(Cite as: 50 FR 13264)

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-122-404]

Preliminary Affirmative Countervailing Duty Determination; Live Swine and

Fresh, Chilled and Frozen Pork Products from Canada

Wednesday, April 3, 1985

*13264 AGENCY: Import Administration, International Trade Administration, Commerce.

ACTION: Notice.

SUMMARY: We preliminarily determine that certain benefits which constitute subsidies within the meaning of the countervailing duty law are being provided to producers or exporters in Canada of live swine and fresh, chilled and frozen pork products. The bonding/deposit rate is Can$0.053/lb.

We have notified the United States International Trade Commission (ITC) of our determination. We are directing the U.S. Customs Service to suspend liquidation of all entries of live swine and fresh, chilled and frozen pork products from Canada that are entered, or withdrawn from warehouse for consumption, on or after the date of publication of this notice, and to require a cash deposit or bond on entries of these products in the amount equal to the estimated net subsidy.

If this investigation proceeds normally, we will make our final determination by June 10, 1985.

EFFECTIVE DATE: April 3, 1985.

FOR FURTHER INFORMATION CONTACT:Gary Taverman, Office of Investigations, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, D.C. 20230; telephone: (202) 377-0161.

SUPPLEMENTARY INFORMATION:

Preliminary Determination

Based upon our investigation, we preliminarily determine that there is reason to believe or suspect that certain benefits which constitute subsidies within the meaning of section 701 of the Tariff Act of 1930, as amended (the Act), are being provided to producers or exporters in Canada of live swine and fresh, chilled and frozen pork products. For purposes of this investigation, the following programs are found to confer subsidies:

Provincial Programs

New Brunswick Hog Price Stabilization Program.
Nova Scotia Pork Price Stabilization Program.
Prince Edward Island Price Stabilization Program.
Newfoundland Provincial Government Loans to Pork Producers.
British Columbia Swine Producers Farm Income Plan.
Alberta Pork Producer's market Insurance Plan.
Saskatchewan Hog Assured Returns Program.
Manitoba Hog Income Stabilization Plan.
Ontario Weaner Pig Stabilization Plan.
Quebec Farm Income Stabilization Insurance.
Quebec Meat Sector Rationalization Program.

The bonding/deposit rate is Can$0.053/lb.

Case History

On November 2, 1984, we received a petition from the National Pork Producers Council (NPPC) on behalf of the domestic pork producers, which include hog producers and packers of unprocessed pork products. Seven domestic pork packers are co-petitioners. In compliance with the filing requirements of section 355.26 of our regulations (19 CFR 355.26), the petition alleged that producers or exporters in Canada of live swine and fresh, chilled and frozen pork products directly or indirectly receive benefits which constitute subsidies within the meaning of section 701 of the Act, and that these imports materially injure or threaten material injury to a U.S. industry.

We found that the petition contained sufficient grounds upon which to initiate countervailing duty investigation, and on November 23, 1984, we initiated such an investigation (49 Fed. Reg. 47079). We stated that we expected to issue a preliminary determination by January 26, 1985. On January 4, 1985, we determined this investigation to be "extraordinarily complicated," as defined in section 703(c)(1)(B) of the Act. Therefore, we extended the period for making our preliminary determination to 65 until April 1, 1985 (50 Fed. Reg. 1613).

Since Canada is a "country under the Agreement" within the meaning of section 701(b) of the Act, an injury determination is required for this investigation. Therefore, we notified the ITC of our initiation. On December 19, 1984, the ITC determined that there is a reasonable indication that these imports materially injure a U.S. industry (49 FR 50315).

We presented a questionnaire concerning the allegations to the government of Canada in Washington, D.C. on December 11, 1984. On January 29, 1985, we received a response to the questionnaire. We received supplemental responses on February 19, 20, March 5, 11, and 14, 1985.

Subsequent to our initiation, we received timely requests for exclusion from several Canadian firms. Questionnaires were presented to these firms in order that the Department might determine the extent to which they may have benefited from the alleged subsidy programs. Responses were received on February 25, 1985.

There are approximately 37,000 known producers and exporters in Canada of live swine and fresh, chilled and frozen pork products. For purposes of this preliminary determination the period for which we are measuring subsidization is the Government of Canada's 1984 fiscal year--April 1, 1983, to March 31, 1984.

Standing of Petitioner

The petition was filed by the National Pork Producers Council, an association of domestic hog growers, naming as the products to be investigated imports of live swine, and fresh, chilled and frozen pork products from Canada. Because the petitioner is an association of hog growers, respondents challenged its standing to file a petition against fresh, chilled and frozen pork products, as well as live swine.

According to section 702(b) of the Act, a petitioner must be a domestic interested party filing on behalf of an industry. 19 U.S.C. 1671a(b). Under section 771(9)(C) of the Act, an association of producers of a like product is an interested party qualified to be a petitioner. A like product, in turn, is defined in section 771(10) as like or most similar in characteristics and uses to the product under investigation. 19 U.S.C. 1677(10). NPPC members produce the like product, at least insofar as live swine are the product under investigation.

*13265 The second requirement for standing is that the petitioner file on behalf of an industry, which section 771(4) of the Act describes as all or most of the domestic producers of the like product. 19 U.S.C. 1677(4). As representative of the United States hog growers, NPPC clearly has filed on their behalf.

