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NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[CV-122-807]
Final Affirmative Countervailing Duty Determination: Fresh, Chilled, and
Frozen Pork from Canada
Monday, July 24, 1989
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We determine that benefits which constitute subsidies within the
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meaning of the countervailing duty law are being provided to producers or exporters in Canada of fresh, chilled, and
frozen pork, as described in the "Scope of Investigation" section of this notice. The estimated net subsidy is Can$0.08/kg.
(Can$0.036/lb.) for all producers or exporters in Canada of fresh, chilled, and frozen pork and de minimis for all producers
or exporters in Canada of fresh, chilled, and frozen sow and boar meat.
EFFECTIVE DATE: July 24, 1989.
FOR FURTHER INFORMATION CONTACT:Kay Halpern or Rick Herring, Office of Countervailing Investigations, Import
Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue, NW., Washington, DC 20230; telephone: (202) 377-0192 or 377-2438.
SUPPLEMENTARY INFORMATION:
Final Determination
Based on our investigation, we determine 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
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Canada of fresh, chilled, and frozen pork. For purposes of this investigation, the following programs are found to confer
subsidies:
Federal Programs
- Tripartite Stabilization Programs under the Agricultural Stabilization Act.
- Feed Freight Assistance Program.
- Western Diversification Program.
- Western Transportation Industrial Development Program.
Federal/Provincial Program
- Canada/Quebec Subsidiary Agreement on Agri-Food Development.
Provincial Programs
- Alberta Crow Benefit Offset Program.
- Alberta Economic Development and Trade Act.
- Alberta Grant to Fletcher's Fine Foods.
- Ontario Farm Tax Rebate Program.
- Ontario Marketing Assistance Program for Pork Producers.
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- Ontario (Northern) Livestock Improvement and Transportation Assistance Programs.
- Onterio Pork Industry Improvement Program.
- Quebec Farm Income Stabilization Insurance Program.
- Quebec Productivity Improvement and Consolidation of Livestock Production Program (Farm Building Subprogram).
- Quebec Regional Development Assistance Program (Livestock Transportation Subprogram).
- Saskatchewan Hog Assured Returns Programs.
- Saskatchewan Livestock Investment Tax Credit Program.
- Saskatchewan Livestock Facilities Tax Credit Program.
We determine the estimated net subsidy to be Can$0.08/kg. (Can$0.036/lb.) for all producers or exporters in Canada of
fresh, chilled, and frozen pork and de minimis for all producers or exporters in Canada of fresh, chilled, and frozen sow and
boar meat.
Case History
Since the last Federal Register publication pertaining to this investigation (Preliminary Affirmative Countervailing Duty
Determination: Fresh, Chilled, and Frozen Pork from Canada, 54 FR 19582, May 8, 1989) (Preliminary
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Determination), the following events have occurred. Respondents submitted a supplemental response to our third
supplemental/deficiency questionnaire on May 11, 1989. We conducted verification of the questionnaire responses of the
Government of Canada and the provincial governments of Alberta, Manitoba, Ontario, Quebec and Saskatchewan in
Canada from May 15 to June 1, 1989. Respondents submitted amended responses and additional clarifying information
requested at verification on May 24, June 13, June 14, June 15, June 22 and June 30, 1989.
Both petitioner and respondents requested a public hearing in this investigation. Case briefs were filed by petitioner and
respondents on June 23 and rebuttal briefs were filed on June 27, 1989. The hearing was held on June 28, 1989.
During the hearing, one party presented oral arguments which had not been included in a rebuttal brief. Under section 355.38(b)
of the Commerce Department's regulations, published in the Federal Register on December 27, 1988 (to be codified at 19 CFR
355.38(b)), *30775
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during the hearing "an interested party may make an affirmative presentation only on arguments included in that party's case brief
and may make a rebuttal presentation only on arguments included in that party's rebuttal brief." For this reason, that party's
rebuttal presentation has been stricken from the transcripts of the hearing. We wish to remind all interested parties that, in all
hearings before
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the Department, we will strictly enforce the requirements of section 355.38(b).
Scope of Investigation
The United States has developed a system of tariff classification based on the international harmonized system of customs
nomenclature. On January 1, 1989, the U.S. tariff schedules were fully converted to the Harmonized Tariff Schedule (HTS), and all
merchandise entered or withdrawn from warehouse for consumption on or after that date is now classified solely according to the
appropriate HTS item number(s). The Department is providing both the appropriate Tariff Schedules of the United States
Annotated (TSUSA) item number(s) and the appropriate HTS item number(s) with product descriptions for convenience and
Customs purposes. The Department's written description of the products under investigation remains dispositive as to the scope
of the products covered by this investigation.
The products covered by this investigation are fresh, chilled, and frozen pork, currently provided for under TSUSA item numbers
106.4020 and 106.4040, and currently classifiable under HTS item numbers 0203.11.00, 0203.12.90, 0203.19.40, 0203.21.00,
0203.22.90, and 0203.29.40. Specifically excluded from this investigation are any processed or otherwise prepared or
preserved pork products such as canned hams, cured bacon, sausage and ground pork.
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Application of Section 771B
Section 1313 of the Omnibus Trade and Competitiveness Act of 1988 amended the Tariff Act of 1930 to include a new section
771B. This section reads as follows:
In the case of an agricultural product processed from a raw agricultural product in which--
(1) the demand for the prior stage product is substantially dependent on the demand for the latter stage product, and
(2) the processing operation adds only limited value to the raw commodity,
subsidies found to be provided to either producers or processors of the product shall be deemed to be provided with respect to
the manufacture, production, or exportation of the processed product.
The subject merchandise in this investigation is an agricultural product, fresh, chilled, and frozen pork, processed from a raw
agricultural product, live swine. Therefore, in this investigation, we must analyze the elements of section 771B to determine
whether the subsidies provided to producers or processors of live swine shall be deemed to be provided with respect to the
manufacture, production, or exportation of fresh, chilled, and frozen pork. For the reasons discussed below, we determine that
the elements of section 771B
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are met.
Prior to the enactment of section 771B, the Department considered a benefit to producers of a raw agricultural product as a
benefit to producers of a processed agricultural product. See Certain Fish from Canada: Final Countervailing Duty
Determination (43 FR 25996, June 16, 1978); Lamb Meat from New Zealand: Preliminary Affirmative Countervailing Duty
Determination (46 FR 58128, November 30, 1981); Final Affirmative Countervailing Duty Determination: Live Swine and
Fresh, Chilled, and Frozen Pork Products from Canada (Swine) (50 FR 25098, June 15, 1985); Final Affirmative
Countervailing Duty Determination and Order: Lamb Meat from New Zealand (Lamb Meat 1985) (50 FR 37708, September
17, 1985); Preliminary Affirmative Countervailing Duty Determination: Red Raspberries from Canada (50 FR 42574,
October 21, 1985); Final Affirmative Countervailing Duty Determination and Order: Rice from Thailand (51 FR 12356, April
10, 1986); and Final Affirmative Countervailing Duty Determination: Certain Fresh Atlantic Groundfish from Canada
(Groundfish) (51 FR 10041, March 24, 1986). For example, in Swine, respondents argued that the Department should apply the
upstream subsidy provision, section 771A of the Act, to determine if benefits to hog producers passed through to pork producers.
We disagreed because we did not consider live swine to be an "input" into unprocessed pork. Instead, we considered benefits to
hog producers as direct benefits to pork producers. Therefore, since we otherwise
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did not find reasonable grounds to believe or suspect that an upstream subsidy was being paid or bestowed with respect to
unprocessed pork, we did not conduct an upstream subsidy investigation.
We clearly spelled out in Swine our reasons for determining that benefits to hog producers directly benefit pork producers. "We
believe there are two characteristics which evidence that live swine should not be considered an 'input' into fresh, frozen, and
chilled pork products. These characteristics are level of value added and the role of the producer." First, in our discussion of value
added we said, "A low level of value added at a given level of processing is an indication that the prior stage product entering that
level is not an input into the processed product." Second, in our discussion of the role of the processor and whether the processor
merely makes the product ready for the next consumer we said, "The salient criterion is the degree to which the demand for the
prior stage product is dependent on the demand for the latter stage product."
Respondents in Swine appealed the Department's decision not to apply the upstream subsidies provision. The Court of
International Trade (CIT) remanded Swine to the Department of conduct an upstream subsidy investigation. The CIT ruled that
Commerce had to apply the upstream subsidy provision because it found no exception to that provision for agricultural products
either in the statute or in the legislative history. See, Canadian Meat Council v. United
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States, 661 F. Supp. 622 (1987). The decision of the CIT can only be considered advisory, however, because its later decision to
uphold the ITC's negative injury determination regarding the domestic industry for pork products mooted its remand
instructions. See, National Pork Producers Council v. United States, 661 F. Supp. 633 (1987). In light of the Court's decision,
Congress amended the Act by adding section 771B to codify the Department's practice. 133 Cong. Rec. S8814-16 (daily ed. June
16, 1989).
In this investigation, we determine that the first criterion of section 771B is met because the demand for live swine depends
substantially upon the demand for fresh, chilled, and frozen pork. Swine producers raise most swine for slaughter. Pork
constitutes the primary product of the slaughtered pig. Thus, the demand for pork and for live swine are inextricably linked, a fact
recognized by the provincial hog marketing boards, which actively promote the consumption of pork to increase the demand for
live swine. The demand for live swine to be processed further, e.g., into canned ham or sausage, still requires that the live swine
first be processed as fresh, chilled, and frozen pork. In this regard, the demand for fresh, chilled, and frozen pork incorporates
both the retail customer who demands fresh, chilled, and frozen pork for consumption and the wholesale customer who demands
fresh, chilled, and frozen pork for further processing.
The second criterion of section 771B is also met in this investigation because
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the processing operation used to manufacture fresh, chilled, and frozen pork adds limited value to the live swine. We verified that
pork producers in Canada add, on average, approximately 20 percent in value to the live swine. This figure, however,
encompasses various levels of processing that often go beyond the initial steps needed to first make a pig into pork. That is, to
make the product under this investigation, the pork manufacturer immobilizes, kills, washes, dehairs, eviscerates, and splits the
hog. After the pork producer weighs the carcass, he then removes the head and kidneys and trims air pockets or diseased
portions. The split carcass now classifies as fresh, chilled, and frozen pork.
