NOTICES

DEPARTMENT OF COMMERCE

[C-122-404]

Live Swine from Canada; Final Results of Countervailing Duty Administrative Reviews

Tuesday, March 12, 1991

AGENCY: International Trade Administration/Import Administration, Commerce.

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

SUMMARY: On May 21, 1990, the Department of Commerce published the preliminary results of its administrative reviews of the countervailing duty order on live swine from Canada. We have now completed those reviews and determine the net subsidy for the period April 1, 1986 through March 31, 1987 to be Can $0.0001/lb. for sows and boars and Can$0.0039/lb. for all other live swine; for the period April 1, 1987 through March 31, 1988 to be Can$0.0030/lb. for sows and boars and Can$0.0032/lb. for other live swine. In accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem rates. The rate is de minimis for sows and boars for the April 1, 1986 through March 31, 1987 review period and all other live swine for both review periods.

EFFECTIVE DATE: March 12, 1991.

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

*10411 SUPPLEMENTARY INFORMATION:

Background

On May 21, 1990, the Department of Commerce (the Department) published in the Federal Register (55 FR 20612) the preliminary results of its administrative reviews of the countervailing duty order on live swine from Canada (50 FR 32880; August 15, 1985). The Department has now completed those administrative reviews in accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act).

Scope of Review

Imports covered by these reviews are shipments of live swine from Canada. During the review periods, such merchandise was classifiable under item number 100.8500 of the "Tariff Schedules of the United States Annotated" (TSUSA). This merchandise is currently classifiable under item numbers 0103.91.00 and 0103.92.00 of the "Harmonized Tariff Schedule" (HTS). The TSUSA and HTS item numbers are provided for convenience and Customs purposes. The written description remains dispositive.
The reviews cover the periods April 1, 1986 to March 31, 1987 and April 1, 1987 to March 31, 1988, and 35 programs: (1) Agricultural Stabilization Act, (2) Feed Freight Assistance Program, (3) National Tripartite Red Meat Stabilization Program, (4) Canada/British Columbia Agri-Food Regional Development Subsidiary Agreement, (5) Canada/Quebec Subsidiary Agreement on Agri-Food Development, (6) Saskatchewan Hog Assured Returns Program, (7) British Columbia Farm Income Insurance Plan, (8) Manitoba Hog Income Stabilization Plan, (9) New Brunswick Hog Price Stabilization Plan, (10) Newfoundland Hog Price Support Program, (11) Nova Scotia Pork Price Stabilization Program, (12) Prince Edward Island Price Stabilization Program, (13 Quebec Farm Income Stabilization Insurance Programs, (14) Alberta Crow Benefits Offset Program, (15) New Brunswick Swine Assistance Program, (16) New Brunswick Livestock Incentives Program, (17) New Brunswick Hog Marketing Program, (18) New Burnswick Swine Industry Financial Restructuring Program, (19) New Brunswick Swine Assistance Policy on Boars, (20) Newfoundland WEanling Bonus Incentive Policy, (21) Nova Scotia Swine Herd Health Policy, (22) Nova Scotia Transportation Assistance, (23) Nova Scotia Improved Sire Policy, (24) Ontario Farm Tax Rebate Program, (25) Ontario (Northern) Livestock Improvement and Transportation Assistance Programs, (26) Ontario Weaner Pig Stabilization Plan, (27) Ontario Pork Industry Improvement Plan, (28) Prince Edward Island (PEI) Hog Marketing and Transportation Subsidies, (29) PEI Swine Development Program, (30) PEI Interest Payments on Assembly Yard Loan, (31) PEI Swine Incentive Policy Program, (32) Quebec Productivity Improvement and Consolidation of Livestock Production Program, (33) Quebec Regional Development Assistance Program, (34) Saskatchewan Livestock Investment Tax Credit, and (35) Saskatchewan Livestock Facilities Tax Credit Program.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. Case briefs were submitted by the petitioner, the National Pork Producers Council (NPPC), and two parties to the procedding, the Canadian Pork Council (CPC) and the Government of Quebec (GOQ). Rebuttal briefs were submitted by the petitioner and the CPC. At the request of the CPC, we held a public hearing on July 9, 1990.

Comment 1: Petitioner argues that the Department incorrectly calculated the benefit from the Ontario Farm Tax Rebate Program using the percentage of farmers in the $5,000 to $8,000 income range in the province rather than the percentage of farmers in the same income range in Eastern and Northern Ontario. Petitioner contends that the existence of a lower threshold for Eastern and Northern Ontario suggests that such farmers are more heavily concentrated there than in the rest of the province.

