NOTICES

DEPARTMENT OF COMMERCE

[C-122-404]

Live Swine From Canada; Final Results of Countervailing Duty Administrative Review

Monday, January 9, 1989

AGENCY: International Trade Administration/Import Administration, Commerce.

ACTION: Notice of final results of countervailing duty administrative review.

SUMMARY: On June 14, 1988, the Department of Commerce published the preliminary results of its administrative review of the countervailing duty order on live swine from Canada. We have now completed that review and determine the net subsidy to be de minimus for slaughter sows and boars and Can $0.022/lb. for all other live swine during the period April 3, 1985 through March 31, 1986.

EFFECTIVE DATE: January 9, 1989.

FOR FURTHER INFORMATION CONTACT:Sylvia Chadwick or Bernard Carreau, Office of Countervailing Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On June 14, 1988, the Department of Commerce ("the Department") published in the Federal Register (53 FR 22189) the preliminary results of its administrative review of the countervailing duty order on live swine from Canada (50 FR 32880, August 15, 1985). The Department has now completed that administrative review in accordance with section 751 of the Tariff Act of 1930 ("the Tariff Act").

Scope of Review Imports covered by the review are shipments of Canadian live swine. Such merchandise is currently classifiable under Harmonized Tariff Schedule items 0103.91.00 and 0103.92.00. The review covers the period April 3, 1985 through March 31, 1986, and 28 programs:
1. Agricultural Stabilization Act
2. Record of Performance Program
3. Canada-Ontario Stabilization Plan for Hog Producers 1985
4. Alberta Red Meat Interim Insurance
5. Saskatchewan Hog Assured Returns
6. British Columbia Farm Income Insurance Plan
7. Manitoba Hog Income Stabilization Plan
8. New Brunswick Hog Price Stabilization Plan
9. Newfoundland Hog Price Support Program
10. Nova Scotia Pork Price Stabilization Program
11. Prince Edward Island Price Stabilization Program
12. Quebec Farm Income Stabilization Insurance Programs
13. New Burnswick Swine Assistance Program
14. New Brunswick Livestock Incentives Program
15. New Brunswick Hog Marketing Program
16. New Brunswick Swine Industry Financial Restructuring Program
17. Nova Scotia Swine Herd Health Policy
18. Nova Scotia Transportation Assistance
19. Ontario Farm Tax Reduction Program
20. Ontario (Northern) Livestock Programs
21. Prince Edward Island Hog Marketing and Transportation Subsidies
*652 22. Prince Edward Island Swine Development Program
23. Prince Edward Island Interest Payments on Assembly Yard Loan
24. Quebec Special Credits for Hog Producers
25. Saskatchewan Financial Assistance for Livestock and Irrigation
26. Saskatchewan Livestock Investment Tax Credit
27. Saskatchewan Livestock Advance Program
28. Ontario Weaner Pig Stabilization Plan

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. At the request of the petitioner, the National Pork Producers Council (NPPC), we held a public hearing on August 5, 1988. The NPPC, the Canadian Pork Council (CPC), and Quintaine & Sons Ltd., the major Canadian exporter of slaughter sows and boars, took part in the hearing.

Comment 1: The CPC points out that the Department misread the financial statement of the Farm Income Stabilization Commission ("FISC") of Ontario in calculating the benefit from the Ontario Weaner Pig Stabilization Plan.

Department's Position: We agree and have revised our calculations accordingly. We determine the benefit from this program to be Can $0.00000037/lb.

Comment 2: The CPC asks the Department to clarify its rationale for determining that the Agricultural Stabilization Act ("ASA"), the National Tripartite Red Meat Stabilization ("Tripartite") Program, the British Columbia Farm Income Insurance Program, and the Quebec Farm Income Stabilization Insurance Program are limited to specific industries. The CPC also requests that the Department establish detailed criteria to explain further its specificity test by answering the following questions: If all major commodities in a jurisdiction were covered by stabilization programs, would these programs then be considered not countervailable How is a major commodity defined If all major commodities are covered by a stabilization or other program (e.g., supply management) at the national or provincial level, should not the Department take this factor into account On the other hand, if there are no clearly discernible major commodities in a jurisdiction, is it possible to pass the Department's specificity test if less than 100 percent of the commercial farm products are covered by a stabilization program If so, how much less than 100 percent: 90, 80, 60, or 51 percent How is coverage measured: by number of products, tonnage, or value

