Calculations for the Final Results Comment 9: Correction of Errors in the Subsidy Rate Calculations for Preliminary Results

2 See Memorandum, “Certain Uncoated Paper from Indonesia: Extension of Deadline for Final Results of 2015-2016 Countervailing Duty Administrative Review,” dated May 2, 2018. 3 See Memorandum, “Verification of the Questionnaire Responses of APRIL,” dated June 21, 2018 (APRIL Verification Report) and Memorandum, “Verification of the Questionnaire Responses of the Government of Indonesia,” dated June 21, 2018 (GOI Verification Report). 4 The petitioners are: United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC (USW); Domtar Corporation; Finch Paper LLC; P.H. Glatfelter Company; and Packaging Corporation of America. 5 See Letter from petitioners, “Case Brief Submitted on Behalf of the Petitioners,” dated July 13, 2018 (Petitioners’ Case Brief); Letter from APRIL and the GOI, “Certain Uncoated Paper from Indonesia APRIL - Case Brief,” dated July 13, 2018 (APRIL and the GOI’s Case Brief); Letter from the petitioners, “Rebuttal Brief Submitted on Behalf of the Petitioners,” dated July 27, 2018 (Petitioners’ Rebuttal Brief); and Letter from APRIL and the GOI, “Certain Uncoated Paper from Indonesia APRIL - Rebuttal Brief,” dated July 27, 2018 (APRIL’s and GOI’s Rebuttal Brief).

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III. Scope of the Order The merchandise subject to this order includes uncoated paper in sheet form; weighing at least 40 grams per square meter but not more than 150 grams per square meter; that either is a white paper with a GE brightness level6 of 85 or higher or is a colored paper; whether or not surface-decorated, printed (except as described below), embossed, perforated, or punched; irrespective of the smoothness of the surface; and irrespective of dimensions (Certain Uncoated Paper). Certain uncoated paper includes (a) uncoated free sheet paper that meets this scope definition; (b) uncoated ground wood paper produced from bleached chemi-thermo-mechanical pulp (BCTMP) that meets this scope definition; and (c) any other uncoated paper that meets this scope definition regardless of the type of pulp used to produce the paper. Specifically excluded from the scope of this order are (1) paper printed with final content of printed text or graphics and (2) lined paper products, typically school supplies, composed of paper that incorporates straight horizontal and/or vertical lines that would make the paper unsuitable for copying or printing purposes. For purposes of this scope definition, paper shall be considered “printed with final content” where at least one side of the sheet has printed text and/or graphics that cover at least five percent of the surface area of the entire sheet. On September 1, 2017, Commerce determined that that imports of uncoated paper with a GE brightness of 83 +/- 1% (83 Bright paper), otherwise meeting the description of in-scope merchandise, constitute merchandise “altered in form or appearance in minor respects” from in-scope merchandise that are subject to this order.7 Imports of the subject merchandise are provided for under Harmonized Tariff Schedule of the United States (HTSUS) categories 4802.56.1000, 4802.56.2000, 4802.56.3000, 4802.56.4000, 4802.56.6000, 4802.56.7020, 4802.56.7040, 4802.57.1000, 4802.57.2000, 4802.57.3000, and 4802.57.4000. Some imports of subject merchandise may also be classified under 4802.62.1000, 4802.62.2000, 4802.62.3000, 4802.62.5000, 4802.62.6020, 4802.62.6040, 4802.69.1000, 4802.69.2000, 4802.69.3000, 4811.90.8050 and 4811.90.9080. While HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope is dispositive.

6 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 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. “Colored paper” as used in this scope definition means a paper with a hue other than white that reflects one of the primary colors of magenta, yellow, and cyan (red, yellow, and blue) or a combination of such primary colors. 7 See Certain Uncoated Paper from Australia, Brazil, the People’s Republic of China, Indonesia, and Portugal: Affirmative Final Determination of Circumvention of the Antidumping and Countervailing Duty Orders, 82 FR 41610 (September 1, 2017).

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IV. Subsidies Valuation Information A. Allocation Period Commerce made no changes to the allocation period or the allocation methodology used in the Preliminary Results.8

B. Attribution of Subsidies We attributed subsidies received by RAPP only to the combined sales of RAPP, PT Intiguna Primatama (IP), and APRIL’s cross-owned producers of the subject merchandise (i.e., AKU, RAK, and SVI), net of intercompany sales. Further, we excluded the sales of IHM because RAPP is not an input supplier to IHM, and IHM is not a pulp or paper producer. See Comment 2, below, for further discussion. Other than excluding IHM’s sales, Commerce made no changes to the attribution methodologies used in the Preliminary Results.9 C. Benchmarks and Short-Term Interest Rates Commerce made no changes to the short-term interest rate benchmark used in the Preliminary Results.10 Commerce made changes to the mixed hardwood benchmarks for the stumpage and log export ban programs, and the acacia log benchmark for the log export ban program used in the Preliminary Results.11 See Comments 3 and 4 below. V. Programs Determined To Be Countervailable12

1. Provision of Standing Timber for Less Than Adequate Remuneration (LTAR) Interested parties submitted comments in their case and rebuttal briefs regarding the benchmarks used to calculate benefits under this program, which are addressed below. Commerce has modified its calculation of the subsidy rate for this program from the Preliminary Results. 2015: 4.21 percent ad valorem 2016: 0.04 percent ad valorem

2. Government Prohibition of Log Exports (Log Export Ban)

Interested parties submitted comments in their case and rebuttal briefs regarding the benchmarks used to calculate benefits under this program, which are addressed below. Commerce has modified its calculation of the subsidy rate for this program from the Preliminary Results.

8 See PDM at 4-5. 9 Id. at 5-7. 10 Id. at 8. 11 Id. at 10-12, and 14-15. 12 For additional information on the below subsidy rate calculations, see the Preliminary Determination, and Memorandum, “Final Results Benefit Calculations for APRIL” (Final Calculation Memorandum), dated concurrently with this memorandum.

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2015: 7.49 percent ad valorem 2016: 5.08 percent ad valorem

3. Exemption from Import Income Tax Withholding for Companies in Bonded Zone Locations

Commerce made no changes to the methodology used to calculate the subsidy rates for this program in its Preliminary Results.

2015: 0.01 percent ad valorem 2016: 0.01 percent ad valorem VI. Program Determined Not to Confer Benefits13

1. Preferential Lending to RAPP and RAK VII. Programs Determined Not to Be Countervailable

1. Tax Amnesty Program14

VIII. Programs Determined Not to Be Used During the POR

1. Debt Forgiveness through the Indonesian Government’s Acceptance of Financial Instruments with No Market Value

2. Debt Forgiveness through Asia Pulp and Paper/Sinar Mas Group’s (APP/SMG) Buyback of Its Own Debt from the GOI

3. Export Financing from Export-Import Bank of Indonesia 4. Export Credit Insurance 5. Export Credit Guarantees 6. Tax Incentives for Investment in Specified Business Lines and/or in Specified Regions by

Indonesia’s Investment Coordinating Board (BKPM) – Corporate Income Tax Deduction 7. Tax Incentives for Investment in Specified Business Lines and or in Specified Regions by

the BKPM – Accelerated Depreciation and Amortization 8. Tax Incentives for Investment in Specified Business Lines and or in Specified Regions by

the BKPM – Extension of Loss Carry-Forwards 9. Preferential Treatment for Bonded Zone Locations

a. Waiver of License and Fee Requirements b. Exemption from Sales Taxes for Capital Goods and Equipment Used to Produce

Exports

13 See PDM at 16. 14 Id. at 17.

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IX. Analysis of Comments Comment 1: Whether Commerce Should Apply Adverse Facts Available to a Loan from

BRI to SVI APRIL and GOI’s Case Brief

During verification at APRIL, Commerce noted that SVI has a loan from Bank Rakyat Indonesia (BRI) which SVI borrowed at the end of 2016. This loan was listed on SVI’s audited financial statements, provided as part of APRIL’s CVD questionnaire response.15

The petitioners did not file a new subsidy allegation relating to the SVI loan, nor did Commerce ask APRIL or the GOI any questions about this loan.