CPC points out that Ontario does not have farm income information by regions for the periods under review and agrees with the Department's methodology. However, CPC points out that, in the preliminary results, the Department calculated the benefit based on the entire amount of the tax rebate in each review period, rather than on the share of the rebate attributable to farmers in the $5,000 to $8,000 income range. CPC requests that the Department recalculate the benefit to accurately reflect the methodology stated in the preliminary results.

Department's Position: The data furnished by the Canadian government during the review periods does not allow us to calculate the concentration of farmers in the $5,000 to $8,000 income range in Eastern and Northern Ontario. Therefore, to calculate the benefit from this program, the Department used information on farmers's income from the 1986 Census of Agriculture, Statistics Canada, as best information available. This is consistent with Alberta Pork Producers' Marketing Board v. United States, 669 F.Supp. 445, 457-58 (1987).

In accordance with the CPC's comment, the Department has revised its calculations using the percentage of the total payout made to swine farmers in the $5,000 to $8,000 range during the 1986/87 and 1987/88 review periods. Based on these calculations, we determine the benefits during both review periods to be significantly less than Can$0.0001/lb., which is effectively zero, for both sows and boars and all other live swine.

Comment 2: Petitioner argues that, even though no benefits were provided to producers under the Canada/British Columbia Agri-Food Regional Development Subsidiary Agreement and the Canada/Quebec Subsidiary Agreement on Agri-Food Development programs during the periods of review, the Department should determine that the provincial contributions to these joint federal/provincial programs are countervailable because these programs provide benefits to a specific enterprise or industry, or group of enterprises or industries.

The CPC disagrees and asserts that such a determination would be premature, erroneous and constitute an advisory opinion. Furthermore, CPC submits that both programs involve a large number and a variety of agricultural products and therefore, the provincial governments' contributions are not limited to a specific enterprise or industry, or group of enterprises or industries.

Department's Position: It is the Department's practice not to address the countervailability of programs that producers/exporters of merchandise subject to a group of enterprises or industries. Department's Position: It is the Department's practice not to address the countervailability of programs that producers/exporters of merchandise subject to a countervailing duty order have not used.

Comment 3: CPC contends that the Department has failed to consider all of the information provided by the Government of Canada in making its determination that the Tripartite agreements are counteravailable. Further, the Department's description of the Tripartite scheme for hogs is not accurate and if all the facts are considered fairly, the Tripartite stabilization program does not meet the four-part "specificity test" and is thus not countervailable.
In examining de facto selective treatment, CPC argues that the *10412 Department has focused too narrowly on the number of commodities for which there already are finalized Tripartite agreements, rather than recognizing Tripartite as a new, expanding program having the stated purpose to include all agricultural products. CPC points out that ongoing negotiations have resulted in more than doubling the number of commodities covered by agreements, from four during 1986/87 to ten by March 31, 1988. Because there were no payouts from the Tripartite plan for hogs during the periods of review, CPC contends hog producers were not "dominant" users nor did they receive disproportionately large benefits from the Tripartite plans. Finally, CPC contends that the legitimate exercise of governmental discretion, based not on undue political considerations, but on objective, neutral, and economic factors, is not evidence of selective treatment in the sense intended by the Department's regulations. Neither in the statutory language nor in the legislative history of the U.S. countervailing duty law is there any indication that Congress intended the Department to examine the decision-making processes of a trading partner in the conduct of its domestic economic programs.

Department's Position: No benefits were received under the Tripartite Program during either review period. Any issue related to its countervailability is therefore moot. See Comment 2.

Comment 4: CPC disputes the Department's determination that the Feed Freight Assistance Program (FFA) is a countervailable subsidy to live swine producers. CPC emphasizes that payments are made to livestock feed manufacturers who transform feed grains into commercial feed to be sold to livestock producers. Payments are made only incidentally to livestock producers based on their capacity to produce livestock feed, not as a livestock producer. There is no requirement that any of the feed produced be used to feed swine. Furthermore, since feed is obviously a different product from live swine, it can only be considered an input into the final product, live swine, and an upstream subsidy investigation must be conducted before countervailing duties are assessed to offset FFA benefits.
CPC also points out the statutory language and regulations limit benefits only to users to grain in "grain deficit" regions of Eastern Canada and British Columbia. CPC therefore states that the Department must amend its calculations and trade-weight the amount of the benefit.