While a percentage figure for value added helps focus our evaluation of the second element of section 771B, it does not resolve the
question of whether the processing operation adds only limited value to the raw commodity. The pork producers incur most of
their cost in processing the live swine into split carcasses. The additional cost associated with processing the split carcass into
primal or trimmed cuts is small relative to the price which these cuts receive in the market. For example, we verified that, in some
cases, a flick of the knife transformed a primal cut into a more expensive, trimmed cut. As explained by the General Manager for
the Canadian Meat Council, "It has made practical and economic sense for the industry to do this additional fat trimming at the
plant level due to high returns for the fat credits and, in
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many cases, the fat is removed without additional labour." Thus, the figure of 20 percent value added to a degree corresponds to
the higher profits earned in the marketplace by product presentation, and not the cost of processing the split carcass into primal
or trimmed cuts. For these reasons, we find in this investigation that the processing operation adds only limited value to the raw
commodity because the processing represented by the figure of 20 percent has not changed the essential character of the live
swine.
Therefore, for the reasons set forth above, we determine that subsidies found to be provided to live swine shall be deemed to be
provided with respect to the manufacture, production, or exportation of fresh, chilled, and frozen pork in accordance with section
771B of the Act.
Analysis of Programs
We streamlined this investigation because of the large number of programs involved, the large number of swine and pork
producers in Canada, and the fact that we have previously examined most of the programs upon which we initiated, and
decided to examine only swine and pork producers in the provinces of Quebec, Ontario, Alberta, Manitoba, and Saskatchewan.
These five provinces accounted for 92.5 percent of hogs slaughtered in Canada in 1987, the most recent year for which such
information is available.
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We used our standard methodology to calculate benefits under grant programs. Grants provided on a recurring basis are
expensed in the year of receipt. For non-recurring grants, we totalled the grants provided under each program and divided that
amount by the total sales value of the subject merchandise from the five provinces examined for purposes of this investigation. If
the sum was less than 0.5 percent of the sales concerned, we expensed such grants in the year of receipt. Since we have not
received sales information for the years prior to the review period, we used as best information available the sales value for 1988,
as reported in the response, to determine if grants received prior to 1988 should be allocated over time or expensed in the year of
receipt. Based on this methodology, all grants were expensed in the year of receipt.
In both Swine and this investigation, we have used a conversion factor to calculate the percentage of pork yield from live swine.
This percentage is then used in calculating the subsidy. Both respondents and petitioner have made suggestions as to the
appropriate conversion factor. We have selected a conversion factor of 79.5 percent as verified for the review period.
We believe that 79.5 percent is the most appropriate conversion factor to use because the two largest countervailable programs
in this investigation, the tripartite program and the Quebec Farm Income Stabilization Insurance Program, both use similar
conversion factors. Of the conversion factors which have been
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proposed in this investigation, the factor of 79.5 percent most closely approximates the conversion factor used by the
stabilization programs and the provincial marketing boards and packers in determining the final price to be paid for the live swine.
In the Final Results of Countervailing Duty Administrative Review; Live Swine from Canada, 54 Fed. Reg. 651
(1989) (Live Swine Review), separate rates were calculated for market hogs and for sows and boars. Sows and boars were
determined to be a distinct subclass of merchandise. Both respondents and petitioner have argued that a separate rate should be
applied for sow and boar meat. In light of the practice established in the administrative review, and the arguments
provided by respondents and petitioner, we have calculated a separate rate for sow and boar meat. For those programs where
sows and boars are not eligible for benefits, we have allocated payments only to market hogs. For additional information on this
issue, see Comment 11.
We discovered the Quebec Reimbursement of Municipal and Educational Taxes Program, which may provide different levels of
tax rebates to farmers based on regional criteria, too late in the investigation to gather sufficient information to be used in this
determination. If a final countervailing duty order is issued in this investigation, we will examine this program in any
subsequent 751 review.
For purposes of this final determination, the period for which we are
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measuring subsidies ("the review period") is calendar year 1988.
Based upon our analysis of the petition, the responses to our questionnaire, verification, and written comments from respondents
and petitioner, we determine the following:
I. Programs Determined To Confer Subsidies
We determine that subsidies are being provided to producers or exporters in Canada of fresh, chilled, and frozen pork under
the following programs:
A. Federal Programs
1. Tripartite Programs under the Agricultural Stabilization Act. The Agricultural Stabilization Act (ASA) of 1958 was passed by the
federal government to provide for the price stabilization of certain agricultural commodities. In 1975, the ASA was amended to
revise the list of named commodities to cattle, hogs, sheep, industrial milk and cream, corn, soybeans, and oats and barley grown
outside the Canadian Wheat Board designated areas. The support formula was update to a minimum of 90 percent of a five year
average market price plus an index to reflect production cost changes.
In January 1985, the ASA was further amended by Bill C-25, which authorized
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the Minister of Agriculture, with the approval of the Governor in Council, to enter into tripartite agreements with the provinces
and/or producers to provide price stabilization schemes for any natural or processed product of agriculture. The Minister may
enter into a tripartite agreement only after he *30777
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determines that it will not give a financial advantage to some producers in the production or marketing of the product not enjoyed
by other producers of the same product in Canada and that it will not provide an incentive to overproduce. The Bill also
amended the Act by (1) changing "sheep" to "lamb and wool," (2) adding to the list of named commodities spring and winter wheat
grown outside the Canadian Wheat Board designated areas, and (3) providing for different support periods with respect to
different commodities (e.g. quarterly periods for livestock).
Tripartite agreements on hogs were signed effective January 1, 1986, with Alberta, Saskatchewan, Manitoba, and Ontario. An
amended agreement was signed on February 8, 1989, adding the Provinces of British Columbia, Quebec, New Brunswick, Prince
Edward Island, and Nova Scotia. Under the terms of the tripartite agreements on hogs, the provinces, with the exception of
Quebec, may not offer separate stabilization plans or other ad hoc assistance for hogs, nor may the federal government offer
compensation to hog producers in a province not a party to the agreement. The tripartite scheme provides for a five-year
phase-in period to adjust for differences between the tripartite scheme and
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previously existing provincial programs. Existing provincial stabilization plans, with the exception of the Quebec Farm Income
Stabilization Program, are to be completely phased out by 1991.
The tripartite agreements on hogs are administered by the Stabilization Committee ("Committee") in conjunction with the
Agricultural Stabilization Board ("Board"). The Committee calculates the stabilization payments on a quarterly basis in the
following manner. First, it calculates a "support price," which is equal to the cash costs of production in the current 13-week
period plus 95 percent of the average margin in the same 13-week period for the preceding five years. The margin for any period is
equal to the national average market price for the period minus the national average cash costs in that period. The difference
between the support price and the average market price is the amount of stabilization payment. Stabilization payments are
triggered in any 13-week period that the market price falls below the support price. Payments are made only on hogs indexing 80
or above, thereby automatically excluding sows and boars.
To date, tripartite ageements have been signed for the following commodities: hogs, cattle, cows/calves, lambs, sugar beets,
apples, white pea beans and other dry edible beans, honey, and yellow seeded onions. We verified that producers of one
commodity, asparagus, requested a tripartite agreement and were rejected. Producers of two other commodities, sour cherries
and corn,
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have also requested agreements, but no agreements are being drawn up for these commodities.
Support payments under the tripartite agreements for various commodities are calculated in the manner described above, using a
formula ranging from 85 to 95 percent of the average market price over the past five years plus an index to reflect production cost
changes. We verified that the support level for beef and apples, both of which are covered under tripartite agreements, is 85
percent, as compared to the 95 percent used for hogs.
As federal and provincial payments to hog producers are now made pursuant to tripartite agreements, rather than as named
commodities under the ASA, we must, as respondents have argued, focus on the tripartite program and consider whether it is, de
jure or de facto, limited to a specific enterprise or industry, or group of enterprises or industries, within the meaning of section
771(5)(B) of the Act.
We typically consider three factors in determining whether a program is limited to a specific enterprise or industry or group of
enterprises or industries: (1) The extent to which a foreign government acts (as demonstrated in the language of the relevant
enacting legislation and implementing regulations) to limit the availability of a program; (2) the number of enterprises, industries,
or groups thereof that actually use a program, which may include the examination of disproportionate or dominant users; and (3)
the
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extent, and manner in which, the government exercises discretion in making the program available.
Pursuant to the first factor, we verified that there is no de jure limitation as to which commodities may be covered under tripartite
agreements. Thus, we find that the federal government did not act to limit the availability of the tripartite program.
Pursuant to the second factor, by its terms, the ASA, as amended, provides that any agricultural product may be covered under a
tripartite agreement. However, since the January 1985 amendment authorizing tripartite agreements, only nine out of an
innumerable number of agricultural commodities have been incorporated under such agreements. Furthermore, not all
producers who request tripartite agreements for their commodities obtain such agreements. For example, agreements for sour
cherries and corn have not been drawn up because of "administrative difficulties" involving the valuation of land and other
factors, despite the fact that an agreement already exists for apples, a commodity with similar valuation problems. Asparagus
growers were rejected because government officials deemed there was little need for an asparagus agreement due to the rising
price of asparagus and the relatively small value of asparagus sales.
Pursuant to the third factor, we found that discretion in the administration of the tripartite program, which results in different
treatment for different
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commodities, is exercised in the following ways. First, there are no explicit or standard criteria for evaluating tripartite
agreement requests. Neither the ASA, as amended, nor the regulations and guidelines concerning tripartite agreements, establish
procedures or criteria for when a commodity is to become subject to a tripartite agreement. In practice, it is ultimately at the
Ministry's discretion whether to implement a request for a tripartite agreement (see Comment 7).