APRIL states that it had no reason to identify the SVI loan as part of the “other subsidies” received from an Indonesian authority when disclosing the loan because APRIL officials consider the loan to be a standard commercial loan.16

The petitioners did not submit any evidence suggesting that this loan was provided on non-commercial terms or at the direction of the GOI. Therefore, there is no information on the record regarding this loan suggesting either preferential treatment or the GOI’s involvement.17

Petitioners’ Case Brief

APRIL failed to respond regarding SVI’s loan from BRI under the “Other Subsidies” section of Commerce’s CVD questionnaire, despite Commerce’s specific instructions to do so.18

APRIL reported certain loan information with respect to IHM, but did not do so for SVI, even though SVI’s financial statements, which APRIL provided as part of its questionnaire response, listed the BRI loan.19

Similarly, the GOI also failed to report the BRI loan to SVI when Commerce asked if the GOI provides, directly or indirectly, any other forms of assistance to producers or exporters of uncoated paper.20

15 See APRIL and the GOI’s Case Brief at 30 (citing APRIL Verification Report at 2). 16 See APRIL and the GOI’s Case Brief at 31-32 (citing Certain Warmwater Shrimp from the Republic of Indonesia: Final Negative Countervailing Duty Determination, 78 FR 50383 (August 19, 2013) (Shrimp from Indonesia), and accompanying Issues and Decision Memorandum (IDM) at Comment 8; and APRIL Verification Report at 2). 17 See APRIL and the GOI’s Case Brief at 32. 18 See Petitioners’ Case Brief at 9-10 (citing Letter, “2015-2016 Countervailing Duty Administrative Review of Certain Uncoated Paper from Indonesia: Countervailing Duty Questionnaire,” dated May 16, 2017, (Commerce’s Initial Questionnaire) at III-14). 19 See Petitioners’ Case Brief at 10 (citing APRIL’s July 6, 2017, Initial Questionnaire Response (APRIL IQR) at 40-41). 20 See Petitioners’ Case Brief at 10 (citing GOI’s July 6, 2017, Initial Questionnaire Response (GOI IQR) at 21-22).

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Commerce has applied AFA in other situations where respondents have failed to report loans from government-owned banks.21

In Steel Flanges and Fine Denier PSF, Commerce discovered at verification that respondents had received loans from banks owned by the Government of India, which had not been reported in response to Commerce’s CVD questionnaire.22

In those cases, Commerce found that the use of facts available under section 776(a) of the Act was warranted because company respondents and the government withheld information which prevented Commerce to fully analyze loan programs to determine whether countervailable benefits existed.23

Further, Commerce determined that adverse inferences were also warranted under section 776(b) of the Act because the parties in those cases failed to cooperate by not acting to the best of their ability to report and provide necessary and complete information about the loan programs.24

In both cases, Commerce rejected the respondents’ arguments that the loans were provided on commercial terms because the respondents withheld necessary information.25

In Steel Flanges, Commerce stated that interested parties cannot determine whether a company is required to provide a response to Commerce’s questions and which information is necessary for Commerce’s analysis. Since the requested information was withheld, Commerce could not fully analyze whether the loans discovered at verification were extended on commercial terms because Commerce did not have any information on the record related to those loans.26

Consistent with Steel Flanges and Fine Denier PSF, Commerce should apply AFA here based on APRIL’s and the GOI’s failure to report BRI’s loan to SVI because APRIL’s company officials knew that BRI is a government-owned bank.27 Thus, it was incumbent upon APRIL to respond to Commerce’s request for information in the initial CVD questionnaire with complete information about BRI’s loan to SVI, but APRIL failed to do so.

APRIL’s inclusion of SVI’s financial statements listing the BRI loan in its initial CVD questionnaire response does not satisfy APRIL’s obligation to provide information about the loan in response to Commerce’s request because Commerce’s questionnaire asks for numerous details.28 Neither APRIL nor the GOI answered any questions in the CVD questionnaire with respect to the BRI loan.

21 See Petitioners’ Case Brief at 11 (citing Finished Carbon Steel Flanges from India: Final Affirmative Countervailing Duty Determination, 82 FR 29479 (June 29, 2017) (Steel Flanges), and accompanying IDM at Comment 4; and Countervailing Duty Investigation of Fine Denier Polyester Staple Fiber from India: Final Affirmative Determination, 83 FR 3122 (January 23, 2018) (Fine Denier PSF), and accompanying IDM at Comment 2). 22 See Petitioners’ Case Brief at 11 (citing Steel Flanges IDM at Comment 4; and Fine Denier PSF IDM at Comment 2). 23 Id. 24 Id. at 12. 25 Id. 26 Id. (citing Steel Flanges IDM at Comment 4). 27 Id. at 13 (citing APRIL Verification Report at 2). 28 Id. at 13-14 (citing Commerce’s Initial Questionnaire).

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Accordingly, consistent with Steel Flanges and Fine Denier PSF, Commerce should find that the use of facts available with an adverse inference is warranted because APRIL and the GOI failed to cooperate to the best of their ability to report and provide complete information about the BRI loan any time prior to verification.29

Commerce should reject APRIL’s claim that the BRI loan is a standard commercial loan and not a subsidy, just like it rejected the respondents’ arguments in Steel Flanges and Fine Denier PSF that their loans were provided on commercial terms.30

If APRIL believed that the loan was not countervailable, it should have reported the loan and provided any supporting evidence before verification. It is for Commerce to determine whether APRIL is required to respond to its questions and which information is necessary for its analysis. APRIL cannot be permitted to unilaterally decide to withhold information from Commerce.31

Commerce should select, as AFA, the highest calculated rate for the same or a similar program, consistent with its established practice (i.e., the highest rate for a similar loan proceeding involving Indonesia of 5.05 percent).32

APRIL’s and GOI’s Rebuttal Brief

APRIL did not fail to report the SVI loan from BRI. This loan has been on the record since July 2017, and the petitioners should not be allowed to profit from failing to review APRIL’s lengthy responses.33

The petitioners are factually incorrect in asserting that APRIL failed to identify BRI as a government-owned bank because SVI’s 2016 financial statements disclosed the full name of BRI (i.e. PT Bank Rakyat Indonesia (Persero) Tbk), which identifies the bank as a limited liability company with at least 51 percent of its shares owned by the state.34

Therefore, the petitioners could have conducted meaningful research for potential subsidy concerns regarding this loan.35

Throughout their questionnaire responses, both APRIL and the GOI explained that Persero banks are independently-managed commercial banks, and not government authorities.36 Nonetheless, the petitioners failed to raise any concerns about the BRI loan prior to their case brief.