Department's Position: In the Preliminary Results, we preliminarily determined that this program is countervailable because it is limited to a specific enterprise or industry, or group of enterprises or industries. The Department countervailed only the amount of FFA benefits paid to livestock producers who have indicated that they raise hogs. FFA benefits, in the form of reduced costs for feed, result in a direct reduction in the cost of production of hogs. Therefore, the Department is not required to conduct an upstream subsidy investigation under section 771A (See "United States-Canada Binational Panel Review of Fresh Chilled and Frozen Pork, Secretariat File No. USA-89-1904-06" September 28, 1990 at page 57). In these reviews, CPC submitted no new information addressing the requirements for an upstream subsidy investigation. Therefore, the Department's determination remains unchanged.
The Department has noted that the eligibility for benefits is restricted to Eastern Canada, British Columbia, the Yukon Territory and the Northwest Territories. The Federal Government's questionnaire response did not break out payouts according to regions; therefore, to calculate the benefit, we allocated five percent of the total payout made during each of the periods of review over hog production in Eastern Canada (including 2/3 of Ontario, all of Quebec and the Maritime Provinces) and British Columbia. We then weight- averaged the benefit by the percent of total Canadian exports accounted for by these areas, resulting in a benefit during both review periods of Can $0.0001/lb., for both sows and boards and all other live swine.

Comment 5: CPC argues that the Alberta Crow Benefit Offset Program (Offset Program) is not a countervailable subsidy. They assert that the Federal Crow Benefit payment to railways shipping grain from Manitoba, Saskatchewan and Alberta to other parts of Canada reduces grain producers' shipping costs. Lower shipping costs for grain producers result in artificially higher prices for grain to Alberta users because the price of grain in Alberta is the market price of grain at the port of export net of transportation costs. The high price of grain places Alberta livestock producers at a comparative disadvantage with respect to producers outside of Alberta. The Offset Program partially counteracts this disadvantage created by the federal program, allowing livestock producers to buy grain feed at competitive prices and to maintain livestock production on a competitive basis.
CPC compares the benefits of the Offset Program to the benefits determined by the Department not to be countervailable in "Certain Steel Products from the Federal Republic of Germany" (47 FR 39345; Sept. 7, 1982). In that instance, because the Federal Republic of Germany (FRG) restricted imports of coking coal, steel producers were prevented from buying coal at lower world prices. Because these import restrictions created a competitive disadvantage for steel producers, the FRG began subsidizing the coking coal used by the steel industry. The Department determined that the production assistance and the import restrictions for coal were "inseparably linked": i.e., "one action simply renders the other null and void" resulting in no "economic benefit" to the steel industry. CPC contends that the Offset Program is similarly designed to counteract the disadvantage to Alberta feed users caused by a related federal program.
If, despite the parallels with the FRG steel case, the Department does determine that the Offset Program benefits hog producers, CPC states that the Department must conduct an upstream subsidy investigation since the direct benefits of the federal program go to the producers of grain, an input to live swine. Unless and until an upstream subsidy investigation is carried out, the benefit, if any, to hog producers from the Offset Program cannot be measured.
CPC asserts that the Department incorrectly calculated the benefit from this program relying on erroneous, unverified information from the "Final Affirmative Countervailing Duty Determination: Fresh, Chilled, and Frozen Pork from Canada," (54 FR 30774; July 24, 1989) (Pork). They submit copies of affidavits attesting that 10 percent instead of 15 percent of barley produced in Alberta is consumed by swine. CPC also contends that the Department has taken no notice that barley accounts for only 10 percent of Alberta's total crop production and that therefore hogs consume significantly less than 10 percent of total Alberta's feed grain production. Should the Department find that the Offset Program provides a benefit and that the benefit flows to hog producers, CPC suggests an alternative methodology to calculate the benefit. CPC proposes that the Department divide the amount of Farm Cash Receipts for Hogs for 1988 by the amount of Farm Cash Receipts for all commodities. This figure (5.48 percent) should be used to calculate the only measurable benefit under the Offset Program from payments that have been *10413 made for grain ultimately consumed by hogs.