Seven pork packers, including one of the largest in the United States, are now co-petitioners. As producers of fresh, chilled and frozen pork products, they produce the product like the pork products under investigation and are therefore domestic interested parties qualified to be petitioners. Of those packers who advised the Department of their positions, a substantial majority either gave unqualified support to the petition or urged us to include pork products in the scope of the investigation of live swine from Canada. The co-petitioners satisfy the statutory requirements for filing on behalf of an industry. We find that the petitioners and co-petitioners have standing, having filed a petition on behalf of producers of live swine and fresh, chilled and frozen pork products. Since we have found that inclusion of the seven packers as co-petitioners provides standing with respect to pork products, we need not address whether the NPPC on behalf of the hog growers has standing with respect to pork products.

Scope of the Investigation

The products covered by this investigation are live swine and fresh, chilled and frozen pork products, as currently provided for in items 100.8500, 106.4020 and 106.4040 of the Tariff Schedules of the United States Annotated (TSUSA).

Analysis of Programs

Throughout this notice, we refer to certain general principles applied to the facts of the current investigation. These principles are described in the "Subsidies Appendix" attached to the notice of "Cold-Rolled Carbon Steel Flat- Rolled Products from Argentina; Final Affirmative Countervailing Duty Determination and Countervailing Duty Order," which was published in the April 26, 1984, issue of the Federal Register (49 FR 18006).

Consistent with our practice in preliminary determinations, where a response to an allegation denies the existence of a program, receipt of benefits under a program, or eligibility of a company or industry under a program, and the Department has no persuasive evidence showing that the response is incorrect, we accept the response for purposes of the preliminary determination. All such responses are subject to verification. If the response cannot be supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.

All values referred to are in Canadian dollars.

Upstream Issue

Respondents argue that benefits bestowed on live swine are not subsidies on fresh, chilled and frozen pork products unless the Department determines that there is an upstream subsidy within the meaning of section 771(A) of the Act, as amended by section 613(a) of the Trade and Tariff Act of 1984. We disagree. In his floor statement presenting to the Senate the bill as approved by the Conference Committee, Senator Dole defined upstream subsidies as subsidies on "inputs or components of the finished product" (130 Cong. Rec. S. 13970, daily ed. Oct. 9, 1984). Inputs (or parts) and components are transformed into different articles in the production process. For example, bolts used in producing engines are transformed in the process. The finished product (an engine) is different from the part.

No such transformation occurs here. The pork meat industry can be characterized as a single, continuous line of production. The pork meat is not transformed into a different article during its various stages (from live swine to fresh, chilled and frozen pork meat). The pork meat remains substantially unchanged. Moreover, the product yielded by each stage has no commercial use except in the next stage of production.

The primary, if not the sole, purpose of all segments of the industry is to produce a single end product--pork meat. Thus, unlike bolts, which can be used as parts in a variety of finished products besides engines, the raw material here (live swine) is only used to produce one finished product--pork meat. The fact that beyond this stage many separate processed products can be made (e.g., bacon and canned ham) is irrelevant. The key is that there is a single continuous line of production from live swine to pork meat.

Congress recognized the special nature of agriculture and foresaw that analyses of subsidies and injury involving agricultural products would be different from analyses of industrial products. Congress explicitly noted that the ITC faced special problems in determining the appropriate industry in agricultural cases. (See S. Rep. No. 249, 96th Cong., 1st Sess. 88 (1979)). Indeed, this report uses livestock as the example where growers and packers could be considered as one industry. Although Congress did not explicitly comment on the issue before us, logic dictates that since growers and packers can be considered as the same industry, and there is a single, continuous line of production resulting in one end product (that is not substantially transformed during the production process), a subsidy to any segment of the pork meat industry is applicable to the output of the industry.

In light of this decision, the requests for exclusion submitted by certain Canadian packers will not be considered. Based upon our analysis of the petition and the responses to our questionnaire, we preliminarily determine the following:

I. Programs Determined to Confer Subsidies

We preliminarly determine that subsidies are provided to producers or exporters in Canada of live swine and fresh chilled and frozen pork products under the following programs:

A. Federal Programs.--1. Hog Stabilization Payments Provided Under the Agricultural Stabilization Act. The Agricultural Stabilization Act (ASA) of 1957-58 was enacted to provide for the stabilization of the prices of certain agricultural commodities. Three groups of commodities are explicitly provided for within the ASA (cattle, hogs and sheep; industrial milk and industrial cream; and corn, soy beans, oats and barley) Other natural or processed agricultural products, with certain exceptions, may be designated by the Governor in Council. Programs of the ASA are administered by the Agricultural Stabilization Board (the Board), whose members are appointed by the Governor in Council.

The Board has the duty to take such action in accordance with the ASA as is necessary to stabilize the prices of the covered agricultural commodities at their prescribed prices, and the power to "pay to producers of an agricultural commodity . . . the amount by which the prescribed price exceeds a price determined by the Board to be the average price by which the commodity is sold . . ." Chapter A-9, section 10(1)(b).The mechanism by which the stabilization payment is determined is as follows: (1) "base price" is established, which is the average price of the commodity in representative markets for the 5-year period immediately preceding the year in review; (2) "prescribed price" is determined by taking a minimum of 90 percent of the base price and adjusting it *13266 by an index reflecting changes in production costs; and (3) "average market return price" for the commodity for the year in review is established. The difference between the prescribed price and the average market return price is the amount of the gross stabilization payment.

In fiscal year 1984, because the average market return price for hogs of Can $66.98/hundredweight. fell short of the prescribed price of Can $71.75/hundredweight., the federal government authorized a stabilization payment of Can$4.77/hundredweight. or Can$8.19/hog. this amount was reduced by approximately 20 percent to reflect the proportion of Canadian production which was exported in fiscal year 1984, resulting in a net payment of Can$6.54/hog. All producers who sold hogs of index 80 (a grading factor) or better for slaughter were eligible for benefits under this program provided they submitted an application with appropriate proof of sale and slaughter. For 1983-84, there was a participation ceiling of 12,000 hogs per producer. However, while payments for fiscal year 1984 were authorized, no payments were actually disbursed during the period.