Second, we verified that the level of price stabilization and the terms of each scheme varies, at the discretion of the government,
from commodity to commodity. For parity of benefits among the producers of different commodities to exist, it is essential that
the cost of production elements in the stabilization formulas for various commodities be comparable to one another. That is, the
cost of production model used for the swine program should reflect the actual cost of production experience of swine producers
to the same extent that the model for other commodities reflects the actual cost of production experience of producers of those
commodities. At verification, we learned that cost of production models do not necessarily reflect the experience of the relevant
producer group.
Furthermore, the support level has varied historically for the same product and is ofter different for different commodities. For
example, the support level for hogs was raised from 93 percent to 95 percent in an effort to get
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Quebec to sign a tripartite agreement on hogs. Moreover, as noted above, the suport level for apples and beef is only 85 percent.,
We were told during verification that the Committee worked with different support models for these commodities, and that a
model was originally devised for beef in which the *30778
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support level would be 50 percent. However, due to opposition to that support level, it was raised to the present level but
elements in the cash cost component of the model were dropped. Thus, the incomes of producers of certain covered commodities
are being stabilized to a significantly greater or lesser extent than those of others for no objective reasons.
Even among swine producers, benefits are not available on equal terms. Indeed, it appears that, by allowing Quebec to keep its
provincial hog stabilization program, the Ministry is undermining the general guidelines of the tripartite program by giving an
advantage to some producers in the production of hogs not enjoyed by other producers of the same product in Canada.
For the foregoing reasons, we determine the tripartite program to be limited to a group of enterprises or industries, and therefore
countervailable.
To calculate the benefit under this program, we first calculated the dressed- weight equivalent of hogs marketed during the review
period in the five provinces examined for purposes of this investigation (less sows and boars). To obtain the dressed-weight
equivalent, we used the live-weight to dressed-
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weight conversion factor of 79.5 percent as verified for the review period. Since the stabilization payments are disbursed from a
pool of funds made up of equal contributions from the federal government, provincial governments, and producer premiums,
plus interest, we multiplied the stabilization payments which we verified were made to hog producers during the review period by
two- thirds to factor out the producer premiums. We then allocated the result over the dressed-weight equivalent of hogs
marketed in the five provinces during the review period (less sows and boars) to obtain an estimated net subsidy of Can
$0.027486/kg. (Can$0.012468/lb.) for fresh, chilled, and frozen pork. Because sows and boars are ineligible for benefits under
this program, we determine the benefit to be zero for sow and boar meat.
2. Feed Freight Assistance Program. The Feed Freight Assistance Program was administered by Agriculture Canada until
1967, when the Livestock Feed Act (LFA) was passed and the Livestock Feed Board was formed to administer the program.
Parliament enacted the LFA in response to domestic feed grain supply problems and price fluctuations in eastern Canada and
British Columbia. The Board ensures the availability of feed grain to meet the needs of livestock feeders, the availability of
adequate storage space in eastern Canada for feed grain, and price stability for feed grain in eastern Canada, British
Columbia, the Yukon, and the Northwest Territories. Only users of feed grain, i.e., those who buy it to feed livestock (commercial
mills and livestock producers),
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are eligible for assistance.
Eligibility for the program is restricted to feed grain millers in "designated areas" (Manitoba, Saskatchewan, Alberta and parts of
British Columbia) whose grain is fed to livestock, and to livestock owners in parts of eastern Canada and British Columbia, and
in the Yukon Territory and the Northwest Territories.
To qualify for assistance, the feed grain must be transported outside the farm where it is grown and moved through commercial
channels. Commercial channels are defined as transactions that provide an invoice, weight certificate, grade certificate, and bill of
lading. Payments are made only on grain that will be fed to livestock.
Benefits are provided for transporting and storing feed. Payments for feed grain transportation are set per ton according to the
destination of the grain. Feed grain storage payments are made on a product-specific basis.
Because this program is limited to feed grain millers in the above described "designated areas" whose grain is fed to livestock, and
to livestock owners in parts of eastern Canada and British Columbia, and in the Yukon Territory and the Northwest
Territories, we, determine that it is limited to a specific enterprise or industry, or group of enterprises or industries, and is
therefore countervailable.
Of the five provinces we are examining for purposes of this investigation, livestock owners in only Ontario and Quebec are eligible
for assistance under
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the program. We found that no benefits were provided to hog producers in Ontario. Therefore, we are only considering the
assistance provided to Quebec producers. We verified that 2.7 percent of all payments under this program went to livestock
owners in Quebec. At verification we found that 50 percent of feed grains were consumed by hogs. Therefore, to calculate the
benefit to hog producers, we used 1.35 percent (50 percent of 2.7 percent) of total payments as the benefit to hog producers. We
divided this total by the dressed-weight equivalent of hogs marketed during the review period in the five provinces to obtain an
estimated net subsidy of Can$0.000034/kg. (Can $0.000016/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
3. Western Diversification Program. The Western Diversification Program was established by the federal government in August
1987 to diversify the economic base of western Canada (British Columbia, Alberta, Saskatchewan and Manitoba). The
program was established as a five-year program with a $1.2 billion diversification fund. Assistance is provided in the form of
"contributions," either repayable or non-repayable. The amount of funding provided, as well as the terms and conditions attached
to it, are determined on a project-by-project basis. The federal government funds the program; provincial governments do not.
Interest is rarely charged on repayable assistance. Eligible projects include new product development, plant establishment, new
market development, industry-wide productivity improvement, feasibility studies or new technology.
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Upon approval of a project, an offer of financial assistance is made. Contributions are disbursed quarterly, usually after the
project is completed.
Because this program is limited to western Canada, we determine that it is limited to enterprises or industries located in a
specific region of Canada, and is therefore, countervailable. We verified that, of the projects approved to date, only one
provided benefits on the production of hogs or the processing of pork during the review period.
To calculate the benefit, since we do not have the calendar year 1988 figures, we used as best information available the
non-repayable contribution disbursed to the one hog/pork-related project during fiscal year 1988-1989 and divided it by the
dressed-weight equivalent of hogs marketed during the review period in the five provinces to obtain an estimated net subsidy of
Can$0.000105/kg. (Can $0.000048/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
4. Western Transportation Industrial Development Program. Under this program, assistance was provided by the federal
government to manufacturing, processing and related service industries in Manitoba, Saskatchewan, Alberta and British
Columbia. This program expired in June 1988 and was incorporated into the Western Diversification Program.
Because this program is limited to firms in the four provinces of western Canada, we determine that it is limited to enterprises
or industries located in a specific region of Canada, and is therefore countervailable.
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To calculate the benefit under this program, we divided the grants attributable to pork production during *30779
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the review period by the dressed-weight equivalent of hogs marketed during the review period in the five provinces to yield an
estimated net subsidy of Can$0.000054/kg. (Can $0.000025/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
B. Federal Provincial Program
1. Canada/Quebec Subsidiary Agreement on Agri-Food Development: The Subsidiary Agreement on Agri-Food Development
is pursuant to an Economic and Regional Development Agreement (ERDA) between the Government of Canada and the
Province of Quebec. Programs funded under the Subsidiary Agreement include the following:
Program 1: Research and Development; A. Contract Research; B. Food Research
Program 2: Technological Innovations and New Initiatives; A. Agricultural Production; B. Conservation, Processing and
Marketing
Program 3: Soil Conservation and Improvement; A. Inventory of Soil Degradation Problems; B. Soil and Water Conservation
Research; C. Technology Transfer in Soil and Water Conservation
Funding for each program and subprogram for the duration of the Subsidiary Agreement is estimated at Can$35 million, and is
split evenly between the
(Cite as: 54 FR 30774, *30779)
federal and provincial governments.
Of the seven subprograms available, we verified that only three, 1.A., 2.A. and 3.B., include hog-related projects. Of these
projects, those under subprogram 1.A. were contracted with universities or research institutions, and the one under subprogram
3.B. was contracted with a consulting firm. We verified that the projects under these two subprograms included provisions for
making the research results publicly available. (See Section II of the notice, Programs Determined to be Not Countervailable,
concerning subprograms 1.A. and 3.B.) The hog-related projects under subprogram 2.A. were contracted with private individuals
or farmers, and do not involve research.
Because projects under subprogram 2.A. are limited to Quebec, we determine that the federal government's contribution is
limited to enterprises or industries located in a specific region of Canada and is therefore countervailable. Because we verified
that projects in subprogram 2.A. involve a large number and a wide variety of agricultural products, we determine that the
provincial government's contribution is not limited to a specific enterprise or industry, or group of enterprises or industries, and
is therefore not countervailable.
To calculate the benefit, we summed the grants provided to hog-related projects under subprogram 2.A. during the review period
and multiplied this sum by one-half to factor out the Government of Quebec contribution. We divided
(Cite as: 54 FR 30774, *30779)
the result by the dressed-weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated
net subsidy of Can $0.000019/kg. (Can$0.000009/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
C. Provincial Programs
1. Alberta Crow Benefit Offset Program. The purpose of this program, which is administered by Agriculture Alberta, is to eliminate
market distortions in feed grain prices created by the federal government's policy on grain transportation.
Assistance is provided on feed grain produced in Alberta, feed grain produced outside Alberta but sold in Alberta, and feed grain
produced in Alberta to be fed to livestock on the same farm. The government provides certificates to registered feed grain users
and registered feed grain merchants, which can be used as partial payments for grains purchased from grain producers. Feed grain
producers who feed their own grain to their own livestock submit a claim directly to the government for payment.
Hog producers receive benefits in one of three ways. Hog producers who do not grow any of their own feed grain receive
certificates which are used to cover part of the cost of purchasing grain. Hog producers who grow all of their own
(Cite as: 54 FR 30774, *30779)
grain submit a claim to the Government of Alberta for direct payment. Finally, hog producers who grow part of their own grain
but who also purchase grain receive both certificates and direct payments.
Because this program is limited to feed grain users, we determine that it is limited to a specific enterprise or industry, or group of
enterprises or industries, and is therefore, countervailable.