29 Id. at 14. 30 Id. at 15 (citing APRIL Verification Report at 2; Steel Flanges IDM at Comment 4; and Fine Denier PSF IDM at Comment 2). 31 Id. at 15. 32 Id. at 15-16 (citing Steel Flanges IDM at 8; Final Affirmative Countervailing Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate from Indonesia, 64 FR 73155, 73161-62 (December 29, 1999) (CTL Steel Plate) (calculating a 5.05 percent rate for the Rediscount Loan Program); and Certain Uncoated Paper from Indonesia: Final Affirmative Countervailing Duty Determination, 81 FR 3104 (January 20, 2016) (Final Determination), and accompanying IDM at 7). 33 See APRIL’s and GOI’s Rebuttal Brief at 2-3. 34 Id. at 3 (citing APRIL IQR at Exhibit 20). 35 Id. at 3-4 (citing GOI’s October 12, 2017, new subsidy allegation response (GOI NSAQR) at 6-7). 36 Id. at 4-5 (citing APRIL’s October 12, 2017, new subsidy allegation response (APRIL NSAQR) at 2; generally GOI NSAQR; generally APRIL’s November 15, 2017, new subsidy allegation supplemental response (APRIL NSASQR); GOI’s November 15, 2017, new subsidy allegation supplemental response (GOI 2NSAQR) at 3; GOI’s

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The reason why APRIL reported IHM’s loan information was because the loan was provided under the Forestry Resources Development Program of the Ministry of Forestry (i.e., there was a relationship between the loan and the GOI). However, no such connection exists between the GOI and the BRI loan.37

The petitioners should have known to review APRIL’s financial statements and promptly raise any potential subsidy concerns to Commerce. Because the petitioners did not do this, they forfeited the opportunity to do so now.38, 39

The application of AFA is not warranted in this case. APRIL did not fail to provide information because it disclosed SVI’s loan in its initial questionnaire response. APRIL and the GOI submitted all information which Commerce requested in this review.40

APRIL and the GOI have cooperated to the best of their abilities in this review and have also undergone rigorous and thorough verifications by Commerce, with no issues found other than the identification of SVI’s loan. Therefore, it is unreasonable and unfair to apply AFA to APRIL’s subsidy rate for this program.41

The petitioners’ reliance on Steel Flanges to support their AFA arguments is misplaced because: 1) the four loans at issue in that case were discovered at verification and fell under three lending programs; and 2) the Government of India had previously failed to timely respond to an entire supplemental questionnaire. In the instant case, the SVI loan was not discovered at verification, as it was disclosed and has been on the record since July 2017, nor is there any record evidence suggesting that this loan may be fairly described as having been granted under a specific lending program. Further, APRIL and the GOI did not fail to respond timely to any of Commerce’s CVD questionnaires.42

The petitioners’ reliance on Fine Denier PSF is also misplaced because both Indian respondents in that case failed to provide sufficient information about a program, despite multiple requests by Commerce for them to do so. The respondents in Fine Denier PSF failed to cooperate, which directly contrasts with APRIL’s and the GOI’s extensive cooperation in this review.43

Nevertheless, if Commerce were to apply AFA and countervail the BRI loan to SVI, the 5.05 percent rate from the Rediscount Loan Program identified by the petitioners is dissimilar to the BRI loan and should not be used. The Rediscount Loan Program has

February 6, 2018, new subsidy allegation supplemental response (GOI 3NSAQR) at 2; and generally Letter from APRIL and the GOI, “Certain Uncoated Paper from Indonesia: APRIL – Pre-Preliminary Comments,” dated March 22, 2018). 37 Id. at 5 (citing APRIL IQR at 41). 38 Id. at 5-6 (citing 19 CFR 351.311(c) (if Commerce is made aware of a potential subsidy concern too late in a CVD review and insufficient time remains to examine the issue, Commerce shall defer consideration of the potential subsidy issue until a subsequent administrative review, if any)). 39 Id. at 7 (citing Ta Chen Stainless Steel Pipe, Ltd, v. United States, Ct. No. 97-08-01344,1999 CIT LEXIS 110, at 4142 (CIT 1999)). 40 Id. at 8 (citing Nippon Steel Corp. v. United States, 337 F.3d 1373, 1381 (Fed. Cir. 2003) (Nippon Steel), Ad Hoc Shrimp Trade Action Comm. v. United States, 33 CIT, 1906, 1923 (2009) (quoting Nippon Steel, 337 F.3d at 1381-1383), and Light Weight Thermal Paper from the People’s Republic of China: Final Affirmative Countervailing Duty Determination, 73 FR 57323 (October 2, 2008), and accompanying IDM at Comment 3). 41 Id. at 9 (citing APRIL Verification Report and GOI Verification Report). 42 Id. at 9-10 (citing Steel Flanges IDM at 8-9, and Comments 1, 3, and 4). 43 Id. at 10-11 (citing Fine Denier PSF IDM at Comment 2).

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different timing terms from the BRI loan and Commerce deemed it to be an export subsidy. There is no evidence suggesting that the BRI loan is export contingent.44

If Commerce were to apply AFA to SVI’s loan, it should instead apply the 0.65 percent rate calculated for the Two-Step Loan Program in CTL Steel Plate, because this preferential lending program has the highest calculated rate for such Indonesian programs and consists of loans with similar timing terms as the BRI loan.45

Petitioners’ Rebuttal Brief

The information on the record regarding SVI’s loan is not sufficient to allow Commerce to evaluate whether it was provided on commercial terms.46

Commerce’s Position: Based on the facts of this record, we find that use of AFA under section 776 of the Act is not warranted with respect to the loan from BRI to SVI. Under section 351.505(a)(2)(ii) of Commerce’s regulations, “the Secretary will treat a loan from a government-owned bank as a commercial loan, unless there is evidence that the loan from a government-owned bank is provided on non-commercial terms or at the direction of the government.” APRIL’s questionnaire response contains SVI’s financial statements, which identify the loan in question.47 Further, the information on the record indicates that BRI is a Persero bank, which the GOI defines as a “State-Owned Limited Liability Company” whose capital is divided into shares where all or at least 51 percent of the shares are owned by the state and whose main purpose is to gain profit.48 We note that in Shrimp from Indonesia, Commerce investigated, but did not countervail, the loans from BRI that the respondent received in that case.49 Given that we have previously not countervailed loans from the BRI and absent evidence that the loan from BRI to SVI was provided on non-commercial terms or at the direction of the government, we find that APRIL was not required to report the loan under “Other Subsidies.” Therefore, we find that AFA is not warranted and we did not include this loan in our subsidy calculations.

44 Id. at 12 (citing CTL Steel Plate; APRIL IQR at Exhibit 20; and APRIL Verification Report at 2, Petitioners’ Case Brief at footnote 61; and Certain Uncoated Paper from Indonesia: Final Affirmative Countervailing Duty Determination, 81 FR 3104 (January 20, 2016) and accompanying IDM at Appendix)). 45 Id. at 12-13 (citing CTL Steel Plate; generally, the records for: Final Determination IDM; Final Affirmative Countervailing Duty Determination: Certain Hot-Rolled Carbon Steel Flat Products from Indonesia, 66 FR 49637 (September 28, 2001), and accompanying IDM; Certain Coated Paper Suitable for High-Quality Print Graphics Using Sheet-Fed Presses from Indonesia: Final Affirmative Countervailing Duty Determination, 75 FR 59209 (September 27, 2010), and accompanying IDM; and Fine Denier PSF IDM at 13 (10. Exemption from Payment of Central Sales Tax on Purchases of Capital Goods and Raw Materials, Components, Consumables, Intermediates, Spare Parts, and Packing Material)). 46 Id. at 23-25 (citing APRIL Verification Report at 2, APRIL IQR at 40-41, and GOI NSA SQR at 6). 47 See APRIL IQR at Exhibit 20. 48 See GOI NSAQR at 7. 49 See Shrimp from Indonesia IDM at Comment 9.