To avoid double counting, the federal government deducted the amount of any provincial stabilization payment from the federal stabilization payment before it reimbursed each producer. If the provincial payment was greater than or equal to the federal payment, the federal government made no stabilization payment. If the federal payment exceeded the provincial payout, the federal government paid the producer the difference between the federal and provincial stabilization payments.

Respondents have claimed that ASA payments are not countervailable because they are provided to more than a specific enterprise or industry, or group of enterprises or industries. In support of their claim, they cite a previous Department ruling that benefits provided to the agricultural sector are not limited in availability within the meaning of section 771(5)(B). See Final Negative Countervailing Duty Determination: Fresh Cut Flowers from Mexico (49 FR 15007).

We disagree with respondents' claim. Based on the information received, we find that ASA payments are made only to selected agricultural producers and that the level of price stabilization payments varies, at the discretion of the Agricultural Stabilization Board, from commodity-to-commodity. As such, we cannot conclude that ASA payments are available to more than a specific enterprise or industry, or group of enterprises or industries.

The legislation establishing the ASA program specifically lists "named products" that are eligible for price support payments: Livestock (cattle, hogs and sheep), certain dairy products (industrial milk and industrial cream), and certain grains (corn, soy beans, oats and barley). The ASA further allows the Governor in Council to designate other agricultural products ("designated products") for coverage.

Thus, three types of products are singled out in the legislation. Each year, prescribed prices are calculated for these named products, and if the prescribed price is less than the average market return price, payments can be authorized. Moreover, the ASA directs that for named products prescribed prices will be calculated as at least 90 percent of the base price (adjusted by a production cost index).

This treatment of named products can be compared to that of designated products. Designated products are only considered for ASA payments if the Governor in Council so directs. There apparently is no automatic calculation of a prescribed price and potential for ASA payments, as is the case with named products. Also, there is no legally mandated coefficient to be applied to the base price of designated products.

A second aspect of the scheme which leads us to conclude that ASA payments benefit a specific enterprise or industry, or group of enterprises or industries is the lack of neutrality in the formula for calculating the prescribed price. As noted above, there is not a prescribed coefficient for designated products. Even among the named products, there is discretion in setting the coefficient to be applied to the base price. Ninety percent only serves as a minimum.

Therefore, unlike the benefits discussed in Flowers, ASA payments are made to selected agricultural products in specific amounts and the specific rates of support provided depend upon the commodity in question. Hence, we preliminarily determine that ASA income support payments made to Canadian hog producers are countervailable.

In reaching this preliminary conclusion, we have focused primarily on the apparent selectivity in entitlement to ASA payments. Respondents have provided us with information that many agricultural products have been eligible for payments as designated products. Therefore, they have argued, the program is provided de facto to agriculture in general. We will seriously consider this issue for our final determination and invite interested parties' views.

Calculation of Benefit

In deciding whether to allocate the benefit arising from stabilization payments to the year of receipt or over time, we have examined whether the program under which the payments are authorized is recurring or non-recurring (exceptional), i.e., has the program been established for a period of years, or is it designed as a "one-time, shot-in-the-arm" subsidy program for the live swine industry In the case of recurring programs, we would allocate the benefit to the year of receipt; in non-recurring programs, we would allocate the benefit over time.

The support for this approach derives from the legislative history surrounding the Trade Agreements Act of 1979, where both the House and Senate Reports singled out "non-recurring subsidy grants or loans" for special treatment:

Reasonable methods of allocating the value of such subsidies over the production or exportation of the subsidies benefiting from the subsidy must be used.

S. Rep. No. 249, 96th Cong., 1st Sess. 85 (1979). See also H. Rep. No. 317, 96th Cong., 1st Sess. 75 (1979).

In the case, we have determined that the Federal Hog Stabilization Program is long-standing. It was established in 1957 by the Agricultural Stabilization Act. Annual market prices and five-year prescribed prices have been calculated for at least the last 5 years; stabilization payments have been authorized for 3 of the last 5 years. In addition, we have no reason to believe that the program will not continue. For these reasons, we have determined that the benefits provided under this program are not exceptional and should, therefore, be allocated to the year of receipt.

Because no federal stabilization payments were received during the period we investigated, and because we are allocating the benefits to the year of receipt, we find that no subsidy was received under this program during the period we investigated. However, in cases where changes have occurred after the period for which we are measuring subsidization and prior to a preliminary determination, and where the changes are verifiable, the Department's practice is to adjust the bonding/deposit rate to correspond as nearly as possible to the eventual duty liability. See Final Affirmative Countervailing Duty Determination: Oil Country Tublar Goods from Brazil (49 FR 46570) and Final Affirmative Countervailing Duty Determination: Certain Cast Iron Pipe Fittings from Brazil (50 FR 8755). In this case, because *13267 1984 federal stabilization payments are not being made, we are adjusting the bonding/deposit rate to reflect those payments. We calculated the adjusted bonding rate by applying the federal payment of Can $6.54/hog to all eligible hogs. We then divided that value by the total weight of the products under investigation. This calculation resulted in a bonding/deposit rate of Can $0.26/lb.

2. The Record of Performance Program. The Canadian Swine Record of Performance Program (ROP) is a national herd testing system designed to assist swine producers in improving breeding stock and to encourage the production of a uniformly wholesome, high quality pork product at minimal production costs. In accordance with the guidelines formulated by the Canadian Swine Record of Performance Advisory Board and Agriculture Canada, the ROP provides for performance testing on the farm and at central test stations for backfat thickness and growth rates. Information from the testing program enables within-herd ranking and comparison of animals for genetic merit. The Canadian government funds this program.