Since we do not have precise data on hog consumption of feed grain, as best information available, we are using data published in
Agriculture in Alberta, which states that hogs consumed 15 percent of the province's barley production and that barley is the
primary grain fed to hogs. Therefore, to calculate the benefit, we allocated 15 percent of the total amount of benefits to feed grain
users in Alberta over the dressed-weight equivalent of hogs marketed during the review period in the five provinces. On this basis,
we calculated an estimated net subsidy of Can$0.003228/kg. (Can$0.001464/lb.) for fresh, chilled, and frozen pork, and for sow
and boar meat.
2. Alberta Department of Economic Development and Trade Act. The purpose of this program is to foster economic development
in the province. Assistance may be provided in the form of grants, loans, or loan guarantees. However, only loans and loan
guarantees have been provided under the program. Loans and loan guarantees are only provided to firms which cannot receive
financing or equivalent financing from commercial sources. Two pork producers in Alberta
(Cite as: 54 FR 30774, *30779)
have received benefits under this program. Gainers Inc. has received both a loan and a loan guarantee from the province under
this program, and Fletcher's Fine Foods has received a loan guarantee.
In order to determine whether a domestic program confers a countervailable subsidy, we must determine whether the benefits
provided under the program are limited to a specific enterprise or industry, or group of enterprises or industries, in accordance
with section 771(5)(B) of the Act. We typically consider three factors when making this determination: (1) The extent to which a
foreign government acts (as demonstrated in the language of the relevant enacting legislation and implementing regulations) to
limit the availability of a program; (2) the number of enterprises, industries, or groups thereof that actually use a program, which
may include the examination of disproportionate or dominant users; and (3) the extent, and manner in which, the government
exercises discretion in making the program available. (See, Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order: Carbon Steel Wire Rod from Malaysia (Wire Rod), 53 FR 13303, April 22, 1988, and the DOC
Position to Comment 7.)
During verification, we found no standard criteria for either the approval or rejection of applicants under this program. We were
unable to review applications of successful and rejected companies under this program. We were also unable to determine why
certain companies were approved for either a loan
(Cite as: 54 FR 30774, *30779)
or a loan guarantee, including both pork packers under investigation in Alberta. Provincial officials were unable to provide us
with a list of rejected companies. They were also unable to determine the number of companies that have applied for benefits
under this program. In addition, we noted that *30780
(Cite as: 54 FR 30774, *30780)
there was no formal or standard application process.
Since we were unable to review the documents necessary to make an adequate evaluation of two of the three factors cited above,
as best information available, we determine that the program is limited to a specific enterprise or industry, or group of enterprises
or industries. In making this determination, we note that, of the amount of loans granted under this program from its inception in
1986 through March 1989, approximately 75 percent went to Gainers. Also, in any given year there were only a limited number of
loan guarantees provided.
We determine this program to be countervailable because the terms of the loan and loan guarantees are inconsistent with
commercial considerations. During the review period, two loan guarantees and one loan were provided to pork packers. In
considering the guaranteed loans, we assumed that the packers would not have received loans at the interest rates provided
without these guarantees because this program is available only to companies that could not otherwise receive financing. In
addition, we found that loan guarantees are not provided as a normal banking practice in Alberta.
(Cite as: 54 FR 30774, *30780)
One loan guarantee was used to obtain a short-term interim loan. Therefore, to calculate the benefit from this loan, we used our
standard short-term loan methodology, comparing the interest rate on this guaranteed loan to a benchmark rate for
non-guaranteed loans. No guarantee fee was paid on this loan during the review period; therefore, we did not deduct a guarantee
fee from the net benefit.
The other loan guarantee was used to obtain a long-term loan, and we therefore used our standard long-term loan methodology.
We used as our benchmark the average long-term corporate bond rate during the review period. To that, we added our standard
risk premium to reflect the fact that this program is available only to uncreditworthy companies. We considered as the principal
of this loan only the amount attributable to pork operations. Because the firm paid part of the guarantee fee during the review
period, we subtracted that portion of the fee attributable to the loan for pork operations from the net benefit.
We followed the same methodology for the one loan provided under this program without a guarantee, except that no guarantee
fee was subtracted from the benefit.
We then totalled the net benefits from this program and divided the result by the dressed-weight equivalent of hogs marketed in
the five provinces during the review period to yield an estimated net subsidy of Can$0.000018/kg. (Can
(Cite as: 54 FR 30774, *30780)
$0.000008/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
3. Alberta Grant to Fletcher's Fine Foods. During verification we found that Fletcher's Fine Foods had received a grant from the
province of Alberta. Company officials stated that the grant was received prior to the review period, but no supporting
documentation was provided. They were unable to tell us under which program this grant was provided.
The grant from the province of Alberta is limited specifically to Fletcher's, and is therefore countervailable. Because we were
unable to verify that this grant was provided prior to the review period, as best information available, we are attributing the full
amount of the grant to the review period. We divided this grant by the dressed-weight equivalent of hogs marketed in the five
provinces during the review period to yield an estimated net subsidy of Can$0.000066/kg. (Can$0.000030/lb.) for fresh,
chilled, and frozen pork and for sow and boar meat.
4. Ontario Farm Tax Rebate Program. The Ontario Farm Tax Rebate Program replaced the Ontario Farm Tax Reduction Program.
While the Ontario Farm Tax Reduction Program provided a rebate of 60 percent of total property taxes levied on eligible farm
properties, the current program provides a rebate of 100 percent of taxes levied on outbuildings and properties only. Taxes
levied on the residence and one acre of land are no longer rebated.
Any resident of Ontario may receive a rebate if he or she owns and pays taxes
(Cite as: 54 FR 30774, *30780)
on eligible properties. Eligible properties are farming enterprises that produce farm products with a gross value of at least
Can$8,000 in southern and western Ontario and Can$5,000 in northern and eastern Ontario. We determine that this program is
limited to enterprises or industries located in a specific region within the province, and is thus countervailable. However, since all
farmers in Ontario whose gross output is at least Can$8,000 are eligible to receive a rebate under this program, the program is
countervailable only to the extent that farmers in northern and eastern Ontario whose gross output is between Can$5,000-8,000
receive benefits.
Based on data taken from the 1986 Census of Agriculture, Statistics Canada, the last year for which complete information is
available, the Government of Ontario estimated that 4.7 percent of all Ontario swine farmers have sales valued within the
Can$5,000-8,000 range. To calculate the benefit, we therefore multiplied the total amount paid to swine producers in eastern
and northern Ontario during the review period by 4.7 percent. We divided the result by the dressed-weight equivalent of hogs
marketed in the five provinces during the review period to obtain an estimated net subsidy of Can $0.000020/kg.
(Can$0.000009/lb.) for both fresh, chilled, and frozen pork and for sow and boar meat.
5. Ontario (Northern) Livestock Improvement and Transportation Assistance Programs. The purpose of these programs is to
assist livestock producers in
(Cite as: 54 FR 30774, *30780)
northern Ontario by reducing their relatively high costs of maintaining and improving herd quality. Livestock producers in
northern Ontario are reimbursed up to 20 percent of the cost of purchasing breeding stock and 50 percent of the transportation
cost associated with the purchase of such breeding stock.
Because these programs are limited to livestock producers in northern Ontario, we determine that they are limited to a specific
enterprise or industry, or group of enterprises or industries, and therefore countervailable.
To calculate the benefit to swine producers, we allocated the reimbursements made to swine producers during the review period
over the dressed-weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated net
subsidy of less than Can$0.000001 in either kilograms or pounds for fresh, chilled, and frozen pork and for sow and boar meat.
6. Ontario Pork Industry Improvement Plan (OPIIP). The purpose of this program is to foster excellence in farm business
management and the adoption of improved production technologies. Assistance is provided under a number of subprograms. To
be eligible for any of the subprograms, a producer must have at least 20 sow equivalents (one sow equivalent is equal to one sow
or 15 market-weight hogs marketed annually) and must submit the required production records.
Grants are provided to hog producers under the following subprograms: Swine Production Analysis, Enterprise Analysis, Swine
Ventilation, Productivity and
(Cite as: 54 FR 30774, *30780)
Quality Improvement, Artificial Insemination, Rodent Control, Private Veterinary Herd Health, Education, Feed Analysis and
Herd Health Improvement.
In addition to the above subprograms, there are three other subprograms under OPIIP. One provides grants to the *30781
(Cite as: 54 FR 30774, *30781)
Ontario Swine Artificial Insemination Association, a farmer cooperative organized for the purpose of developing swine semen
production facilities. This Association is the only licensed producer of swine semen in the province. The other two subprograms
provide grants to support (1) research projects related to swine production and (2) local chapters of the Ontario Pork Producers'
Marketing Board. (For additional information on these last two subprograms, see Section II of the notice, Programs Determined to
be Not Countervailable.)
Because the OPIIP provides grants under the remaining subprograms only to swine producers, we determine that these remaining
subprograms are limited to a specific enterprise or industry, or group of enterprises or industries, and are therefore,
countervailable.
To calculate the benefit, we summed the grants provided under these subprograms during the review period and divided the
result by the dressed- weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated
net subsidy of Can$0.002324/kg. (Can $0.001054/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
7. Ontario Marketing Assistance Program for Pork (MAPP). This program,
(Cite as: 54 FR 30774, *30781)
instituted in 1986, assists Ontario port processors in their efforts to improve domestic market prospects for pork sales and to
sustain and enhance their ability to compete in global pork markets. Pork processors receive grants of 25 percent of the total cost
of plant upgrading, new technology adoption or new product development.
Because this program provides grants to only pork processors, we determine that it is limited to a specific enterprise or industry,
or group of enterprises or industries, and is therefore, countervailable.
A consumer survey was also financed under MAPP. For additional information on that project, see Section II of this notice,
Programs Determined to Be Not Countervailable. In addition, there was an export promotion subprogram which was not used
during the review period.