Department's Position: As stated in our preliminary results, we continue to regard the subsidy programs referred to by the CPC as countervailable because they are provided to specific industries. Several aspects of the ASA have changed since our final determination (50 FR 25097, June 17, 1985). Furthermore, we received additional information on the Tripartite program, the British Columbia Farm Income Insurance Program, and the Quebec Farm Income Stabilization Insurance Program. However, we received no additional evidence that any of these programs are not still limited to specific industries. For example, with respect to the ASA, several major agricultural commodities, such as most wheat, dairy products, and poultry, are still ineligible for payments. Several major agricultural products are also excluded from the British Columbia Farm Income Insurance Program (e.g., wheat, dairy products, and poultry) and the Quebec Farm Income Stabilization Insurance Program (e.g., milk products, poultry, and eggs). Therefore, we determine that these four programs continue to be countervailable.

The request by the CPC that the Department establish detailed criteria to explain further its specificity test appears to be a request for an advisory opinion. We do not consider it appropriate to issue advisory opinions based upon hypothetical situations. Also, it is well established that the Department's specificity test cannot be reduced to a mathematical formula because domestic subsidy programs are seldom identical. The terms and conditions of domestic subsidy programs differ from case to case, as do the circumstances under which a specific program may be used. Thus, we cannot reduce our test for specificity to a single formula that would be applicable to every case, as CPC implicitly suggests we should. Instead, we must analyze each program on its own merits and weigh various factors before we can determine that a program is or is not provided, either de jure or de facto, to a specific enterprise or industry, or group of enterprises or industries.

Parties, however, are not without guidance. The determinations published by the Department provide a significant body of precedents by which a domestic subsidy program may be analyzed. Moreover, we routinely consider the following factors when we apply the specificity test: (1) The extent to which a foreign government acts to limit the availability of a program; (2) the number of enterprises, industries, or groups that actually use a program; (3) the dominant or disproportionate use of a program by certain enterprises, industries or groups; and (4) the extent to which the foreign government exercises discretion when it confers benefits under a program. See, e.g., Preliminary Affirmative Countervailing Duty Determination: Certain Softwood Lumber Products from Canada (51 FR 37453, October 22, 1986)).

Comment 3: The NPPC contends that the Department's preliminary determination that the Record of Performance Program (ROP) is not countervailable is based on errors of law and mistakes of fact. As long as the ROP is provided to a specific industry, the Department should find the program to be countervailable.

The NPPC claims that while the results of the ROP research are nominally available to any interested party, few, if any, parties other than the Canadian hog industry are interested in the results. Only the Canadian hog industry can benefit from the ROP research because the information generated is specifically tailored for the production practices and climatic conditions existing only in Canada. ROP data cannot be used by other industries in Canada or by the hog industry in the United States.

The NPPC argues that the Department's long-standing practice is to find research and development programs such as the ROP to be countervailable and, to support its assertion, cites Appendix 2 to Certain Steel Products from Belgium, 47 FR 39304, (1982); Optic Liquid Level Sensing Systems from Canada, 44 FR 1728, (1979); and Certain Steel Products from France, 47 FR 39332, (1982).

Department's Position: We disagree. In Appendix 2 to Certain Steel Products from Belgium, we determined that assistance provided by a foreign government to finance research and development does not confer a countervailable benefit if the research and development has broad application and yields results that are made available to the public.

In Optic Liquid Level Sensing Systems from Canada, we found that the research and development program provided selective treatment because the information generated was not publicly available and was only used to improve the respondent's ability to introduce a commercially successful product to market. In Certain Steel Products from France, we examined two research and development programs, *653 one publicly available and the other not. We found only the program whose research was not publicly available to be countervailable.