Because this program is limited to a specific industry, we preliminarily dertermine it to be counteravilable. To calculate the benefit, we divided the total value of the government contribution to the program during the period for which we are measuring subsidization by the total weight of the products under investigation. This resulted in a subsidy rate of Can $0.001/lb.

3. Hog Carcass Settlement System. Hog carcasses and meat in Canada are graded under the Hog Carcass Grading Regulations, pursuant to the federal Livestock Grading Program and the Canada Agricultural Products Standards Act. The cost of the hog marketing grading program is borne by the federal government. Participation in this program is voluntary--and producer can get grading services who sends hogs to a government inspection plant. While the government of Canada has stated that grading programs similar to this program are available to a wide spectrum of agricultural products, it has not provided any evidence to that effect. Therefore, we preliminarily determine this program to be countervailable because it appears to be limited to a specific industry.

We calculated the benefit by dividing the total weight of the products under investigation. This resulted in a subsidy rate of Can $0.001/lb.

B. Provincial Stabilization Programs--1. Alberta Pork Producers' Market Insurance Program (PPMIP). Pursuant to the Marketing of Agricultural Products Act, the PPMIP was created in 1981 to succeed the Stop Loss Program. The program assures hog producers in Alberta a specified level of return over certain production costs. It is administered by the Alberta Pork Producers Marketing Board (the Board), and is funded by a 1981 Can$10 million grant from the government of Alberta, by loans secured by the provincial government, by premiums paid by participating hog producers, and by interest earned on the foregoing.

Participation in the program is voluntary; however, once producers have elected to participate in the program they must continue to do so for its duration. All hog producers which were registered with the Board are eligible. For stabilization payments on increased herds (over 10 percent more than the number of hogs marketed in the immediately preceding year) producers must seek and obtain Board approval. Without such approval, the producer will be liable for premium payments due to excess production without receiving additional stabilization payments.

Support levels are adjusted quarterly to reflect fluctuations in the cost components of hog production. Support payments are calculated weekly, and paid monthly based on the difference between the support level and weekly average market price. In fiscal year 1984, the provincial share of the support payments made to hog producers averaged Can$2.93/hog.

2. British Columbia Swine Producers--Farm Income Plan (SPFIP). Created in 1979 pursuant to British Columbia's Farm Income Insurance Act, the SPFIP assures hog producers in British Columbia a specified level of return over certain basic production costs. The program is administered by the provincial Ministry of Agriculture and Food, the British Columbia Federation of Agriculture and the British Columbia Pork Producers' Association. The program is funded by contributions, in roughly equal proportions, by the provincial government and participating hog producers.

Participation in the program is voluntary and is open to all producers who are members of the British Columbia Pork Producers' Association and who have an annual production capacity of 300 eligible market hogs. Certain participation ceilings restrict the number of hogs for which the program provides coverage. There are also payment ceilings, above which benefits are reduced.

Participating hog producers receive stabilization payments in calendar quarters during which certain costs of production exceed market returns. Costs of production and market returns are determined monthly by the administering authorities. Stabilization payments are made quarterly and are equal to the difference between costs of production and market return, multiplied by the number of eligible hogs sold, less a discount representing the producer's contribution. Producers make contributions to SPFIP in all quarters, regardless of whether costs of production exceed market returns. In fiscal year 1984, the provincial share of the support payment to hog producers averaged Can$10.73/hog.

3. Manitoba Hog Income Stabilization Plan (HISP) Created in 1983 pursuant to The Farm Income Assurance Plans act, the HISP provides price support payments to hog producers in Manitoba. The program is administered by the provincial Ministry of Agriculture and the Manitoba Hog Producers' Marketing Board. It is funded by premiums from participating producers and from the government of Manitoba. The government also makes loans to HISP, if needed, during periods when payouts are made to producers.

Participation in the program is voluntary and is open to all producers registered with the Manitoba Hog Producers' Marketing Board. Coverage is limited to 1,250 hogs per calendar quarter, per producer, with special provision for higher ceilings for multiple family unit producers.

Participating producers receive payments at the end of each quarter in which the market price for hogs falls below a support level. This price support level is 87 percent of a cost of production model, which is recalculated each quarter. Producer premiums are deducted from the proceeds realized upon the sale of hogs. Provincial government contributions account for approximately 30 percent of the stabilization payment; the balance is funded by members' premiums, up to a maximum of 2 percent of the sale price. In fiscal year 1984, the provincial share of the support payment to hog producers averaged Can $5.26/hog.

4. The New Brunswick Hog Stabilization Program (NBHSP). The NBHSP, a joint program of the New Brunswick Department of Agriculture and the Hog Marketing Board (the Board), was established in 1974. Its purpose is to assure hog producers greater income stability, to enable hog producers to remain in the business during periods of low hog prices, and to provide a more uniform volume of pork production for the processing industry.

*13268 All hog producers in New Brunswick who market hogs through the Board are eligible to participate in this program. The maximum quarterly eligibility is equal to 25 percent of the producer's previous twelve-month production level. Each producer may carry forward any unused eligibility for a maximum of three additional quarters.

The Board establishes the price at which farmers make the required contributions. When the weekly market price exceeds this level, hog producers make the required contribution. If the weekly market price increases, the required contribution increases proportionately up to Can$2.50/hog.

In addition, the Board establishes a stabilization price which is based on certain production costs. When the average weekly price falls below the stabilizing price, the Board will make deficiency payments equal to the difference between the average weekly price and the stabilization price. In fiscal year 1984, this program was in a deficit position. Producers were not required to fund their share of the deficiency payment through a premium, but received a loan from the province to cover their share of the payment. We have no information on the terms or conditions of their loans. In fiscal year 1984 the deficiency payment, which may include loans, was Can$18.26/hog.