Department's Position: We disagree with CPC. Certificates are issued directly to Alberta grain users enabling them to buy feed grain from the feedmill or grain producers at the market price less the value of the certificate. Therefore, the certificates benefit the grain users by reducing the cost of grain in Alberta.
The FRG steel determination is not relevant in this case. The Department determined that the coal subsidies and the import restrictions benefit the coal industry. The steel industry not only did not receive any direct benefits, but also was put at a competitive disadvantage since it was forced to buy the input, coal, at the higher domestic prices. Although the Crow Benefit payments result in higher prices in Alberta, we are not aware of any restrictions preventing Alberta's livestock producers from buying cheaper feed grains outside Alberta.
Because the subsidy from this program goes directly to the hog producers reducing their cost of a primary input, an upstream investigation is not required (See "United States-Canada Binational Panel Review of Fresh, Chilled and Frozen Pork" Secretariat File No. USA-89-1904-06, September 28, 1990 at page 66).
However, we have recalculated the benefit from this program. Based on the methodology in the cost model used by the National Tripartite Hog Stabilization Committee to calculate hog support prices, we first calculated that it takes 630 pounds of grains to produce one hog by multipling the live weight gained by a hog from the weanling to the market stage (180 lbs.) by the grains conversion ratio of 3.5, provided in the "Economic Indicators of the Farm Sector, Cost of Production--Livestock and Dairy, 1989", a U.S. Department of Agriculture publication. We then found the total amount of grains consumed by hogs in Alberta by multipling Alberta's total hog production by the quantity of feed consumed by each hog. By dividing the result by the total grain fed to all livestock in Alberta, we found that 12.75 percent of total grain is consumed by hogs. Therefore, to calculate the benefit from this program, we multiplied 12.75 percent by the total payout to fed grain users in Alberta and divided the result by the total weight of all live swine including sows and boars produced in Alberta. We then weight-averaged the benefit by Alberta's share of all live swine including sows and boars exported to the United States. On this basis, we determine the benefit for both sows and boars and all other live swine to be Can$0.0023/lb. for the 1987/88 review period.

Comment 6: CPC disputes the determination that four breeding stock programs are countervailable: New Brunswick Swine Assistance Policy on Boars, New Brunswick Livestock Incentives Program, Nova Scotia Improved Sire Policy, and Ontario (Northern) Livestock Improvement Program. CPC claims that "breeding stock, bred and sold as breeding stock, is not covered by this order on live swine."
Petitioner points out that payments from these programs go directly to the producers of live swine and are not limited to persons who deal exclusively in buying, breeding, and selling breeding stock.

Department's Position: We disagree with CPC. The benefits from these programs go directly to hog producers, not breeding stock producers, to aid in the purchase of breeding stock to upgrade the quality of their herds. Therefore, we determine that the programs are countervailable.

Comment 7: CPC asserts that the calculations for the 1986/87 review period should be revised to correct the following clerical errors: (1) The Department's calculations included incorrect individual provinces' percentages of total Canadian exports of live swine; (2) the Manitoba Hog Income Stabilization Plan benefits were overstated due to a typographical error; (3) the amount used for the benefit under the Prince Edward Island Price Stabilization Program (PEIPSP) was incorrect; (4) the Saskatchewan Investment Tax Credit was incorrectly calculated; (5) the FFA benefits should have been weighted by exports from each province; and (6) ASA benefits should have been broken out by province.

Department's Position: We agree with CPC and have revised our calculations accordingly. As a result, for the 1986/87 review period, we determine the benefits to be: zero for sows and boars and Can$0.0029/lb. for all other live swine from the Manitoba Hog Income Stabilization Plan; zero for sows and boars and significantly less than Can$0.0001/lb., which is effectively zero, for all other live swine from the PEIPSP; and zero for sows and boars and Can $0.0001/lb. for all other live swine from the Saskatchewan Investment Tax Credit Program.

Comment 8: CPC objects to the Department's determination, based on information submitted in the previous review, not to factor out the producer contributions in the Nova Scotia Pork Price Stabilization Program (NSPPSP). CPC contends that the Department has no authority to use information without incorporating appropriate documentation in the record and asks the Department to fully explain the methodology followed in calculating the benefits.

Department's Position: The questionnaire response in the instant reviews states that no changes have been made to the Nova Scotia Natural Products Act-- PPSP (the Act) since 1985. The 1985 amendment to the Act, summarized in Nova Scotia's questionnaire response in the 1985/86 review, which we have incorporated into the record, stipulated that contributions by producers to this program would be used to pay off an existing industry loan. The questionnaire response showed no producer contributions to the payout during the review period. In accordance with the 1985 amendment and with the information submitted in the questionnaire response, we considered the total payout to be a grant and allocated the benefit over the total production minus sows and boars. We then weight-averaged the benefit by Nova Scotia's portion of total Canadian exports minus sows and boars, for a benefit of zero for sows and boars, and significantly less than Can$0.0001/lb., which is effectively zero, for all other live swine for both periods of review.

Comment 9: The Government of Quebec (GOQ) argues that the Department erred in determining that the Farm Income Stabilization Insurance Program (FISI) is countervailable because it is not limited, in law or in fact, to a specific group of enterprises or industries and there is no evidence in the record of exclusion or targeting.
The petitioner maintains that the FISI program has previously been found countervailable. Further, under the authority of the FISI Act, the GOQ is permitted to "order, for any product or group of products it indicates, the establishment of a farm income stabilization insurance scheme established for the whole of Quebec or any region of Quebec it designates."