The NPPC submitted no information to support its claim that the availability and applicability of ROP research data are selective. The CPC, on the other hand, submitted in its rebuttal brief numerous examples of the broad application and public use outside of Canada of the research and development generated by the ROP. Among the documents submitted by the CPC are copies of scientific papers published outside Canada using ROP data; copies of papers on the results of Canadian ROP tests submitted to the National Swine Improvement Federation in St. Louis, Missouri; extensive mailing lists of recipients of ROP data, including recipients in the United States as well as other foreign countries; circulation lists of Canadian Swine, a Canadian industry magazine, that include many subscribers in the United States; and copies of Canadian Swine announcements of breeding stock sales--all with ROP data listed. The examples of the wide public use of this information supports our preliminary determination that the ROP research data are publicly available and applicable to hog producers all over the world, including those in the United States. For these reasons, we determine that the ROP program is not counteravailable.

Comment 4: The NPPC contends that the Department understated the benefit from all programs by weight-averaging benefits according to each province's proportion of total Canadian exports of live swine to the United States. The NPPC claims that weight-averaging by province rather than by producer is grossly distortive of market realities, wide open to circumvention, and improper as applied to this case. The Department should focus on the overall effect that the subsidies have on production and calculate one country-wide rate for all hogs by dividing the total amount of subsidies from all provinces by the total Canadian production of live swine. Geographic boundaries are meaningless to the production, flow and pricing of any commodity whose production is easily stimulated by government subsidies. Futhermore, weight- averaging by province creates strong incentives to circumvent or evade countervailing duties by transshipping hogs within Canada prior to exporting to the United States. The Newfoundland transshipments found by the Department in its preliminary results demonstrate that the threat of transshipment is valid.

Department's Position: We disagree. In this administrative review, as in the original countervailing duty investigation, we did not investigate individual producers, electing instead to focus on aggregate benefits provided by the federal and provincial governments to producers of live swine. We did this because of the large number of hog producers and the administrative burden imposed in analyzing and verifying numerous responses.

To calculate the subsidy, we divided, for each province, total benefits paid to hog producers in that province by total production in that province. We then weight-averaged these benefits by the provincial shares of total Canadian exports of the subject merchandise to the United States.

In our view, this method provides a better measure of the subsidy on exports to the United States than that proposed by the NPPC. This is because it gives greater weight to those provinces which ship more hogs to the United States and therefore more accurately reflects the level of subsidy on the subject merchandise.

The danger of transshipment is minimal because the same countervailing duty rate on live swine applies to all of Canada. We believe that the transshipment scenario described by the NPPC is too far removed from reality to pose any significant threat to the integrity of the countervailing duty law. As we stated in our preliminary results, the individual producer usually is not aware of the ultimate destination of his hogs. Furthermore, it is impossible for individual producers to predict which province will have the lowest benefit because the Department does not calculate provincial benefits until up to two years after the time of exportation. Finally, the Newfoundland transshipments do not support the NPPC's argument because they were made at a time that the cash deposit rate was calculated in the manner that the NPPC is now advocating.

Comment 5: The NPPC states that, although it does not challenge the Department's creation of a subclass or kind of merchandise for sows and boars, the Department should announce strict definitions of sows, boars, and slaughter hogs in order to prevent circumvention of the order by masquerading bona fide slaughter hogs as sows and boars. Quintaine opposes NPPC's request for strict definitions as unnecessary because industry standards determine the weight of sows and boars and because sows and boars are sold and shipped separately, command different prices, and have different markets.

Department's Position: We disagree with the NPPC and agree with Quintaine. In our preliminary results of review, we found that sows and boars are distinguishable from other live swine not only by their physical characteristics, but also by their ultimate use, markets and prices. Further, there is no financial incentive to sell slaughter hogs at the much lower price commanded by sows and boars.

Comment 6: The NPPC disputes the Department's estimate that sows and boars represent only one percent of Canadian production of live swine. The NPPC claims that the figure should be at least four percent, which is the approximate proportion of sows and boars to all live swine produced in the United States.