To calculate the benefit, we summed the grants provided under this program during the review period and divided the result by
the dressed-weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated net subsidy
of Can$0.000613/kg. (Can$0.000278/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
8. Quebec Farm Income Stabilization Insurance Program. This program was started in 1976 to guarantee a net annual income to
participating producers. It is administered by the Regie des Assurances Agricoles du Quebec (the Regie). The program covers
calves, feeder cattle, potatoes, piglets, feeder
(Cite as: 54 FR 30774, *30781)
hogs, corn, oats, wheat, barley, heavy veal, and sheep. There are no established criteria and no authorization for designating
additional commodities to be covered. To be eligible for the piglet or feeder hog programs, a producer must own the hogs or sows
he insures, be personally involved in raising the hogs or piglets, own at least 300 insurable hogs or 15 insurable sows, and enroll
in the scheme for at least five years. The coverage year runs from April 1 to March 31, for the feeder hog program, and runs from
July 1 to June 30 for the piglet program.
The support level is calculated according to a cost of production model that includes an adjustment for the difference between the
average wage of farm workers and the average wage of all other workers in Quebec. Payments to growers are calculated on a
yearly basis and are made at the end of the coverage year. The program is funded two-thirds by the provincial government and
one-third by producer assessments. Producer and government contributions are made once a year and are kept in one account
from which all disbursements are made. Pursuant to an amendment of July 13, 1988, producer assessments and the stabilized net
annual income are set according to the size of production, effective in the 1988-89 coverage years. Payments received from
another source, e.g., under a tripartite agreement, are deducted from any stabilization payments made by the Regie.
Since several major agricultural commodities, such as eggs, dairy
(Cite as: 54 FR 30774, *30781)
products, and poultry, are not covered under this program, we determine that it is limited to a specific enterprise or industry, or
group of enterprises or industries, and is therefore countervailable.
We calculated the benefit by multiplying the total amount of stabilization payments made under the piglet and feeder hog
programs during the review period by two-thirds to factor out producer assessments. We then divided the result by the
dressed-weight equivalent of hogs marketed in the five provinces during the review period (less sows and boars) to obtain an
estimated net subsidy of Can$0.043170/kg. (Can$0.019582/lb.) for fresh, chilled and frozen pork. Because sows and boars
slaughtered for meat are ineligible for benefits under this program, we determine the benefit to be zero for sow and boar meat.
9. Quebec Productivity Improvement and Consolidation of Livestock Production Program (Farm Building Improvements
Subprogram). This program was started in 1987 and is designed to aid small producers. It is divided into eight subprograms.
Swine growers are only eligible for one subprogram, the Farm Building Improvements Subprogram. With regard to hogs, this
subprogram provides grants to consolidate production so that the process from farrowing to finishing takes place on the same
farm. The grants cover up to 30 percent of the actual cost of the conversion.
To be eligible for assistance, applicants must be recognized farm producers according to the Farm Producer's Act and be
registered with the Bureau de
(Cite as: 54 FR 30774, *30781)
Renseignements Agricoles. Producers operating farrowing facilities must maintain between 40 and 80 sows, and finishing farms
must maintain between 500 and 1,000 hogs. The maximum assistance is Can$200 per sow and Can$25 per hog, with a maximum
of Can$15,000 per farm operation for the duration of the program.
Because this subprogram is limited to livestock producers, we determine that it is limited to a specific enterprise or industry, or
group of enterprises or industries, and is therefore countervailable.
To calculate the benefit, we summed the grants provided under this program during the review period and divided the result by
the dressed-weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated net subsidy
of Can$0.000010/kg. (Can$0.000005/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
10. Quebec Regional Development Assistance Program (Livestock Transportation Subprogram). This program was started in 1987
to promote regional development in Quebec. The program consists of four subprograms, only one of which, the Livestock
Transportation Subprogram, is available to hog producers. This subprogram provides financial assistance to eligible producers
for transporting animals to a government inspected slaughterhouse. Quebec is divided into twelve agricultural regions, only five
of which (three full regions and parts of two others) are eligible for aid under the subprogram. These five regions
(Cite as: 54 FR 30774, *30781)
are divided into seven zones based on the distance from the Montreal-Quebec triangle, where most of the slaughterhouses are
located. The assistance offered varies according to *30782
(Cite as: 54 FR 30774, *30782)
the zone in which the applicant's operation is located.
Because this subprogram is limited to livestock producers in specific regions of Quebec, we determine that it is limited to a specific
group of enterprises or industries located in a specific region within the province, and is therefore countervailable.
To calculate the benefit, we divided the amount of payments made to hog producers during the review period by the
dressed-weight equivalent of hogs marketed in the five provinces during the review period to obtain an estimated net subsidy of
Can$0.000025/kg. (Can$0.000011/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
11. Saskatchewan Hog Assured Returns Program (SHARP). SHARP was established in 1976 pursuant to the Saskatchewan
Agricultural Returns Stabilization Act. SHARP provides stabilization payments to Saskatchewan hog producers when market
returns fall below a designated "floor price." The program is administered by the Saskatchewan Pork Producers' Marketing Board
on behalf of the provincial Department of Agriculture. Under the Saskatchewan Agricultural Returns Act, the provincial
government may establish a stabilization plan for any agricultural commodity. However, in practice, only hogs and cattle have
such
(Cite as: 54 FR 30774, *30782)
plans.
To be eligible, a producer must own market hogs raised and finished to slaughter weight on the production unit or purchased as
weanlings or feeder hogs and fed a minimum of 60 days. Coverage is limited to 1,500 hogs per producer per quarter.
The program is funded by producer premiums and matching funds from the provincial government. When Saskatchewan joined
the tripartite agreement on hogs effective January 1, 1986, SHARP payments were reduced by the amount of payments received
through the tripartite program. No producers have been eligible to join SHARP since December 31, 1985. SHARP payments are
being phased out and will be terminated by March 31, 1991.
Stabilization payments are based on the sum of the producer's cash costs plus 75 percent of the sum of non-cash costs for each
quarter. Payments are made approximately four weeks after the end of each quarter. Unlike the tripartite program, under which
all producers of a commodity receive the same payment per unit of that commodity, each producer under SHARP is paid the
difference between his average market price and the support price.
Although the Saskatchewan Agricultural Returns Act allows the provincial government to establish stabilization plans for any
agricultural commodity, in practice, only hog and cattle producers have such plans. Because stabilization payments under this
program are limited to only hogs and cattle, we determine
(Cite as: 54 FR 30774, *30782)
that the program is limited to a specific group of enterprises or industries, and therefore countervailable.
To calculate the benefit, we multiplied the total amount of stabilization payments made to hog producers during the review period
by one-half to factor out producer premiums. We then divided the result by the dressed-weight equivalent of hogs marketed in the
five provinces during the review period (less sows and boars) to obtain an estimated net subsidy of Can$0.001408/kg.
(Can$0.000639/lb.) for fresh, chilled, and frozen pork. The estimated net subsidy is zero for sow and boar meat because sows and
boars are ineligible for benefits under this program.
12. Saskatchewan Livestock Investment Tax Credit Program. The Saskatchewan Livestock Investment Tax Credit Program was
introduced in March 1984, under the Saskatchewan Livestock Investment Tax Credit Act. The program is administered by the
Economics Branch of Saskatchewan Agriculture. It provides incentives for the finishing of livestock in Saskatchewan. The program
provides a tax credit on a per head basis for feeder cattle, hogs and lambs sold for slaughter. Dairy cows, hogs and lambs used for
breeding purposes do not qualify for assistance. Poultry is also not eligible for tax credit under this program.
To be eligible for a tax credit, hogs must index 80 or above and be owned by a resident of Saskatchewan for at least 60 days. (This
qualification
(Cite as: 54 FR 30774, *30782)
automatically excludes sows and boars.) There is a credit of $3.00 per hog and a $100 deductible per claimant per year. Any
unused portion of the tax credit can be carried forward for seven years and applied to provincial tax payable.
Because this program is limited to livestock producers, we determine that it is limited to a specific enterprise or industry, or
group of enterprises or industries, and is therefore countervailable.
To calculate the benefit, we divided the tax credits net of deductibles claimed by swine producers during the review period by the
dressed-weight equivalent of hogs marketed in the five provinces during the review period (less sows and boars) to obtain an
estimated net subsidy of Can$0.000721/kg. (Can$0.000327/lb.) for fresh, chilled, and frozen pork. The estimated net benefit is
zero for sow and boar meat because sows and boars are ineligible for benefits under this program.
13. Saskatchewan Livestock Facilities Tax Credit Program. This program, implemented on January l, 1986, provides tax credits to
livestock producers for investment in livestock production facilities. The credit may only be used to offset provincial taxes and
applications for tax credits must be received by Saskatchewan Agriculture no later than six months after the project is completed.
Unlike the Investment Tax Credit Program, livestock covered under this program can be raised for either breeding or slaughter.
Eligible livestock include
(Cite as: 54 FR 30774, *30782)
cattle, horses, sheep, swine, goats, poultry, bees, fur-bearing animals raised in captivity, or any other designated animals.
Investments covered under the program include new buildings, improvements to existing livestock facilities and any stationary
equipment related to livestock facilities.
The program pays 15 percent of 95 percent of project costs, or 14.25 percent of total costs, in order not to overlap the Business
Investment Tax Credit Program, a federal program. As with the Livestock Investment Tax Credit Program, participants may carry
forward any unused credit for up to seven years.
Because this program is limited to livestock producers, we determine that it is limited to a specific enterprise or industry, or
group of enterprises or industries, and is therefore countervailable.
To calculate the benefit, we divided the total tax credits claimed by hog producers by the dressed-weight equivalent of hogs
marketed in the five provinces during the review period to obtain an estimated net subsidy of Can $0.000355/kg.
(Can$0.000161/lb.) for fresh, chilled, and frozen pork and for sow and boar meat.
II. Programs Determined To Be Not Countervailable
1. Special Canada Grains Program. The Special Canada Grains Program 1987
(Cite as: 54 FR 30774, *30782)
Extension provides grants to grain, oilseed, special crop and honey producers who have experienced dramatic drops in income
due to international agricultural policies. To be eligible, farmers must have seeded acreage in Canada of eligible crops
harvested in 1987 or have seeded acreage which was cut for silage, greenfeed, ploughed down, or left for summerfallow due to a
natural disaster. *30783
(Cite as: 54 FR 30774, *30783)
Eligible crops include wheat, oats, barley, mixed grains, rye, corn, and high moisture grains which are intended to be harvested as
grains or fed to livestock.