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The petitioners cite Steel Flanges and Fine Denier PSF to support their argument that AFA should be applied in this review. We find these cases to be inapposite. For example, in Steel Flanges Commerce initiated and investigated the Government of India’s loan guarantees to specific industrial sectors including the steel sector and the Steel Development Funds Loans, through which the Government of India provides long-term loans at below-market rates.50 Commerce had initiated and found these programs to be countervailable in past Indian cases.51 Thus, the respondents in Steel Flanges should have reported the discovered loans from the state-owned banks when Commerce requested information related to other subsidies before verification. More importantly, unlike Steel Flanges in which Commerce did not have any information on the record related to the discovered loans, we have information pertaining to the SVI loan on the record of this review. Specifically, as noted above, APRIL’s questionnaire response contains SVI’s financial statements, which identify this loan.52 Nothing on the record indicates that the loan was provided at a non-commercial rate. In Fine Denier PSF, Commerce discovered at verification that the respondents failed to report that they received loans from government-owned banks under a specific subsidy program.53 In the instant case, Commerce has no reason to believe that the loan BRI provided to SVI is a policy loan, nor did Commerce find at verification an unreported loan under a specific subsidy program. Therefore, the petitioners’ reliance on Steel Flanges and Fine Denier PSF to support the application of AFA is misplaced. Comment 2: Whether Commerce Should Exclude IHM from the Sales Denominator for

RAPP Petitioners’ Case Brief

Commerce improperly included IHM’s sales in the attribution of subsidies received by RAPP.54

In this review, Commerce correctly found that IHM, RAPP, IP, AKU, RAK, and SVI are cross owned, and that IHM harvested standing timber and supplied pulpwood to RAPP.55

Because Commerce determined that IHM is an input supplier to RAPP, but RAPP is not an input supplier to IHM, Commerce should only attribute subsidies received by RAPP to the combined sales of RAPP and the producers of downstream products in the production chain (i.e., IP, AKU, RAK, and SVI), excluding intercompany sales.56

Commerce should exclude IHM’s sales from RAPP’s sales denominators because RAPP is not an input supplier to IHM, and IHM is not a pulp or paper producer.57

No other interested party commented on this issue.

50 See CVD Investigation Initiation Checklist: Finished Carbon Steel Flanges from India, dated July 20, 2016, at 13-16; see also Countervailing Duty Investigation Initiation Checklist: Stainless Steel Flanges from India, dated September 5, 2017, at 17-18. 51 Id. 52 See APRIL IQR at Exhibit 20. 53 See Fine Denier PSF IDM at Comment 2. 54 See Petitioners’ Case Brief at 2. 55 Id. at 3. 56 Id. at 4-5. 57 Id.

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Commerce’s Position: We agree with the petitioners and excluded IHM’s sales from RAPP’s sales denominators in our subsidy calculations for the final results. Section 351.525(b)(6)(iv) of Commerce’s regulations provides that:

If there is cross-ownership between an input supplier and a downstream producer, and production of the input product is primarily dedicated to production of the downstream product, the Secretary will attribute subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations).

In this case, IHM and RAPP are cross owned, and IHM supplied inputs to RAPP in the form of pulpwood, which are primarily dedicated to the production of the downstream products. However, RAPP is not an input supplier to IHM, and IHM is not a pulp or paper producer. Therefore, we attributed subsidies received by RAPP to the combined sales of RAPP, IP, and the subject merchandise producers (i.e., AKU, RAK, and SVI), net of intercompany sales, and excluded IHM’s sales.58 Comment 3: Which Benchmark is Appropriate for Mixed Hardwood Logs APRIL and GOI’s Case Brief

In the Preliminary Results, Commerce relied on GTA export statistics to derive a benchmark for mixed hardwood timber in analyzing the benefit APRIL received for harvesting mixed hardwood under the stumpage and log export ban programs.59

APRIL states that it harvested and purchased only “pulpwood” for its pulp and paper production. Based on industry consensus, pulpwood is defined as small diameter, low-quality wood that is not suitable for more valuable applications, such as in furniture, construction, and flooring industries.60

Because pulpwood is less valuable than large-diameter veneer logs and sawlogs destined for higher-value applications, Commerce’s benchmark for comparing pulpwood stumpage rates should be representative of pulpwood.61

In the Preliminary Results, Commerce relied on a benchmark for mixed hardwood based on Malaysian export statistics that is not comparable to the mixed hardwood APRIL uses

58 See Final Calculation Memorandum. 59 See PDM at 12 and 14. 60 See APRIL and the GOI’s Case Brief at 9-11 (citing APRIL IQR at 14, 28; APRIL’s November 1, 2017, submission (APRIL Benchmark Submission), at Exhibits 10, 24, 33, 38, and 52); APRIL’s November 13, 2017, submission (APRIL Rebuttal Benchmark Submission) at Exhibit 1; and GOI IQR at 5-6). 61 Id. at 10-13 (citing APRIL Benchmark Submission at Exhibits 2, 10, 21, 24, 30, 31, 33, 39, 40, and 52; and APRIL Rebuttal Benchmark Submission at Exhibit 1).

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for paper production because it includes harmonized tariff schedule (HTS) numbers for species APRIL did not use, and includes higher-value logs, rather than pulpwood logs.62

For the Final Results, Commerce should select a species-specific benchmark with respect to stumpage that is comparable to APRIL’s mixed hardwood input. Specifically, Commerce should select a mixed hardwood benchmark representing small diameter logs (i.e., less than 30 cms.) used for pulpwood.63

Commerce should use the pulpwood-specific price data from the Philippine Forestry Statistics to derive the stumpage benchmark for mixed hardwood. This information is species-, end use-, and size-specific to the mixed hardwood input, and contemporaneous with the POR.64

The Philippine forestry data reports on planted pulpwood, rather than naturally grown wood, and thus is unaffected by the Philippine export ban on naturally grown wood logs. Further, government levies generally account for a very small value of the pulpwood, and Commerce has never found that they are artificially low or otherwise distortive. Finally, Philippine pulpwood prices are within the same range as the Malaysian acacia pulpwood price and the Thai eucalyptus pulpwood export price, thus proving that any market distortion claim is unfounded.65

Alternatively, if Commerce were to continue basing the mixed hardwood stumpage benchmark on Malaysian export statistics, it should use HTS numbers that reflect logs specific to the species harvested by RAPP and apply to pulpwood, as proposed in APRIL’s benchmark submission.66 While the resulting benchmark value is less appropriate than the Philippine pulpwood prices because the Malaysian export data still includes higher-value wood products than pulpwood, the value is superior to the Preliminary Results benchmark, calculated based on the petitioners’ submitted Malaysian export data prices.

Petitioners’ Rebuttal Brief

Reliance on Philippine log prices as benchmarks for APRIL’s mixed hardwood harvest is inconsistent with either a tier 2 benchmark pursuant to 19 CFR 351.511(a)(2)(ii), or a tier 3 benchmark pursuant to 19 CFR 351.511(a)(2)(iii), because these prices are not market based. Moreover, the Philippine prices are domestic prices not available to purchasers on the world market, further disqualifying their use as tier 2 benchmarks. In addition, the

62 Id. at 13-16 (citing Coated Free Sheet Paper from Indonesia: Final Affirmative Countervailing Duty Determination, 72 FR 60642 (October 25, 2007) (CFS Final) IDM at Comment 13, APRIL Benchmark Submission at Exhibits 9, 38, and 50; APRIL Rebuttal Benchmark Submission at Exhibits 1 and 3; APRIL February 1, 2018, submission at Exhibits 10 and 12; Petitioners’ Benchmark Submission at Exhibit 20; and Petitioners’ January 18, 2018, submission at Attachment 2). 63 Id. at 17-20 (citing CFS Final IDM at 22; and APRIL Benchmark Submission at Exhibits 1,2, 22, 24, and 52). 64 Id. at 20 and Exhibit 1 (citing APRIL Rebuttal Benchmark Submission at Exhibit 41; and APRIL February 1, 2018, submission at Exhibit 10c). 65 Id. at 20-21 (citing APRIL Benchmark Submission at Exhibit 41; Petitioners’ Rebuttal Benchmark Submission at 8; Final Determination at Comments 5 and 7; and APRIL February 1 submission at Exhibit 10a). 66 Id. at 22 (citing APRIL Benchmark Submission at Exhibit 9; and APRIL February 1, 2018, submission at Exhibit 12).