Department's Position: We agree that the one-percent figure underestimates the production of sows and boars in Canada. We requested more precise information from Canada. The CPC submitted a hog cost model developed by the Market Outlook and Analysis Division, Policy Branch, Agriculture Canada. The hog cost model was developed after the passage of the 1985 amendment to the ASA and is used for calculating the benefits from the Tripartite swine program. The model is a national average of provincial/regional costs of production of hogs. The model, which is updated yearly, was designed to reflect current industry structure and production practices. The model estimates that the proportion of sows and boars to total live swine production in Canada is 2.1 percent. We believe that this is the most accurate estimate available. Adjusting for this change, we have recalculated the benefits from the various programs to be:

Pound 1. Agricultural Stabilization Act ................................. $0.00075876
2. Record of Performance Program ..................................... 00000000
3. Canada-Ontario Stabilization Plan for Hog Producers 1985 .......... 01249583
4. Alberta Red Meat Interim Insurance ................................ 00322447
5. Saskatchewan Hog Assured Returns .................................. 00246900
6. British Columbia Farm Income Insurance Plan ....................... 00033610
7. Manitoba Hog Income Stabilization Plan ............................ 00130644
8. New Brunswick Hog Price Stabilization Plan ........................ 00000134
9. Newfoundland Hog Price Support Program ............................ 00002401
10. Nova Scotia Pork Price Stabilization Program ..................... 00002521
11. Prince Edward Island Price Stabilization Program ................. 00003519
*654 12. Quebec Farm Income Stabilization Insurance Programs ..............
00073368
13. New Brunswick Swine Assistance Program ........................... 00000003
14. New Brunswick Livestock Incentives Program ....................... 00000249
15. New Brunswick Hog Marketing Program .............................. 00000019
16. New Brunswick Swine Industry Financial Restructuring
Program ............................................................ 00000151
17. Nova Scotia Swine Herd Health Policy ............................. 00000312
18. Nova Scotia Transportation Assistance ............................ 00000000
19. Ontario Farm Tax Reduction Program ............................... 00003182
20. Ontario (Northern) Livestock Programs ............................ 00001269
21. Prince Edward Island Hog Marketing and Transportation
Subsidies .......................................................... 00000041
22. Prince Edward Island Swine Development Program ................... 00002141
23. Prince Edward Island Interest Payments on Assembly Yard
Loan ............................................................... 00000002
24. Quebec Special Credits for Hog Producers ......................... 00000000
25. Saskatchewan Financial Assistance for Livestock and
Irrigation ......................................................... 00000000
26. Saskatchewan Livestock Investment Tax Credit ..................... 00008396
27. Saskatchewan Livestock Stock Advance Program ..................... 00000000
28. Ontario Weaner Pig Stabilization Plan (FISC) ..................... 00000037
Total benefits from all programs ......................................... .022

Final Results of Review

After considering all of the comments received, we determine the net subsidy to be Can$0.00011/lb. for slaughter sows and boars and Can$0.022/lb. for all other live swine for the period April 3, 1985 through March 31, 1986. The rate for slaughter sows and boars is equivalent to 0.30 percent ad valorem. The Department considers any rate less than 0.5 percent to be de minimis in accordance with 19 CFR 355.8.

Therefore, the Department will instruct the Customs Service to liquidate, without regard to countervailing duties, shipments of slaughter sows and boars, and to assess coutnervailing duties of Can$0.022/lb. on shipments of all other live swine entered, or withdrawn from warehouse, for consumption on or after April 3, 1985 and exported on or before March 31, 1986.

As provided by section 751(a)(1) of the Tariff Act, the Department also will instruct the Customs Service to waive cash deposits of estimated countervailing duties on shipments of slaughter sows and boars and to collect cash deposits of estimated countervailing duties of Can$0.022/lb. on shipments of all other live swine entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice. This deposit waiver and deposit requirement will remain in effect until publication of the final results of the next administrative review.

This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.10.

Joseph A. Septrini,

Acting Assistant Secretary for Import Administration.

Dated: December 30, 1988.

[FR Doc. 89-377 Filed 1-6-89; 8:45 am]

BILLING CODE 3510-DS-M