Because this program is based on seeded acreage of eligible crops, we determine that it does not provide a countervailable benefit
with respect to the production or exportation of pork. To determine whether this program provides a benefit to hog producers, it
would be necessary to conduct an upstream subsidy investigation. However, petitioner did not make a sufficient upstream
subsidy allegation, and we therefore did not undertake such an investigation.
This program is distinguished from the Feed Freight Assistance Program (FFA), which we did find countervailable. Under the FFA,
the benefit was provided directly to the hog producer for the purpose of purchasing feed. Under the Special Canada Grains
Program, payment is made to a grain farmer based on his grain production.
2. Research Projects under the Canada/Quebec Subsidiary Agreement on Agri-Food
(Cite as: 54 FR 30774, *30783)
Development. At verification, we examined three subprograms under the Subsidiary Agreement, 1.A., 2.A. and 3.B., which
include hog-related projects. Of these projects, those under subprogram 1.A. were contracted with universities or research
institutions, and those under 3.B. were contracted with a consulting firm. We verified that the research results of projects under
these two subprograms are made available to the public, including producers of fresh, chilled, and frozen pork in the United
States. Therefore, we determine that projects under subprograms 1.A. and 3.B. are not limited to a specific enterprise or industry,
or group of enterprises or industries, and are thus not countervailable. Subprogram 2.A. is discussed under Section I of the
notice, Programs Determined to be Countervailable.
3. Research Projects under the Canada/Saskatchewan Agricultural Development Subsidiary Agreement. Under the Canada
/Saskatchewan Agricultural Development Subsidiary Agreement, pursuant to the ERDA between the federal government and the
Province of Saskatchewan, a variety of research projects are funded. These projects involve crops, livestock, soil, irrigation, and
human resources. The livestock projects include a number of hog/pork-related projects, including the Swine Herd Technology
Transfer Program. Some projects are 100 percent funded by the federal government, while others are 100 percent funded by the
provincial government. In the end, however, dollar amounts for all projects work out to be split 50/50 between
federal/provincial financing.
(Cite as: 54 FR 30774, *30783)
We verified that the research results of projects related to hogs or pork funded under the Subsidiary Agreement are made
available to the public, including producers of fresh, chilled, and frozen pork in the United States. Therefore, we determine that
projects under the Subsidiary Agreement are not limited to a specific enterprise or industry, or group of enterprises or industries,
and are thus not countervailable.
4. Alberta Processed Food Market Expansion Program. This program promoted consumer awareness of Alberta products
throughout the province. The promotion was for all agricultural products produced in Alberta. Because this promotion is
designed to increase domestic awareness, and therefore is tied to the sale of products to a market other than the United States, we
determine that it does not provide a countervailable benefit to the production or exportation of fresh, chilled, and frozen pork.
5. Alberta Food Processors' Promotion Assistance Program. This program replaced the Processed Food Market Expansion
Program. The objective of the program is to promote Alberta agricultural products within Alberta. Because this promotion is
designed to increase domestic awareness, and therefore is tied to the sale of products to a market other than the United States, we
determine that it does not provide a countervailable benefit to the production or exportation of fresh, chilled, and frozen pork.
6. MAPP Consumer Survey. The Ontario Ministry of Agriculture and Food
(Cite as: 54 FR 30774, *30783)
commissioned a survey on U.S. consumer attitudes toward pork. The cost of the survey was Can$250,000 and was financed
under MAPP. The results of the survey are publicly available both inside and outside of Canada. Therefore, we determine that
the benefits from this project are not limited to a specific enterprise or industry, or group of enterprises or industries, and are
thus not countervailable.
7. Research Grants under the OPIIP. Research grants under OPIIP are provided to support research projects related to swine
production. We verified that the results of such research are publicly available both inside and outside Canada. Therefore, we
determine that the benefits of such research grants are not limited to a specific enterprise or industry, or group of enterprises or
industries, and are thus not countervailable.
8. Education Grants to the Ontario Pork Producers' Marketing Board under the OPIIP. Grants are given to local chapters of the
Marketing Board to help defray the costs of general agricultural education programs. The amount of the grants is determined by
the membership of the organization. Because these grants are paid to the marketing boards for agricultural education programs,
we determine that there is no countervailable benefit to the production or exportation of pork.
9. Grants to the Pork Producers' Marketing Boards. During verification we found that some marketing boards had received funds
from the provincial
(Cite as: 54 FR 30774, *30783)
governments to defray the cost of pork promotion campaigns. Because these promotions were designed to increase domestic
consumption, and therefore were tied to the sale of products to a market other than the United States, we determine that they do
not provide a countervailable benefit to the production or exportation of fresh, chilled, and frozen pork.
III. Programs Determined Not To Be Used
We determine that the following programs were not used by producers or exporters in Canada of fresh, chilled, and frozen
pork during the review period:
1. Export Expansion Fund. This fund covers the costs of federal government travel to foreign countries for trade consultations or
technical seminars. The fund also brings foreign officials to Canada. No funds were used to finance travel related to the
exportation of pork to the United States during the review period.
2. Canada/Alberta Subsidiary Agreement on Agricultural Processing and Marketing. This subsidiary agreement operates
under the ERDA between the Government of Alberta and the Government of Canada, which became effective June 8, 1984.
The agreement is jointly funded and administered by the federal and the provincial government. The purpose of the agreement is
to enhance the
(Cite as: 54 FR 30774, *30783)
agricultural processing sector of Alberta's economy.
Applicants who carry out approved projects within the agricultural processing sector receive non-repayable contributions
toward eligible costs incurred. Eligible projects include the establishment, expansion, and modernization of processing
operations and testing and research facilities, as well as feasibility studies and product research and development.
*30784
(Cite as: 54 FR 30774, *30784)
We verified that no assistance was provided to federally-inspected pork producers (the only pork producers eligible to export)
during the review period.
3. Canada/Alberta Livestock Drought Assistance Program. This program provided relief to livestock producers in certain
areas affected by drought. The program was jointly funded by the provincial and federal governments. Eligible livestock included
beef cattle, dairy cattle, bison, sheep, goats and horses. Hog producers were not eligible for benefits under this program.
4. Alberta Livestock Assistance Program. This program provided assistance to livestock producers living in areas not covered by
the joint federal-provincial drought program. Livestock eligible for this program were the same as for the joint program. Hog
producers were not eligible for assistance under this program.
5. Alberta Red Meat Stabilization Program. This interim program provided assistance to livestock producers before the tripartite
agreements were
(Cite as: 54 FR 30774, *30784)
signed. We verified that no assistance was provided to hog or pork producers during the review period, as all payments were made
during 1985.
6. Alberta Grants to Pork Producers. The province of Alberta agreed to provide funds to two pork producers in the province
under the same terms and conditions as the Canada Alberta Subsidiary Agreement on Agricultural Processing and Marketing.
However, the grants are to be fully funded by the province. We verified that no funds were disbursed during the review period.
7. Manitoba Development Corporation. During verification, we discovered that East-West Packers received a forgiveable loan
from the Manitoba Development Corporation. We requested additional information on the Manitoba Development Corporation
but none was submitted. However, using our methodology, the forgiveable loan was received too late to have provided a benefit
to the company during the review period.
8. Manitoba Hog Income Stabilization Program. This program provided income support payments to hog producers when the
market price for hogs fell below an established price support level. It was funded by premiums from participating producers and
from the provincial government. This program was terminated effective June 28, 1986. We verified that no assistance was
provided to hog producers during the review period, as the last payout under this program was made in July 1986.
9. Ontario Export Sales Aid. This program assists agriculture and food
(Cite as: 54 FR 30774, *30784)
producers and processors in developing markets abroad by providing financial and technical support for various promotional
activities. We verified that no assistance was provided to hog or pork producers during the review period.
10. Ontario Small Food Processors Assistance Program. This program assists eligible small food processing companies by
improving their access to market information, strengthening their business planning skills and capabilities, and providing
financial assistance on eligible capital investments. We verified that no assistance was provided to hog or pork producers during
the review period.
11. Quebec Meat Sector Rationalization Program. Under this program, the Ministry of Agriculture assumed part of the eligible
capital costs of investments for the establishment, standardization, expansion, modernization or amalgamation of
slaughterhouses and meat processing plants. The program started in 1975 with a three-year mandate, after which it was renewed
four times for one year at a time. The program officially terminated in 1982, with financial assistance granted until 1984. We
verified that there were no benefits to slaughterhouses or pork packers under this program during the review period.
Comments
(Cite as: 54 FR 30774, *30784)
All written comments submitted by the interested parties in this investigation which have not been previously addressed in this
notice are addressed below.
Comment 1. Respondents assert that the application of section 771B in this investigation is inconsistent with U.S. obligations
under the General Agreement on Tariffs and Trade (GATT) which states that a signatory cannot impose a duty in excess of the
subsidy. Respondents maintain that unless it can be shown that benefits completely pass through from the producers of the raw
agricultural product to the processors of that product, the countervailing duty on the procesed product may be greater
than the actual subsidy to the producers of the processed product.
Petitioner argues that the application of section 771B is not a violation of the GATT because the type of analysis contained in that
section has been used in several previous agricultural cases where a "pass through" analysis was deemed inappropriate. According
to petitioner, in cases involving agricultural products which are closely related, such as hogs and pork, any subsidy paid on the
raw product is itself paid on the initially processed product. Moreover, petitioner claims that the government of Canada has
applied a similar analysis in a countervailing duty investigation involving boneless beef from the European Economic
Community. Petitioner contends that in that investigation the Canadians considered benefits to cattle producers as direct benefits
to producers of boneless beef.