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data on the record is insufficient for using the Philippine prices as benchmarks because there is no information to adjust the domestic prices to species-specific free, on-board (FOB) prices.67

The Philippine timber market is distorted through government ownership, control, and intervention, with nearly 94 percent of Philippine forest area owned by the state in 2015.68 In addition, Philippine stumpage rates have been too low relative to the market value of logs, and the Philippines bans exports of logs from natural forests.69 Thus, Philippine log prices are neither representative of world market prices, nor based on market principles.

APRIL’s assertion that the Philippine data represents only planted wood and which are thus not affected by the ban on exports from natural forests appears inconsistent, as it is not clear how mixed hardwood forests are “planted.” The petitioners note that APRIL harvests mixed hardwood from natural forests.70 Thus, either the Philippine data does not align with APRIL’s mixed hardwood input, as APRIL suggests in its case brief, or the Philippine data actually reflects naturally grown wood, which would then reflect distortions caused by the Philippine log export ban program.

Commerce should continue to rely on Malaysian export statistics for the stumpage and log export ban benchmarks, as in the Preliminary Results and previous proceedings involving Indonesian paper products, based on geographic proximity and similarities between Malaysian and Indonesian forests.71 In contrast, the record does not demonstrate the same similarities between Indonesian and Philippine forests and tree species.72

APRIL’s proposed revision to the Malaysian export statistics data as an alternate benchmark for mixed hardwood is unclear, because at least one of the HTS numbers used in APRIL’s analysis appears misclassified.73

Commerce’s Position: We continue to base the benchmark prices for mixed hardwood under both the stumpage and log export ban programs on the GTA export statistics for Malaysia, consistent with our determinations in the Final Determination and previous Indonesian paper proceedings.74 As discussed further below, we do not find the Philippine forestry data submitted by APRIL to be comparable as either a Tier 2 benchmark for mixed hardwood with respect to the log export ban program, or as a Tier 3 benchmark for mixed hardwood under the stumpage program.

67 See Petitioners’ Rebuttal Brief at 9 and 12 (citing APRIL Benchmark Submission at Exhibit 41; Certain Coated Paper Suitable for High-Quality Print Graphics Using Sheet-Fed Presses from Indonesia: Final Affirmative Countervailing Duty Determination, 75 FR 59209 (September 27, 2010) (CCP Final) IDM at 10; and CFS Final IDM at Comment 13). 68 Id. at 9 (citing Petitioners’ November 13, 2018, Rebuttal Benchmark Submission (Petitioners’ Rebuttal Benchmark Submission) at 8 and Exhibit 10). 69 Id. at 9-10 (citing Petitioners’ Rebuttal Benchmark Submission at Exhibits 8 and 11). 70 Id. at 10 (citing APRIL and the GOI’s Case Brief at 10). 71 Id. at 10-11 (citing PDM at 12; Final Determination IDM at 15-16; CCP Final IDM at 9-11; and CFS Final IDM at 20 and 24). 72 Id. at 11 (citing APRIL Benchmark Submission at Exhibit 13). 73 Id. at 13-14 (citing APRIL February 1, 2018, submission at Exhibit 10c; and APRIL Benchmark Submission, generally.) 74 See Final Determination IDM at Comment 7; CCP Final IDM at 9-11; and CFS Final IDM at 20 and 24.

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We identified the appropriate benchmark log prices for our benefit analysis under the log export ban program in accordance with 19 CFR 511(a)(2)(ii), where we “seek to measure the adequacy of remuneration by comparing the government price to a world market price where it is reasonable to conclude that such price would be available to purchasers in the country in question.” For world market prices, our practice is generally to rely on export prices, such as the average unit prices derived from Malaysian export statistics reported in the GTA, which we used in the Preliminary Results, the Final Determination, and the CCP Final. Commerce noted in CFS Final and CCP Final that Indonesia and Malaysia share a geographic proximity and the similarities of forest conditions, climate, and tree species. In those proceedings, as well as in the Final Determination and the Preliminary Results, Commerce found that the public export statistics of Malaysian pulpwood reported in the GTA are reliable for establishing a benchmark under the “second tier” as a world market price that would be available to a purchaser in Indonesia.75 We disagree with APRIL that it would be appropriate to use Philippine domestic prices for mixed hardwood species, as derived from the Philippine Forestry statistics, as benchmarks for its purchases of mixed hardwood to calculate a benefit under the log export ban program. These prices are domestic prices, and there is no information on the record to demonstrate that logs at these prices would be available to purchasers in Indonesia. Accordingly, these prices fail to meet the essential criterion of a Tier 2 benchmark (i.e., that they are world market prices to purchasers in the country under investigation), and thus are not usable as benchmark prices for comparing APRIL’s purchases of mixed hardwood logs. Moreover, the record lacks support for APRIL’s representations concerning the similarities of Indonesian and Philippine forest conditions, climate, and tree species, and the absence of market distortions. On the other hand, the record includes information indicating that the Philippine timber market is distorted due to the high proportion of state-owned forest area,76 a ban on log exports from natural forests,77 and stumpage rates that may not reflect timber market conditions.78 Accordingly, we cannot rely on this information as Tier 3 benchmarks to compare to APRIL’s stumpage rates. For a mixed hardwood benchmark price to compare APRIL’s purchases of mixed hardwood logs, the only world market price for mixed hardwood logs on the record is the Malaysian GTA data used in the Preliminary Results. As we noted above, Commerce has found this source to be reliable in past Indonesia paper cases for establishing a “second tier” benchmark price for mixed hardwood. Similarly, because we cannot determine that the Philippine log prices are grounded in market experience sufficient to satisfy the Tier 3 regulatory requirement of a market-based

75 See Final Determination IDM at 20; and Preliminary Results PDM at 12. 76 See Petitioners’ Rebuttal Benchmark Submission at 8 and Exhibit 10. The data show that state ownership of forests is estimated at 85 to 94 percent of total forest area. 77 Id. at Exhibit 8. 78 Id. at Exhibit 11.

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benchmark price, the most appropriate source for the mixed hardwood stumpage benefit benchmark is the Malaysian GTA export data. In selecting benchmarks for determining subsidy rates for timber products, Commerce normally relies on species-specific prices, where possible.79 Additionally, for proceedings involving paper products, Commerce attempts to use benchmark prices for pulpwood or wood that may be used to produce pulp, rather than wood not classified as pulpwood that is normally used for the production of other products.80 As an alternative benchmark based on the same Malaysian GTA data source as used for the Preliminary Results, APRIL provided average unit values of mixed hardwood relying on HTS categories that: 1) are specific to the mixed hardwood species APRIL harvested during the POR;81 and 2) apply to pulpwood.82 We analyzed the benchmark values based on APRIL’s selection of HTS numbers from the Malaysian export statistics and determined that they align more closely to the mixed hardwood harvested by APRIL than the values calculated using the petitioners’ selected HTS numbers.83 Consequently, for the final results, while we continue to use the Malaysian GTA export statistics as the source of mixed hardwood benchmarks under the stumpage and log export ban programs, we revised our calculation to use the average unit values based on the HTS numbers identified by APRIL.84

Comment 4: Which Benchmark is Appropriate for Valuing Acacia Logs under the Log Export Ban Program