5. Nova Scotia Pork Price Stabilization Program (NSPPSP). Pursuant to the Nova Scotia Natural Products Act, NSPPSP is administered by the Pork Producers Marketing Board of Nova Scotia (the Board) pursuant to the Nova Scotia Pork Marketing Plan of August 9, 1983. The purpose of the program is to assure price stability with respect to the production of hogs by compensating farmers for fluctuations in the hog price sycles and by assuring that producers consistently recover direct operating costs. Participation is open to all hog producers who market hogs through the Board. Maximum eligibility is established annually according to the producers' existing production facilities.

The NSPPSP is funded by producer contributions to the Pork Price Stabilization Fund. Each quarter, the Board sets and reviews the price at which producers contribute to the fund (the contribution price) and the price at which they receive payments from the fund (the stabilization price, which is set to reflect current, direct, out-of-pocket operating costs). When the weekly market price exceeds the producers' contribution price, the Board deducts the amount of the contribution from the sale price and deposits it in the Stabilization Fund. When the weekly market price falls below the stabilization price, the Board pays the producer the full amount of the difference between the weekly market price and the stabilization price. In fiscal year 1984, this program was in a deficit position. Producers were not required to fund their share of the deficiency payment through a premium, but received a loan from the province to cover their share of the payment. We have no information on the terms or conditions of their loans. In fiscal year 1984, the deficiency payment, which may include loans was Can$16.74/hog.

6. Ontario Weaner Pig Stabilization Plan. This program was initiated on April 1, 1980, pursuant to Ontario's Farm Income Stabilization Act. Ontario does not have a price stabilization program for slaughter hogs; this program covers only weaner pigs. A weaner pig is a swine, at the stage of production at which it has been separated from the sow, but before it becomes a pig and eventually a slaughter hog. This program is intended to contribute towards providing income stabilization to sow weaner producers. It is administered by the Farm Income Stabilization Commission on Ontario's Ministry of Agriculture and Food.

Particpation in the program is voluntary and is open to all sow weaner producers in Ontario with a minimum of four sows. A producer's participation is limited to the number of weaner pigs produced by 100 sows in any production period. (Production periods under this program are 6-month time periods, from April 1 to September 30 and from October 1 to March 31 of the following year.) The cost of this program is shared by the provinical government, which pays two-thirds of the costs, and participating producers which pay one-third.

Participating producers receive suport payments in any production period in which the average market price for that period is below a support price. This support price is calculated at 95 percent of the average price in the five years immediately preceding the production period, adjusted for cash-cost changes. Price and cash costs are those used in the Federal ASA program for slaughter hogs. Payments are calculated on a slaughter hog basis and then converted to a per sow basis by formula. In fiscal year 1984, the provincial payments under this program amounted to Can$3,660,444.

7. The Prince Edward Island (PEI) Price Stabilization Program. In accordance with the PEI Natural Products Marketing Act, the PEI Hog Commodity Marketing Board established the PEI Price Stabilization Program in 1973. The purpose of the program is to provide income stability to hog producers by compensating them for fluctuations in prices caused by traditional hog-price cycles.

The Price Stabilization Fund is made up of equal producer and provincial government contributions. Contributions are made when the weekly average market price for hogs exceeds a predetermined level and are increased proportionally as the average weekly price for hogs increases. If the weekly market price for hogs falls below the contribution level no payments are made. If the weekly market price declines below a second predetermined level (the stabilization price). The PEI Hog Commodity Marketing Board will pay the producer a deficiency payment equal to of one-half the difference between the depressed market price and the stabilization price. Support levels are recalculated quarterly in March, June, September and December.

Participation in the program is voluntary; there are no minimum production requirements. However, producers are only eligible to receive deficiency payments on the number of hogs equal to the average number of hogs marketed in the previous quarter, up to a ceiling of 4,000 hogs in four consecutive quarters. In fiscal year 1984, the provincial share of the support payment to hog producers averaged Can $9.33/hog.

8. Quebec: Farm Income Stabilization Insurance. The 1981 Act Respecting Farm Income Stabilization Insurance was enacted to guarantee a net annual income to participating producers. The program is administered by the Regie des Assurances Agricoles du Quebec (Regie), which annually decides the level at which it supports agricultural producers.

In order to participate in this program, Quebec producers must agree to stay with the program for at least 5 years and produce at least 100 hogs and own 15 sows during the first year, with a participation ceiling of 5,000 hogs or 400 sows.

At the end of each year, the Regie calculates the level of stabilization income, which is based on a farm production model designed to cover fixed costs, variable costs and producers' remuneration. The provincial government annually assesses participants for contributions to the income stabilization fund. These funds make up one-third of the Stabilization Insurance Fund. The provincial government provides the balance. In fiscal year 1984, the provincial share of the support payment to hog producers averaged Can $15.08/hog.

*13269 9. Saskatchewan Hog Assured Returns Program (SHARP). SHARP was established in 1976 pursuant to the Saskatchewan Agricultural Returns Stabilization Act and provides stabilization payments to hog producers in Saskatchewan at times when market prices fall below certain production costs. The program is administered by the Saskatchewan Pork Producers' Marketing Board on behalf of the provincial Department of Agriculture.

Participation in the program is voluntary and is open to all hog producers in the province. Coverage is limited to 1,500 hogs per producer each calendar quarter. During the period we investigated, nearly 75 percent of all hogs marketed in Saskatchewan were covered by the program.