(Cite as: 54 FR 30774, *30784)
DOC Position. Section 771B is consistent with Article VI(3) of the GATT. Article VI(3) of the GATT holds, in part, "No
countervailing duty shall be levied on any product * * * in excess of an amount equal to the estimated bounty or subsidy
determined to have been granted, directly or indirectly, on the manufacture, production or export of such product in the country
of origin or exportation * * *" First, section 771B simply recognizes that, due to the nature of the market for certain agricultural
products, the subsidy on such products is deemed to be provided directly to the manufacture, production, or exportation of the
processed product. See Application of Section 771B. Second, section 771B does not inflate the subsidy given on the raw or
processed product. In fact, to accurately measure the subsidy, we used a conversion factor to calculate the percentage of pork
yield from live swine. For these reasons, section 771B remains consistent with the GATT.
Comment 2. Respondents contend that section 771B supersedes any prior administrative practice regarding raw and processed
agricultural products. Respondents argue that the Department's practice in such cases was not consistent and consequently could
not be considered to be codified in section 771B.
DOC Position. The criteria codified in section 771B are the same criteria used in Swine. In fact, as the legislative history clearly
shows, Congress passed this amendment in order to codify the Department,s practice in past
(Cite as: 54 FR 30774, *30784)
investigations regarding agricultural products, particularly the Swine investigation. For these reasons, we consider previous final
and preliminary determinations that discussed these past practices to be relevant to this investigation.
Comment 3. Petitioner argues that the Department's determination that 20 percent value added was not limited in Initiation of
Countervailing Duty Investigation: Certain Table Wine from France (50 FR 40480, October 4, 1985) (Table Wine), is not
relevant to this case because, unlike hogs, grapes have several other end uses. Petitioner argues that the value added threshold for
a *30785
(Cite as: 54 FR 30774, *30785)
product with multiple alternative retail uses is not necessarily the same as for a product dedicated to a single end use.
Respondents argue that the Department should find the 20 percent value added by pork packers to be more than limited, as it
found in the initiation notice for Table Wine. Respondents argue that in Table Wine the Department refused to consider benefits to
grape growers as benefits to wine producers because the value added by wine producers was at least 20 percent.
DOC Position. We have determined that, in this investigation, it is reasonable to consider the 20 percent added by pork producers
to live swine to be limited value, as the term is defined under section 771B. Because we never reached a preliminary or final
determination following the initiation of Table Wine, the initiation notice for that investigation carries no precedential weight.
(Cite as: 54 FR 30774, *30785)
Comment 4. Petitioner contends that the Alberta Crow Benefit Offset Program is countervailable because it provides direct
benefits to livestock producers who use either farm-fed or purchased grains.
Respondents assert that the Alberta Crow Benefit Offset Program is not countervailable because the program only partially offsets
the disadvantage to grain users created by the federal Crow Benefit Program. Respondents argue that it is consistent with
Department practice to find such offsetting programs not countervailable when there is no gross subsidy to the producer.
Respondents cite the Final Affirmative Countervailing Duty Determinations: Certain Steel Products from the Federal
Republic of Germany (47 FR 39345, September 7, 1982) (FRG Steel), and the Final Affirmative Countervailing Duty
Determinations: Certain Steel Products from Belgium (47 FR 39304, September 7, 1982) (Belgium Steel), as examples of cases
involving offsetting programs which were found not countervailable. In addition, respondents claim that if there is any benefit to
hog producers, that benefit goes to an input, grain, and therefore an upstream subsidy investigation is required. Since no
upstream investigation has been carried out, respondents contend that any possible benefit to hog producers cannot be
measured.
DOC Position. Unlike the Special Canada Grains Program, this program is not tied to grain production; it is limited to feed
grain users and merchants. Therefore, we have determined that it is countervailable.
(Cite as: 54 FR 30774, *30785)
The fact that a program is designed to offset the economic effects of another government program or policy does not exempt it
from investigation under the countervailing duty law. For example, programs designed to exempt certain companies from
income taxes in order to offset the effect of an extremely high national income tax policy are still potentially countervailable. In
order to be considered an offset, the criteria of the offset provisions of section 771(6) of the Act must be met. Clearly, these
provisions were not met here.
We reject respondents' claim that this program is analogous to FRG Steel. In that investigation, the German Government chose to
impose an import ban on coal and to subsidize coal production. We found no countervailable benefit to steel producers resulting
from the coal subsidy because the price that steel producers were paying for coal was higher than the world price. Since the FRG
Steel determination, we have adopted an upstream subsidy analysis, which would now be applied to determine whether benefits
to coal producers passed through to steel producers. In this investigation, the benefit is paid directly to grain users and not to
grain producers. Thus, there is no need to conduct an upstream subsidy analysis.
The precedent set in Belgium Steel also does not apply to this investigation. In Belgium Steel, the government assumed
responsibility for funding the cost it imposed on the steel companies by mandating early retirement of certain workers. We
determined in that case that this assistance was not
(Cite as: 54 FR 30774, *30785)
countervailable because it benefitted only the workers and not the steel companies.
Comment 5. Petitioner asserts that the Department should determine that at least 50 percent of all benefits under the Alberta
Crow Benefit Offset Program are paid to hog producers because hogs account for about 50 percent of total feed consumption in
both eastern and western Canada. Petitioner contends that the 12 percent figure used in the preliminary determination
should be rejected because it is based on the relative value of swine with respect to other livestock and, therefore, is not relevant
to the amount of feed grains consumed by hogs.
Respondents argue that the Department should not use the 50 percent figure requested by petitioner because (1) it is unverified,
(2) it relates to feed consumption in western Canada and not Alberta, and (3) it is unclear whether this 50 percent figure
relates to all feed grains or just corn and barley. Moreover, respondents claim that the 12 percent figure used in the preliminary
determination was based on the cash receipts for hog producers over the cash receipts for all livestock producers. Respondents
argue that it would be more accurate to use the cash receipts for hog producers over cash receipts for all agricultural production
because this program benefits grain producers and not livestock producers. Respondents claim that the correct percentage of
payouts which can be attributed to hog producers is 5.48 percent.
(Cite as: 54 FR 30774, *30785)
DOC Position. We have used, as best information available, data contained in the publication Agriculture in Alberta, which stated
that hogs accounted for 15 percent of the consumption of the province's barley production, and that barley is the primary grain
fed to hogs in Alberta. We consider this to be the most appropriate measure of the benefits conferred on hog production under
this program. We have rejected respondents' 5.48 percent figure because the relative value of hogs to other agricultural
commodities bears no relationship to the amount of grains fed to hogs. The 15 percent figure published in Agriculture in Alberta is
the only data we have on the amount of grain consumed by hogs in Alberta and represents the best information available to
measure the countervailable benefit under the program.
Comment 6. Petitioner argues that the full amount of rebates to hog producers under the Ontario Farm Tax Rebate Program
should be found countervailable because some farmers, namely those with a gross value of production of less than Can$5,000,
are ineligible for benefits. Petitioner maintains that in two prior cases, Final Affirmative Countervailing Duty
Determination and Countervailing Duty Order: Lime from Mexico (49 FR 35672, September 11, 1984) and Groundfish,
programs which provided higher benefits to certain groups or classes of producers were found countervailable to the extent that
there was a differential between the most and the least preferred producer. Since the least preferred producer in this program
receives no benefits, petitioner
(Cite as: 54 FR 30774, *30785)
contends that all benefits to hog producers should be found countervailable.
Respondents argue that this program is generally available to all bona fide farmers and that only rebates to swine producers in
northern and eastern Canada with a gross value of production between Can$5,000 and Can$8,000 are countervailable.
Respondents also claim that the programs cited by petitioner are not relevant in this investigation because under those programs,
even the least preferred producer was included in *30786
(Cite as: 54 FR 30774, *30786)
the program, whereas those farmers with a gross value of production of less than Can$5,000 are not even eligible under this
program. Respondents assert that these farmers are not eligible because they are not considered to be bona fide farmers.
DOC Position. For purposes of this program, the province of Ontario has defined a bona fide farmer as one with a gross value of
production of at least Can$5,000 a year. We find that definition to be reasonable and one that does not restrict benefits to any
specific group within agriculture. However, we do find the program countervailable to the extent that farmers in southern and
western Ontario need a gross value of production of Can$8,000 to qualify for the program. Our decision is consistent with the
cases cited by petitioner. In each of those cases, we only countervailed the difference in the level of benefits based on regional
distinction.
Comment 7. Respondents argue that the Department is not authorized to examine the process by which benefits are conferred in
determining whether benefits
(Cite as: 54 FR 30774, *30786)
under the tripartite program are limited to a specific enterprise or industry or group of enterprises or industries. They state that
the CIT has "never approved * * * the examination of governmental discretion or intent" in determining whether a program is
limited to a specific enterprise or industry or group of enterprises or industries. They cite Cabot Corp. v. United States, 620 F.
Supp. 722, 730 (1985)(Cabot I), in which the Court ruled that the Department "must examine the actual results or effects of
assistance provided by foreign governments and not the purposes or intentions."
Petitioner counters that the Cabot I citation is part of a larger discussion having nothing to do with the role of intent or discretion,
and that "the passing reference to intent" is therefore dicta. Petitioner argues that, "in the absence of any reliable evidence of
specific criteria for extending tripartite coverage to given commodities, the Department must examine discretion and intent in
order to determine how the tripartite schemes, as a group, operate."
DOC Position. We typically consider three factors in determining whether a program is limited to a specific enterprise or industry
or group of enterprises or industries: (1) The extent to which a foreign government acts (as demonstrated in the language of the
relevant enacting legislation and implementing regulations) to limit the availability of a program; (2) the number of enterprises,
industries, or groups thereof that actually use a
(Cite as: 54 FR 30774, *30786)
program, which may include the examination of disproportionate or dominant users; and (3) the extent, and manner in which, the
government excercises discretion in making the program available. With respect to the third factor, it is our general policy when
verifying domestic programs to review the procedures for approving or rejecting applications for benefits. We must examine
relevant documents to ensure that a situation does not exist where a program, which based on the statute appears to be available
to all companies in a country, is being administered in a manner that is distortive. See, for example, Wire Rod.