APRIL and GOI’s Case Brief

In the Preliminary Results, Commerce relied on Malaysian export data based on three HTS categories to derive a benchmark for acacia pulpwood in analyzing the benefit APRIL received under the log export ban program.85

The Malaysian export data used by Commerce is flawed because one of the HTS categories, 4403.99.101, does not relate to acacia wood. Further, an analysis shows that

79 See, e.g., CFS Final IDM at Comment 13; Final Determination IDM at Comment 5; and Certain Uncoated Groundwood Paper From Canada: Final Affirmative Countervailing Duty Determination, 83 FR 39414 (August 9, 2018), and accompanying IDM at Comment 24. 80 See CFS Final IDM at Comment 13. 81 See APRIL Benchmark Submission at Exhibit 50. 82 Id. at Exhibit 54. See also APRIL and the GOI’s Case Brief at 12. 83 The petitioners question APRIL’s inclusion of at least one HTS number in its calculation, stating it “may be a typo and perhaps should refer to HTS 4403.99.9095.” See Petitioners’ Rebuttal Brief at 13-14 (the petitioners treated the APRIL-reported HTS number as business proprietary information). Our analysis of the APRIL Benchmark Submission at Exhibits 50 and 54; the Petitioners’ Benchmark Submission at Exhibit 26; and APRIL’s February 1, 2018, Submission at Exhibits 10 and 12, demonstrates that APRIL correctly the identified this HTS number as representing one type of mixed hardwood species it harvested. However, there are no reported exports under that HTS number and, as a result, it is not included in APRIL’s calculation of benchmark prices from the Malaysian export statistics. 84 See APRIL’s February 1, 2018, submission at Exhibit 10e, and Final Results Calculation Memorandum. 85 See PDM at 14.

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the acacia wood exported under the HTS categories used to calculate the benchmark are not used for pulpwood because the destination countries for the majority of the exports (i.e., the Philippines and Vietnam) do not have meaningful pulp and/or paper industries. The acacia exports appear to be consumed by the furniture industry, and, thus, the export prices represent a higher value product than pulpwood.86

Because the Malaysian export data for acacia is distorted, as further evidenced by comparisons to the Malaysian prices in the Pöyry Report used for the stumpage benchmark, Commerce should instead rely on Malaysian export prices of acacia pulpwood to India based on commercial documents submitted by APRIL covering transactions from 2013 to 2015.87 These transactions provide species-, size-, and end-use-specific FOB prices for the same type of acacia timber harvested by APRIL. These prices are further supported by the Malaysian export declarations filed for the transactions.88

Petitioners’ Rebuttal Brief

Commerce should reject APRIL’s proposed acacia benchmark for the log export ban program because it is based on information from confidential sources. Commerce’s regulations state that factual information used for benchmarks must be publicly available, and Commerce previously articulated that benchmark data from a published, publicly available source is superior to confidential data.89

APRIL’s acacia price data represents a single isolated transaction, rather than a broader range of prices as APRIL claimed in its case brief.90 Accordingly, this transaction does not reflect prevailing market conditions under section 771(5)(E) of the Act. In CFS Final, Commerce relied on data regarding all Malaysian exports rather than data for a single Malaysian export sale.91 Similarly, Commerce should rely on the overall Malaysian export statistics rather than the prices from an isolated export transaction.

APRIL’s acacia price benchmark is also inferior because it does not provide price data for 2016, while the Malaysian export statistics data on the record cover both 2015 and 2016.

With respect to APRIL’s contention that the inclusion of HTS number 4403.99.101 is inappropriate for an acacia benchmark, if Commerce determines that this HTS category should not be included, the benchmark can be revised to excluded data reported under that category.92

86 See APRIL and the GOI’s Case Brief at 24-26 (citing APRIL Benchmark Submission at Exhibits 30, 32, and 38; APRIL February 1 Submission at Exhibit 10b; and APRIL March 20, 2018, submission at Exhibit 3). 87 Id. at 27-28 (citing APRIL Benchmark Submission at Exhibit 34). 88 Id. at 28 (citing APRIL Benchmark Submission at Exhibit 37). 89 See Petitioners’ Rebuttal Brief at 4-5 (citing 19 CFR 351.511(a)(2); and CCP Final IDM at Comment 7). 90 Id. at 5 (citing APRIL Benchmark Submission at Exhibit 34d). 91 Id. at 5 (citing CFS Final IDM at Comment 11). 92 Id. at 6-7. Using data in the Petitioners’ Benchmark Submission at Exhibit 36, the petitioners provide adjusted acacia benchmarks based on Malaysian log export statistics excluding exports reported under HTS number 4403.99.101.

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Commerce’s Position: We continue to base the benchmark prices for acacia pulpwood under the log export ban program on the GTA export statistics for Malaysia. As discussed in Comment 3, above, we find this source to be appropriate to derive benchmark prices for the benefit analysis under the log export ban program, in accordance with 19 CFR 351.511(a)(2)(ii), because it meets the requirements of a world market price available to purchasers in Indonesia. APRIL’s alternative for the acacia pulpwood benchmark under the log export ban program is based on commercial sales transactions for Malaysian acacia pulpwood logs sold to India.93 Pursuant to 19 CFR 351.511(b), the Department will normally consider an LTAR benefit as having been received as of the date on which the firm paid or was due to pay for the government-provided good in question. Further, under 19 CFR 351.511(c), the Department will normally allocate the LTAR benefit to the year in which the benefit is considered to have been received under 19 CFR 351.511(b). Thus, we base LTAR benefit calculations on a POR comparison of the prices the respondent firm paid for the good in question to market-determined benchmark price for the good. Of the sales transactions in APRIL’s benchmark submission, only one represents a sales transaction during the POR.94 In CFS Final, where the respondent similarly provided purchase documentation of private log purchases for benchmark consideration, Commerce rejected the use of a single sale to establish a benchmark price.95 In CCP Final, Commerce relied on Malaysian export statistics from WTA for benchmark prices, noting that the source provided a price that was “a published, publicly available number from a widely recognized source.”96 We also note that in CCP Final, Commerce addressed respondents’ claim that classification errors occurred because shipments of saw logs from Malaysia were incorrectly classified as acacia pulpwood. Commerce found that the products were not misclassified or the errors were corrected before the figures were reported to the WTA.97 Therefore, consistent with the past Indonesian paper proceedings, we find the publicly available Malaysian export statistics published in the GTA and covering the entire POR to be superior as a Tier 2 benchmark price for acacia pulpwood to the single, non-public, sales transaction proffered by APRIL as an alternative. Finally, we agree with APRIL that one of the HTS numbers used by the petitioners to derive the acacia benchmark price does not appear to refer to acacia pulpwood.98 Therefore, in the final results, we used the GTA export data excluding HTS number 4403.99.101 for the acacia benchmark for comparisons under the log export ban program, as provided by the petitioners in their rebuttal brief.99 93 See APRIL Benchmark Submission at Exhibit 34. 94 Id. at Exhibit 34d. 95 See CFS Final IDM at Comment 11. 96 See CCP Final IDM at Comment 7. 97 Id. at Comment 9. 98 See APRIL and the GOI’s Case Brief at 24-25. See also the HTS descriptions in APRIL’s February 1, 2018, submission at Exhibit 12, which shows no entry for HTS number 4403.99.101, and a description of “Baulks, sawlogs and veneer logs,” and “of Penaga,” for HTS number 4403.99.1010. 99 See Petitioners’ Rebuttal Brief at 7.