This program is funded by contributions from participating producers and by matching amounts from the provincial government. Producer contributions range from 1.5 to 4.5 percent of market returns on the sale of hogs which are covered by the program. Whenever the balance in the SHARP account is insufficient to make payments to participants, the provincial government loans the needed funds to the Program.

The stabilization price under this program is the total of all cash production costs plus 75 percent of non-cash costs. This price is determined each calendar quarter. Stabilization payments are made at the end of each quarter to each participating producer whose average price for hogs marketed in that quarter is less than the stabilization price. However, in order to make a stabilization payment, the difference between average market price obtained and the stabilization price must be least Can$1.00. For fiscal year 1984, the provincial share of the support payment to hog producers averaged Can$8.09/hog.

Summary of Provincial Stabilization Programs

Stabilization plans similar to these programs may also be available with respect to some other agricultural commodities in each of the provinces cited above. However, neither the government of Canada nor the provincial governments have provided information on (1) the other commodities receiving stabilization payments, (2) the value of those payments, and (3) the mechanism by which those payments are determined. Therefore, for purposes of this preliminary determination, we find that benefits under these plans are provided to a specific industry, and are countervailable.

Calculation of Benefits

We have determined that the various provincial stabilization benefits are being provided under recurring government programs, and have, therefore, allocated the benefits to the year of receipt. For each province, we calculated the total stabilization payment made during the period for which we are measuring subsidization (after netting out producer contributions), and divided that value by the total weight of the products under investigation. In those provinces where deficiency payments may be in the form of loans (Nova Scotia and New Brunswick) we have treated the entire amount as having been received, because we did not have information on the terms and conditions of the loans. Adding the benefits found for the provincial stabilization programs together resulted in a bonding/deposit rate of Can$0.025/lb.

D. Other Provincial Programs--1. Newfoundland: Low-Interest Loans to Provincial Pork Producers. In 1983-84, the Newfoundland provincial government provided loans to provincial pork producers. We have not received any information as to the terms or conditions of these loans. However, the Canadian federal government estimates a benefit to the hog producers of Can $0.85/hog. For purposes of this preliminary determination, we have applied this value to all hogs sold in Newfoundland, and have calculated a benefit under this program of Can$0.00002/lb.

2. Quebec: Grants to Pork Packers under the Meat Sector Rationalization Program. Between 1975 and 1978, the Quebec Ministry of Agriculture, Fisheries and Food instituted the meat Sector Rationalization Program. The purposes of the program are: (1) To encourage the development of the Quebec meat sector, (2) to ensure Quebec producers with viable, sustained outlets for their production, (3) to provide the industry with a competitive advantage, and (4) to direct businesses to new markets.

Under this program the Quebec Ministry of Agriculture, Fisheries and Food provides technical assistance and grants for the establishment, standardization, expansion, or modernization of slaughterhouses, processing plants, or plants preparing foods containing meat. All businesses operating or wishing to operate such a facility are qualified to participate in this program. Total capital costs must exceed Can$10,000 and processors may not depreciate new equipment to the extent of any grant.

Because benefits under this program are limited to the meat sector, we preliminarily determine that they are provided to a specific enterprise or industry, or group of enterprises or industries, and are therefore countervailable. The Government of Quebec has reported that three packers currently in operation have received benefits under this program. Using the grant methodology, we have calculated a benefit of Can$0.00005/lb.

II. Programs Determined Not To Confer Subsidies

We preliminarily determine that subsidies are not being provided to producers or exporters in Canada of live swine and fresh, chilled and frozen pork products under the following programs:

A. Federal Financing Programs.--

1. Farm Credit Act. Canada's Farm Credit Act of 1959 provides long-term loans to individual farmers, farming corporations, and cooperative farm associations for the acquisition of farm land and for a broad array of agricultural operations. The program is administered by the Farm Credit Corporation.

Loans are for a maximum term of thirty years and must be secured. With two exceptions, these loans are made at a fixed annual rate of interest which is 1 percent above a base rate. This base rate is the same as the yield on government of Canada bonds with maturities of five to ten years. The exceptions to the above are (1) loans which were approved between October 18, 1979, and March 31, 1980, at a fixed rate of 12 percent per annum, and (2) a special provision for interest rates on loans approved on or after November 15, 1968, part of the proceeds of which are used to repay prior loans under this program.

2. Farm Syndicates Credit Act. The Farm Syndicates Credit Act provides long- term loans to farming corporations, cooperative farm associations and other farm associations for the purchase or improvement of farm buildings and land, and for the acquisition of farm machinery. The program is administered by the Farm Credit Corporation.

Loans are made for up to Can$100,000, on terms which vary according to the use of the proceeds. Interest rates are prescribed by the Farm Credit Corporation and are set at levels which cover the Corporation's cost of money and its administrative expenses.

3. Special Farm Assistance Programs. Under this program, long-term loans were available to distressed farming enterprises. The program ended on June 28, 1984.

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Summary of Federal Financing Programs

The enabling federal legislation indicates that financing under these Federal plans is available without restriction to the producers of any agricultural product in Canada. Because the programs do not designate specific products for receipt of financing or establish differing terms for specified products, we preliminarily determine that the Federal financing programs for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries, and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs. See Final Negative Countervailing Duty Determination: Fresh Cut Flowers from Mexico (49 FR 15007).

B. Provincial Programs.--

1. Grant Programs in Quebec. (a) Grants under the Act to Promote the Development of Agricultural Operations. Under the Act to Promote the Development of Agricultural Operations, grants are provided to assist farmers in carrying out improvements on their farms.

(b) Grants to Provincial Pork Packers under the Quebec Industrial Assistance Act (IAA) The IAA was established in 1971 to promote economic development in Quebec. Through it, the government of Quebec may make low-interest loans, grants, loan guarantees, and may purchase shares in manufacturing and commercial operations. Two pork packers received grants under this program.