Department's Position: The Quebec statute governing the FISI program states that any product or group of products may have an income stabilization insurance scheme established. The Department has determined that only a limited number of commodity producers have received income stabilization benefits. Because benefits provided under this program are limited to a specific group of enterprises or industries, the Department has determined that this *10414 program is countervailable. See Alberta Pork Producers' Marketing Board v. United States, 687 F.Supp. 445 (CIT 1987). As a result, we have calculated a countervailable benefit of zero for sows and boars for both review periods; for all other live swine, Can$0.0001/lb. for the 1986/87 review period and significantly less than Can$0.0001/lb., which is effectively zero, for the 1987/88 review period.

Comment 10: CPC contends that the payments under the Quebec Farm Income Stabilization Insurance Programs (FISI) used to calculate the benefits in the 1986/87 review period have been countervailed in the previous review.

Department's Position: According to information submitted in the questionnaire response, payments from the FISI program are calculated on a crop year basis. Since the crop year for piglets is July 1 through June 30, payouts of the benefits for piglets are made at the end of June. The date of the payments for the 1985/86 crop year falls within our 1986/87 review period. Therefore, we included them in the calculations of benefits under this program. They were not included in the calculation of the benefits for the 1985/86 review period.

Comment 11: CPC asserts that the Department did not explain how it reached the figure used to calculate the benefits from the Quebec FISI program during the 1987/88 review period.

Department's Position: We have amended our calculations to include 2/3 of the compensation payment figure shown in FISI's financial statement for fiscal year 1987/88. This results in a benefit that is zero for sows and boars and significantly less than Can$0.0001/lb., which is effectively zero, for all other live swine for the review period.

Comment 12: CPC asserts that the Saskatchewan Livestock Facilities Tax Credit (SLFTC) benefit for the 1987/88 review period was overstated due to a typographical error.

Department's Position: We agree and have revised our calculations accordingly. On this basis, we determine the benefit for both sows and boars and all other live swine to be significantly less than Can$0.0001/lb., which is effectively zero, for the 1987/88 review period.

Comment 13: CPC asserts that, for the 1987/88 review period, for purposes of the de minimis calculations, the rate for both sows and boars should be rounded up from Can$0.0029/lb. to Can $0.003/lb.; and for live swine, it should be rounded up from Can$0.0039/lb. to $0.004/lb.

Department's Position: Using more detailed information submitted in the questionnaire response, we revised our de minimis calculations. For each review period, we calculated a separate provincial yearly average price for both sows and boars and for all other live swine. We then weight-averaged the average provincial prices by the portion of exports from each province and summed the results. We multiplied this weighted-average figure by 0.50 percent. Based on the result, we determine that rates of less than Can$0.0026/lb. for sows and boars and Can$0.0041/lb. for all other live swine are de minimis for the 1986/87 review period; rates of less than Can$0.0023/lb. for sows and boars and Can$0.0038/lb. for all other live swine are de minimis for the 1987/88 review period.

Final Results of Review

After reviewing the comments received, we determine the net subsidy for the period April 1, 1986 through March 31, 1987 to be Can$0.0001/lb. for sows and boars and Can$0.0039/lb. for all other live swine; for the period April 1, 1987 through March 31, 1988 to be Can$0.0030/lb. for sows and boars and Can $0.0032/lb. for all other live swine. In accordance with 19 CFR 355.7, any rate less than 0.50 percent ad valorem is de minimis. We converted the cents- per-pound rates to ad valorem rates. The rate is de minimis for sows and boars for the April 1, 1986 through March 31, 1987 and for all other live swine for both review periods.
Therefore, the Department will instruct the Customs Service to liquidate, without regard to countervailing duties, all shipments of sows and boars exported on or after April 1, 1986 and on or before March 31, 1987, and of all other live swine exported on or after April 1, 1986 and on or before March 31, 1988. Further, the Department will instruct the Customs Serivce to assess countervailing duties of Can$0.0030/lb. on all shipments of sows and boars exported on or after April 1, 1987 and on or before March 31, 1988.
The Department will also instruct the Customs Service to collect a cash deposit of estimated countervailing duties of Can$0.0030/lb. on all shipments of sows and boars and to waive cash deposits of estimated countervailing duties for all other live swine entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice. This deposit requirement shall remain in effect until publication of the final results of the next administrative review.
This administrative review and notice are in accordance with section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: March 5, 1991.

Eric I. Garfinkel,

Assistant Secretary for Import Administration.

[FR Doc. 91-5802 Filed 3-11-91; 8:45 am]

BILLING CODE 3510-DS-M