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Comment 5: Whether Commerce Should Deduct Cost Items Inherent to Plantation Operations as Part of Harvesting Costs for the Stumpage Program

APRIL and GOI’s Case Brief

In its Preliminary Results, Commerce correctly adjusted the stumpage benchmark to remove Indonesian wood harvesting costs. However, Commerce improperly failed to deduct “depreciation” and “water management” costs as it had done in its subsidy calculations in the investigation.100

Costs related to the “depreciation” of fixed assets (including housing and offices, plantation equipment, estate roads, access roads, and other infrastructure required by the concession permit) should be deducted from the stumpage benchmarks as part of harvesting costs.101

Costs related to “water management” within the plantation estate (i.e., intra-estate canal cleaning) should also be deducted from the stumpage benchmarks as part of harvesting costs. In the Preliminary Results, Commerce correctly adjusted for road maintenance and jetty maintenance as part of harvesting costs. “Water management” costs are simply another name for canal maintenance costs, and Commerce should also adjust for these plantation maintenance costs.102

Both “depreciation” and “water management” costs are required by the concession permit and are inherent to all plantation operations; these costs are not related to the intrinsic value of wood (i.e., the stumpage value). Therefore, these costs should be treated as part of the harvesting costs incurred by plantation operators and deducted from the stumpage benchmarks.103

Petitioners’ Rebuttal Brief

It would be improper for Commerce to make any further deductions to the stumpage benchmark for harvesting costs. Commerce may only make deductions to the stumpage benchmark if APRIL has proven that each such cost is related to extraction.104

In prior cases, Commerce has derived the values for extraction costs that were deducted from the benchmark from independent sources, not from the data reported by the respondents. As the data from the independent sources are also on this record, Commerce may rely on this information to deduct the reasonable extraction costs for an Indonesian producer, rather than APRIL’s reported costs.105

100 See APRIL and the GOI’s Case Brief at 2-3. 101 Id. at 3. 102 Id. 103 Id. at 3-4. 104 See Petitioners’ Rebuttal Brief at 14 (citing CFS Final IDM at 21; and CCP Final IDM at 11). 105 Id. at 15 (citing CFS Final and CCP Final, and Petitioners’ Benchmark Submission at Exhibit 32).

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Commerce’s Position: We agree with APRIL that we should adjust the stumpage benchmark to deduct “depreciation” and “water management” costs. At verification, we reviewed these costs and confirmed that they are required by APRIL’s concession permit.106 Consequently, for the final results, we adjusted our calculations to deduct “depreciation” and “water management” costs from the stumpage benchmark. With respect to the petitioners’ suggestion to use extraction cost data from independent sources rather than APRIL’s own costs, we find no basis to do so. We successfully verified APRIL’s reporting of these costs.107 Further, we note that we relied on APRIL’s extraction costs in the Final Determination.108 Comment 6: Whether Commerce Should Deduct Transportation-Related Costs from Mill-

Delivered Prices for the Stumpage Program APRIL and GOI’s Case Brief

In the Preliminary Results, Commerce did not adjust stumpage benchmarks that are “mill-delivered prices” for transportation, loading, and wood handling costs. However, because these “mill-delivered prices” are for wood delivered to chipping and/or pulp mills, the transportation-related costs included in these prices should be deducted in order to derive the proper stumpage value.109

For RAPP, “transportation” costs include the intra-estate transportation (including canal barging) of pulpwood and hauling to the chipping mill; for IHM, they only include intra-estate transportation. APRIL’s reported loading costs include costs for loading pulpwood to the barge or truck, and, in island areas, for lansering the wood to jetty, all activities which occur within the plantation estates. “Wood handling” comprises costs for unloading the pulpwood at the chipping mill.110

The only mill-delivered prices at issue are the Malaysian acacia pulpwood average prices sourced from the 2015 and 2016 Pӧyry reports.111

The “mill” referred to in these reports is the chipping or pulp mill that purchase pulpwood, not the plantation that produced the wood.112 The Pӧyry Reports expressly state that transport costs are included in the reported “mill gate” prices; moreover, the reports make clear that “mill gate” prices are prices as delivered to the facilities of end-users, which include transportation costs. Furthermore, the Pöyry reports explain that

106 See APRIL Verification Report at 10-11, and verification exhibits 11 and 12. 107 Id. at 10. 108 See Final Determination IDM at 16. 109 See APRIL and the GOI’s Case Brief at 5. 110 Id. 111 Id. 112 Id.

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Pöyry conducts its price surveys with the end users of the wood products, not the producers.113

Petitioners’ Rebuttal Brief

The information on the record is insufficient to establish that the benchmarks for Malaysian acacia pulpwood prices in 2015 and 2016 sourced from Pöyry reports actually reflect “mill-delivered prices.” Accordingly, Commerce should not deduct such transportation-related costs from the acacia stumpage benchmarks.114

APRIL’s and the GOI’s argument is premised on their assertion that the “mill gate” prices in Malaysia reported by Pöyry reflect prices for pulpwood delivered to chipping and pulp mills that purchase the pulpwood, not the plantation that produced the wood. However, the Pöyry reports fail to adequately define “mill gate” prices. Where the prices that were used as basis for the acacia stumpage benchmarks are discussed, the reports refer to a mill or a wharf gate interchangeably without specifying the type of mill or the exact destination considered by the price. The reports fail to make clear what type(s) of “mills” (e.g., a chip mill, a pulp mill, the wharf gate, or a plantation mill) are considered as the destination of delivery.115

Moreover, if “mill gate” prices comprise transportation costs, the Pöyry reports fail to provide sufficient details on the distances between the destinations at issue. Given that timber growing near several mills can command a higher price than timber located far away from mills, such information is necessary for a proper comparison between RAPP and IHM’s transportation costs and the prices cited in the reports.116

Given the lack of sufficient information on the record to arrive at a proper stumpage value should transportation-related costs be deducted, Commerce should apply the same methodology used in the preliminary determination to arrive at an acacia stumpage benchmark.117

Commerce’s Position: We agree with APRIL that the benchmarks for Malaysian acacia pulpwood in 2015 and 2016 sourced from Pöyry reports should be adjusted to reflect “mill-delivered prices.” We disagree with the petitioners that the Pöyry reports are unclear regarding the definition of “mill gate.” Our analysis of the Pöyry reports supports APRIL’s position that these are the prices for the logs delivered to the pulp mill.118 However, APRIL incorrectly asserts that we failed to make this adjustment in the Preliminary Results. In fact, we note that APRIL reported transportation-related costs and we made these adjustments to the benchmark prices in our Preliminary Results calculations based on APRIL’s responses. Specifically, we stated on the stumpage benefit

113 Id. at 6-7 (citing APRIL Benchmark Submission at Exhibit 38). 114 See Petitioners’ Rebuttal Brief at 16. 115 Id. 116 Id. at 16-17. 117 Id. 118 See APRIL Benchmark Submission at Exhibit 38.

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calculations for 2015 and 2016 that “for benchmarks that are mill-delivered prices, loading and lansering and transportation are also deducted.”119 Therefore, for these final results, we continue to employ the methodology we applied in the preliminary results. Comment 7: What is the Appropriate Adjustment for Logging Profit

In the Preliminary Results, we adjusted the benchmark log prices to remove the Indonesian costs of extraction (harvesting) of the standing timber, including a reasonable amount for profit associated with extraction. To value profit, we used profit information contained in “Addicted to Rent: Corporate and Spatial Distribution of Forest Resources in Indonesia; Implications of Forest Sustainability and Government Policy” (Addicted to Rent Study). Based on this source, the profit amount is $5.00 per cubic meter of harvested timber.120

APRIL and GOI’s Case Brief:

The Addicted to Rent Study, published in 1999, is outdated and cannot be used without inflation. Instead, Commerce should rely on data from a 2011 study published in Scientific Reports, “Impact of Forest Management on Species Richness: Global Meta- Analysis and Economic Trade-Offs.”121

The Scientific Reports article reports a profit amount of $41.98 per cubic meter, or 34.4 percent of timber price.122 Accordingly, Commerce should use either of those values to adjust the timber benchmark for harvesting profit.