Summary of Quebec Grant Programs

Because the programs do not designate specific products for receipt of funding to establish differing terms for specified products, we preliminarily determine that the Quebec grant programs for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries, and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

2. Financing Programs in Quebec. (a) Low-Interest Financing under an Act to Promote Long-Term Farm Credit by Private Institutions. The Office du Credit Agricole du Quebec offers low-cost financing to agricultural producers who maintain a profitable farm as their primary occupation and who demonstrate a need for such financing. The Act permits lenders to make variable-interest, low-cost long-term loans to borrowers so that the interest charged does not exceed the prime rate plus 1/2 percent. In addition, twice a year the Office reimburses a part of the interest, equal to half the difference between 4 percent and the interest charged, to the borrower. On loans granted before November 23, 1983, the Office returns to the producer the portion of the interest exceeding 2 1/2 percent on the first Can$15,000 and the portion exceeding 8 percent on the next Can$135,000 (Can$185,000 for group operations).

(b) Low-interest Financing under the Farm Credit Act. Under the Farm Credit Act, the Office du Credit Agricole du Quebec can make long-term loans on conditions similar to those in the Act to Promote Long-Term Farm Credit by Private Institutions. The interest charged is 2.5 percent on the first Can $15.000 and 8 percent on the remaining amount up to Can$150,000 (or Can$200,000 for group operations). Since August 1, 1978, the Office has ceased making loans although it may, under exceptional circumstances, make loans when private lenders are unable to do so. In addition, the Fonds d'Assurances-prete Agricoles et Forestiers guarantees loans and lines of credit extended to farmers by private institutions under the Farm Credit Act even though these loans carry no interest subsidy.

(c) Low-Interest Guaranteed Loans under An Act to Promote Farm Improvement. The Office du Credit Agricole guarantees medium-term loans of up to Can $200,000, whose variable interest-rate may not exceed the prime rate plus 1/2 percent. Twice a year the Office reimburses borrowers a portion of the interest equal to 3 percent on the first Can$15,000 of loans. All farmers who maintain profitable farms as their primary occupation, and who demonstrate a need for such financing, qualify.

(d) Interest-Free Loans under the Act to Promote the Establishment of Young Farmers. The Act to Promote the Establishment of Young Farmers was promulgated on September 1, 1982. It permits newly established farmers between the ages of 18 and 40 to receive interest subsidies equal to the net interest payable for five years on the first Can$50,000 of a loan.

(e) Low Interest Mortgages under the Farm Loan Act. The Farm Loan Act permits the Office du Credit Agricoles du Quebec to reimburse a portion of the interest on the first Can$15,000 of a mortgage granted by the Farm Credit Corporation of Canada. The Office will reimburse one half of the difference between 4 percent and the rate charged by the Office. On loans granted by the Farm Credit Corporation of Canada (FCC) before November 21, 1981, the Office reimburses the difference between 2 1/2 percent and the rate charged by the FCC on these loans.

Summary of Quebec Financing Plans

Because the programs do not designate specific products for receipt of funding nor do they establish differing terms for specified products, we preliminarily determine that the Quebec financing programs for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries, and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

(3) New Brunswick. (a) Financing Provided Under the Farm Adjustment Act of 1980. Under the Farm Adjustment Act of 1980, the Farm Adjustment Board was empowered to make loans for the purchase of farms and farmland, farm buildings, equipment, and for the conversion of short-term liabilities to medium- and long-term obligations; and to make loans and grants for the conversion of ineffectively used land to more effective use. In addition, the Farm Adjustment Board may conduct research, investigations and feasibility studies to assist in land-use or land-management projects aimed at increasing income and employment in rural areas.

(b) Loans, Leases and Purchasing Rights under the Farm Adjustment Act of 1984. The New Brunswick Regulations under the Farm Adjustment Act of December 20, 1984 permits the Farm Adjustment Board to extend loans, lease property and sell land to qualifying farmers.

Summary of New Brunswick Financing Programs

Because the programs do not designate specific products for receipt of funding or establish differing terms for specified products, we preliminarily determine that the New Brunswick financing programs for agriculture are available to more than a specific enterprise or industry, or group of enterprise or industries, and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

4. Nova Scotia Loans Received Under the Agriculture and Rural Credit Act. The Agriculture and Rural Credit Act establishes the Nova Scotia Farm Loan Board whose purpose is to make low-interest loans for agricultural purposes. Because the programs do not designate specific products for receipt of funding or establish differing terms for specified products, we preliminarily determine that the Nova Scotia financing programs *13271 for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

5. Alberta Agricultural Development Corporation. The Agricultural Development Corporation provides low-interest loans and loan guarantees to farming operations, including hog producers. Because the programs do not designate specific products for receipt of funding or establish differing terms for specified products, we preliminarily determine that the Alberta financing programs for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

6. British Columbia: Interest Free Loans and Loan Guarantees by British Columbia Ministry of Agriculture and Food. Under British Columbia's Agricultural Credit Act, interest-free loans and loan guarantees are provided to eligible farmers. Because the programs do not designate specific products for receipt of funding or establish differing terms for specified products, we preliminarily determine that the Alberta financing programs for agriculture are available to more than a specific enterprise or industry, or group of enterprises or industries, and hence are not countervailable. At verification, we will carefully look at the availability of funds under these programs.

V. Programs Determined Not To Be Used

We preliminarily determine that producers or exporters in Canada of live swine and fresh, chilled and frozen pork products did not use the following programs:

A. Ontario Red Meat Plan. Under this program, various grants and services are provided by Ontario's Ministry of Agriculture and Food to producers of beef and sheep. Benefits are not available to producers or exporters of live swin and fresh, chilled and frozen pork products.