At verification, we found no standard criteria for establishing or operating tripartite agreements. Instead, we found that (1)
tripartite agreements only exist for nine agricultural commodities; (2) tripartite agreements do not exist for all commodities
requested by producers; (3) different levels of stabilization exist among commodities covered by tripartite agreements, and (4)
even among swine producers, benefits are not available on equal terms, due to the fact that Quebec is allowed to maintain its
provincial stabilization program while other provincial stabilization programs must be phased out.
Comment 8. Petitioner argues that the benefit from the tripartite program should be calculated on a credits-as-earned basis.
Petitioner states that this methodology is consistent with the Department,s past practice, and cites Final
(Cite as: 54 FR 30774, *30786)
Affirmative Countervailing Duty Determination and Countervailing Duty Order: Certain Steel Wire Nails from New
Zealand (52 FR 37196, October 5, 1987), in which benefits under the Export Performance Taxation Incentive (EPTI) program, a
New Zealand tax program, were calculated in this manner because there was "no uncertainty as to eligibility, no need for complex
tax accounting, and no dependence on ultimate tax liability." Petitioner asserts that the tripartite program is similar in that there
is "no uncertainty as to eligibility, no need for complex accounting, and no adjustments for individualized circumstances."
Petitioner adds that the credits-as-earned methodology would yield the most accurate cash deposit rate because it is "based on
market conditions which actually existed during the review period."
The Canadian Pork Council (CPC) argues that, if the Department does determine that the tripartite program and provincial
stabilization programs are countervailable, the benefits should be based only on government contributions to the stabilization
fund, regardless of payments to producers. It characterizes the tripartite program as an insurance scheme in which "the actual
benefit to producers * * * should be viewed as the income security that is available on a continuing basis" which "should be
measured not by the amount of any particular payment a producer may receive in any given year, but by the funds available in
the 'insurance' plan, made up of premiums paid by producers, provincial and Federal governments, and any interest on the
accumulated funds."
(Cite as: 54 FR 30774, *30786)
The CPC counters petitioner by stating that this methodology would result in "a more predictable level of countervailable duties
from year to year, and avoid significant differences between deposits and assessed duties."
The Canadian Meat Council and Canada Packers, Inc., (CMC and CP) agree with the CPC but add that if the Department decides
not to use the government contribution approach, it should use the credits-as-earned methodology suggested by petitioner. The
CMC and CP qualify this point by arguing that the time period used should be fiscal year 1988/89 (April 1, 1988-March 31, 1989).
They state that the credits-as-earned method and the fiscal year 1988/89 time period would result in a deposit rate "that is most
consistent" with any final duties which might later be assessed in an administrative review.
DOC Position. The Department has consistently used the cash flow method in determining when benefits are received.
There are two exceptions. One applies to certain situations involving big ticket items, the production and delivery of which may
extend over several years. In such situations, the application of the cash flow method would enable certain countervailable
subsidies to go unremedied. See Final Affirmative Countervailing Duty Determination: Offshore Platform Jackets and Piles
from Korea, 51 FR 11779 (1986). This is not the case with payments under the tripartite program, which would be captured at the
time they are paid out to producers.
(Cite as: 54 FR 30774, *30786)
The second exception involves an export benefit provided as a percentage of the value of the exported merchandise (such as a
cash payment or an overrebate of indirect taxes) on the date of export. This exception is based on the New Zealand EPTI program
cited by petitioner. The EPTI example is not applicable here, however, because the recipients of the EPTI payments knew at the
time they made their export sales what their cash payment would be. By contrast, hog producers enrolled in the tripartite plan for
hogs do not know what cash payments, if any, they will *30787
(Cite as: 54 FR 30774, *30787)
receive until their checks are sent out. Certainty as to the amount to be received does not occur when the federal and provincial
governments contribute to the stabilization fund or when hogs are sold.
Regarding our use of the cash-flow methodology for determining when benefits are received, we note that under Article VI(3) of
the GATT we are not allowed to countervail more than the actual amount of a subsidy. Our cash-flow methodology ensures that we
do not exaggerate the actual subsidy paid on a product during the period under review. The accrual method suggested by
respondents could lead the Department to finding a subsidy when, in fact, pig farmers have received no payments at all or to
finding no benefit when pig farmers actually received substantial payments.
As for the argument made by the CMC and CP that we change our review period to the Government of Canada's 1988/89 fiscal
year, the Department has consistently
(Cite as: 54 FR 30774, *30787)
refused to change the review period in an investigation after the preliminary determination. To change the review period after the
preliminary determination would substantially prejudice the position of all parties to the proceeding by decreasing their ability to
comment on our findings.
Comment 9. Petitioner states that there are discrepancies between the tripartite payouts reported in the March 9, 1989 response
and those reported in a subsequent response. Petitioner argues that the Department should therefore use the higher figures
contained in the later response.
Respondents state that the Department verified the figures reported in the March 9 response and that the figures contained in the
subsequent response are hypothetical amounts based on 100 percent participation in the tripartite program, i.e., participation of
all ten provinces and all federally and provincially inspected plants and all exports of market hogs, rather than the actual amounts
paid out under the program.
DOC Position. We have based our calculations on verified information.
Comment 10. Respondents argue that we should allocate the benefits provided to the production of swine over the entire live
weight of swine. Citing Groundfish, respondents contend that when analyzing benefits from a domestic subsidy, the Department's
practice is to allocate those benefits over all domestic production. They state that the Department allocated the benefit over all
fresh fish and shellfish, even though shellfish was not under
(Cite as: 54 FR 30774, *30787)
investigation. They also cite Lamb Meat 1985, in which the Department allocated the domestic subsidy over all products
produced during the slaughter operation, including the meat, pelts, wool and offal.
DOC Position. Respondents cite Lamb Meat 1985 as an instance where the Department allocated the domestic subsidy over all
products produced during the slaughter operation. This case is not relevant to the present investigation, however, as hogs are
raised for the sole purpose of producing pork. Lambs, on the other hand, are raised for two primary purposes, their meat and
wool. Groundfish also has no relevance to this investigation. In Groundfish, the Department did allocate certain program benefits
over fish and shellfish. We did so because benefits under those programs were provided to both fish and shellfish and could not be
segregated to the subject merchandise.
Comment 11. Petitioner argues that slaughter sows and boars should be excluded from the denominator used to calculate benefits
under any program that does not cover sows and boars. Sows and boars are not eligible under the tripartite program and were
considered a distinct subclass of merchandise in the Department's first administrative review of the countervailing
duty order on live swine. For that review, the rate for all programs under investigation was recalculated by deducting 2.1
percent of production to account for sows and boars.
Respondents, citing the Live Swine Review, also argue that the Department
(Cite as: 54 FR 30774, *30787)
should calculate a separate rate for sows and boars and, in addition, determine which benefits pass through to producers of sow
and boar meat. They maintain that if the Department does not calculate a separate rate for sows and boars, it will be determining
that benefits from programs for which sows and boars are ineligible pass through to sow and boar meat. They maintain that sow
and boar meat should not be subjected to any countervailing duty on fresh, chilled, and frozen pork produced from market
hogs. They contend that sow and boar meat is distinguishable from market hog meat by its color, weight, and consistency, and
that boar meat must be stamped as such.
DOC Position. We have calculated a separate rate for sows and boars. Sows and boars are not eligible for stabilization under the
tripartite and other subsidy programs. Additionally, sows and boars were considered a distinct subclass of merchandise in the
Department's Live Swine Review. Following the methodology used in that review, we have deducted 2.1 percent of hog production
to account for sows and boars, where appropriate, from our subsidy calculations.
Comment 12. Respondents contend that the Department's use of total pork production in the five provinces as the denominator is
accurate. They maintain that, unlike imports of live swine, pork imports are not identified by their province of origin.
Additionally, hogs often originate in one province but are exported as pork by another province. For these reasons, respondents
state that calculating the countervailing duties using the trade-weighted approach
(Cite as: 54 FR 30774, *30787)
would be inaccurate.
DOC Position. We agree. We verified that hogs are often shipped across provincial boundaries for slaughter and cutting into pork.
Therefore, any countervailing duties based on the trade-weighted approach would overstate or understate the level of
benefit depending on whether the province is a net importer or exporter of hogs.
Verification
In accordance with section 776(b) of the Act, except where noted in this determination, we verified the information used in
making our final determination. We followed standard verification procedures, including meeting with government and company
officials, examination of relevant accounting records, and examination of original source documents. Our verification results are
outlined in detail in the public versions of the verification reports, which are on file in the Central Records Unit (Room B-099) of
the Main Commerce Building.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we instructed the U.S. Customs
(Cite as: 54 FR 30774, *30787)
Service to suspend liquidation of all entries of fresh, chilled, and frozen pork from Canada which is entered, or withdrawn
from warehouse, for consumption, on or after May 8, 1988, the date of publication of our preliminary determination in the
Federal Register. The liquidation of all entries, entered or withdrawn from warehouse, for consumption will continue to be
suspended, and as of the date of publication of this notice in the Federal Register, the Customs Service will require a cash deposit
or bond for all entries of fresh, chilled and frozen pork equal to Can$0.08/kg. (Can $0.036/lb.), and zero for all entries of fresh,
chilled, and frozen sow and boar meat.
*30788
(Cite as: 54 FR 30774, *30788)
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our determination. In addition, we are making available to
the ITC all non- privileged and non-proprietary information relating to this investigation. We will allow the ITC access to all
privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information,
either publicly or under an administrative protective order, without the written consent of the Assistant Secretary for Import
Administration.
(Cite as: 54 FR 30774, *30788)
If the ITC determines that material injury, or the threat of material injury, does not exist, this proceeding will be terminated and
all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or cancelled. If,
however, the ITC determines that such injury does exist, we will issue a countervailing duty order, directing Customs
officers to assess countervailing duties on all entries of fresh, chilled, and frozen pork from Canada entered, or
withdrawn from warehouse, for consumption, as described in the "Suspension of Liquidation" section of this notice.
This determination is published pursuant to section 705 (d) of the Act [19 U.S.C. 1671d(d)].
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
July 17, 1989.
[FR Doc. 89-17278 Filed 7-21-89; 8:45 am]
BILLING CODE 3510-DS-M