Petitioners’ Rebuttal Brief:

APRIL’s proposed logging profit data is unsubstantiated and unreasonable. Accordingly, Commerce should continue to rely on the Addicted to Rent Study.

Contrary to APRIL’s representations, the source of APRIL’s profit data is not on the record, nor is there any other primary source for APRIL’s numbers. The Scientific Reports article cites an article that appears to be the source of APRIL’s numbers, but that article is not on the record.123 In a similar situation in CFS Final, Commerce declined to use data from a study that lacked supporting documentation to demonstrate the authenticity of the data.124

Because the original source of the profit data is not on the record, the age of the data cannot be determined. Although the original article was from 2011, the actual time

119 See Memorandum, “2015-2016 Countervailing Duty Administrative Review of Uncoated Paper from Indonesia: Preliminary Results Benefit Calculations for APRIL,” dated April 3, 2018, at Attachment 1, RAPP Stumpage Benefit 2015 worksheet, RAPP Stumpage Benefit 2016 worksheet, IHM Stumpage Benefit 2015 worksheet, and IHM Stumpage Benefit worksheet. 120 See PDM at 12 (citing Petitioners’ Benchmark Submission at Exhibit 17). 121 See APRIL and the GOI’s Case Brief at 23 (citing APRIL Benchmark Submission at Exhibit 7). 122 Id. 123 See Petitioners’ Rebuttal Brief at 18-19 (citing APRIL Benchmark Submission at Exhibit 7). 124 Id. at 19 (citing CFS Final IDM at Comment 12).

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period of the profit data cannot be determined and thus may not be any more contemporaneous to the POR than the Addicted to Rent Study.

The profit values from the Scientific Reports article may reflect excess profit, or economic rent, rather than normal profit. APRIL failed to account for economic rent in presenting its profit adjustments by assuming that the difference between timber price and production costs is attributable entirely to normal profit. APRIL failed to provide information to distinguish between normal profit and economic rent, nor any information to support the timber price and production cost figures used to derive the profit data.125

The Addicted to Rent Study is an independent source on the record that provides specific information on extraction costs and profit in Indonesia. Commerce has relied on this information in past Indonesian paper proceedings and should continue to do in the final results.126

Commerce Position: We continue to rely on the Addicted to Rent Study as the basis for the profit adjustment in the final results. This source provides the only reliable and documented information available on the record to adjust the timber benchmarks for profit, and Commerce has relied on this source in previous proceedings involving Indonesian paper products.127 We agree with the petitioners that APRIL’s proposed alternative from the Scientific Reports is unsupported and unreliable for use in the final results. The profit amount of $41.98 per cubic meter or 34.4 percent of timber price, as suggested by APRIL, is not specified in the Scientific Reports. Rather, APRIL simply subtracted production costs in the Scientific Reports ($80.02 per cubic meter) from the timber price in the report ($122 per cubic meter) to derive that amount for profit.128 Thus, it is important for us to evaluate the reliability and accuracy of the Indonesian cost and timber price figures in the report. The Indonesian cost and price figures in Scientific Report were estimates for hypothetical forest management units in Indonesia.129 The report indicates the authors made simplified assumptions on area surrounding the forestry concessions and the spatial extent of timber species to derive these figures, but the report does not include explanations as to how the authors simplified the assumptions and derived the values of these figures based on the assumptions.130 The Scientific Reports also does not specify what was included in its estimation of production costs. We take into consideration various production costs that are specifically associated with APRIL’s planation operations when calculating the benefit for the stumpage program. We have no basis to determine whether the authors who wrote the Reports also took

125 Id. at 20-21 (citing Petitioners’ Benchmark Submission at Exhibit 17; and APRIL Benchmark Submission at 23 and Exhibit 7). 126 Id. at 21-22 (citing Petitioners’ Benchmark Submission at Exhibits 1, 4, and 17; APRIL IQR at Exhibit 1; and Preliminary Results Calculation Memo at Attachment 1 (Log Benchmarks worksheet)). 127 See Final Determination IDM at 16-17; Certain Coated Paper from Indonesia: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determination, 75 FR 10761, 10767 (March 9, 2010), unchanged in CCP Final IDM at 11; and CFS Final IDM at Comment 12. 128 See APRIL and the GOI’s Case Brief at 23 (citing APRIL Benchmark Submission at Exhibit 7). 129 See APRIL Benchmark Submission at Exhibit 7. 130 Id.

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the same type of production costs into consideration. As a result, we have no basis to determine the reliability and accuracy of the profit amount, as suggested by APRIL. We have no basis to determine whether the profit in Scientific Reports are in fact more appropriate for us to use when calculating the benefit for the stumpage program than the one in the Addicted to Rent study. In contrast, the full Addicted to Rent study, which includes information on methodology, data collection and underlying data, is on the record, and provides us with a sufficient basis to evaluate the profit adjustment.131 We have used the Addicted to Rent study in past Indonesia cases. We have found this is an independent and reliable source that specifies $5 profit in Indonesia.132 Therefore, consistent with the Preliminary Results, we continued to base the adjustment to the timber benchmarks for profit on the Addicted to Rent study. Comment 8: Using APRIL’s Corrected Data Obtained at Verification in the Subsidy Rate

Calculations for the Final Results Petitioners’ Case Brief

Commerce should use APRIL’s corrected sales data and IHM’s revised harvesting cost data obtained at verification in the subsidy calculations for the final results.133

No other interested party commented on this issue. Commerce’s Position: We agree with the petitioners and used APRIL’s corrected sales data and IHM’s revised harvesting cost data in the subsidy calculations for the final results. Comment 9: Correction of Errors in the Subsidy Rate Calculations for Preliminary

Results Petitioners’ Case Brief

Commerce made two errors in its Preliminary Results calculation of the stumpage benefit for IHM which it should correct in the final results. Specifically, Commerce should correct errors: 1) in the calculation of the 2015 timber adjustment for certain species; and 2) in the calculation formula for the “Adjusted Benchmark” in the 2015 and 2016 worksheets.134

131 See Petitioners’ Benchmark Submission at Exhibit 17. 132 See CFS Final IDM at 21. 133 See Petitioners’ Case Brief at 2. 134 Id. at 6-9 (citing PDM at 12; Preliminary Results Calculation Memorandum at Attachments 1, 3 and 4, CFS Final IDM at 21; CCP Final IDM at 11; and APRIL IQR at Exhibit 1).

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APRIL and the GOI’s Case Brief

Commerce made two errors in its Preliminary Results calculation of the log export ban program benefit for RAPP, which it should correct in the final results.135 Specifically, Commerce should: 1) apply the correct benchmark in the 2015 calculation; and 2) include the purchase value of logs from one supplier omitted from the 2016 calculation.136

No other interested party commented on this issue. Commerce’s Position: We agree with both the petitioners and APRIL that we made the benefit calculation errors both parties identified in their case briefs. Therefore, we corrected these errors in our benefit calculations for the final results.137 X. Recommendation Based on our analysis of the comments received, we recommend adopting all of the above positions. If this recommendation is accepted, we will publish these final results of this administrative review and the final subsidy rates in the Federal Register. ☒ ☐ __________ __________ Agree Disagree

10/9/2018

X

Signed by: GARY TAVERMAN Gary Taverman Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, performing the non-exclusive functions and duties of the Assistant Secretary for Enforcement and Compliance

135 See APRIL and the GOI’s Case Brief at 30 (citing Preliminary Results Calculation Memorandum). 136 Id. 137 See Final Results Calculation Memorandum.