B. Swine Sales Assistance Policy. This program is designed to promote the distribution within Ontario of pure-bred animals of superior quality. Grants of Can$2.50 per animal, to a maximum of Can$100 per sale may be made to Breeders' Clubs. These grants are to assist in defraying the costs of conducting consignment sales. No payments were made under this program during the period we investigated.

IV. Programs for Which More Information Is Needed

A. Ontario Farm Tax Reduction Program. This program, which orginated in 1970, provides rebates of 60 percent of municipal property taxes on farmland to all eligible farmers in Ontario. For farm property to be eligible, annual municipal property taxes must be at least Can$20, and it must realize a gross annual production of Can$5,000 if located in eastern and northern Ontario, and Can$8,000 if located elsewhere in the province. Farmers who have received such rebates for a property and convert it to non-farm use must repay all debates of the preceding ten years, with interest.

This program appears to be countervailable as a regional subsidy within the Province. However, we need more information regarding benefits received by the producers of live swine and fresh, chilled and frozen pork products during the period we investigated.

B. British Columbia-Partial Interest Reimbursement. This program operates to reimburse farmers in British Columbia for part of the interest on loans. The government of British Columbia has not provided the enabling legislation for this program. Further informaiton is needed to determine whether benefits under this program are limited to a specific enterprise or industry, or group of enterprises or industries, in specific regions of the Province.

C. Manitoba Agricultural Credit Corporation Loan Guarantees. The government of Manitoba, through the Manitoba Agricultural Credit Corporation, provides guarantees for short-term loans to farmers for general operating expenses. The enabling legislation for this program has not been provided. Further information is needed to determine whether or not benefits under this program are limited to a specific enterprise or industry, or group of enterprises or industries, in specific regions of the Province.

D. New Brunswick Loan Guarantee Under the Livestock Incentives Act, January 1976. The Livestock Incentives Act of January 1976 empowers the Ministers of Agriculture and Rural Development to pay a lender the amount of loss sustained by it as a result of a livestock loan if the terms of the loan were consistent with government regulations. In addition, the Minister may extend a grant to farmers or on their behalf, if the farmers conducted their operations in accordance with a farm plan approved by government officials. Further information is needed to determine whether or not benefits under this program are limited to a specific enterprise or industry, or group of enterprises or industries. To the extent that this program may be countervailable, we also need more information regarding benefits received by the producers of live swine and fresh, chilled and frozen pork products during the period we investigated.

E. Saskatchewan Financial Assistance for Livestock and Irrigation. Under this program, low-interest loans are made available to farmers for the production of livestock, including swine, and to finance irrigation of farmland. Loans to each particpant are limited to Can$350,000. Further information is needed to determine whether or not benefits under this program are limited to a specific enterprise or industry, or group of enterprises or industries, in specific regions of the province.

F. Saskatchewan: Livestock Investment Tax Credit. Saskatchewan's 1984 Livestock Tax Credit Act provides a tax credit of Can$3.00 per hog for hogs slaughtered between March 22, 1984, and December 31, 1986. Producers and other eligible claimants must own the hogs for a minimum feeding period of 60 days and either slaughter them themselves or market them for immediate slaughter. There is a Can$100 deduction from the credit in each year in which this tax credit is claimed. Any unused portion of the tax credit may be carried forward by the claimant for up to seven years after the year in which not used.

Because these tax credits were not available until the 1984 tax year, for which returns would be filed no earlier than 1985, it is virtually impossible to quantify the value of these benefits based on the information we now have. We will seek additional information regarding the benefits provided under this program at verification.

V. Program Determined Not To Exist

A. Proposed Tripartite Red Meat Stabilization Programs. Proposals exist for the introduction of stabilization programs for five sectors of red meat production in Canada, including one for hog producers. These would provide national uniformity in support levels within each sector and would replace the existing federal and provincial programs. These proposals are now in the discussion stage; thee is not yet any legislative foundation for them. Accordingly, we determine that this program does not exist.

Verification

In accordance with section 776(a) of the Act, we will verify the data used in *13272 making our final determination. As previously stated, if any statement in the response cannot be supported at verification, and the program is otherwise countervailable, the program will be considered a subsidy in the final determination.

Suspension of Liquidation

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidattion of all entries of live swine and fresh, chilled and frozen pork products from Canada which are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the Federal Register and to require a cash deposit or bond for each such entry of this merchandise of Can$0.053/lb. This suspension will remain in effect until further notice.

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-confidential information relating to this investigation. We will allow the ITC access to all privileged and confidential information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Import Administration.

The ITC will determine whether these imports materially injure or threaten material injury to a U.S. industry 120 days after the Department makes its preliminary affirmative determination or 45 days after its final affirmative determination, whichever is latest.

Public Comment

In accordance with s 355.35 of our regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination at 10:00 a.m. on May 9, 1985, at the U.S. Department of Commerce, room 3708, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to participate in the hearing must submit a request to the Deputy Assistant Secretary for Import Administration, room B- 099, at the above address within 10 days of the publication of this notice.

Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of the issues to be discussed. In addition, at least 10 copies of pre-hearing briefs must be submitted to the Deputy Assistant Secretary by May 3, 1985. Oral presentations will be limited to issues reaised in the briefs. All written views should be filed in accordance with 19 CFR 355.34, within 30 days of the publication of this notice, at the above address and in at least 10 copies.

This notice is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).

Dated: March 26, 1985.

Alan F. Holmer,

Deputy Assistant Secretary for Import Administration.