(Cite as: 56 FR 28531)

NOTICES

DEPARTMENT OF COMMERCE

[C-122-404]

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

Friday, June 21, 1991

AGENCY: International Trade Administration/Import Administration Department of Commerce.

ACTION: Notice of Final Results of Countervailing Duty Administrative Review.

SUMMARY: On February 12, 1991, the Department of Commerce published the preliminary results of its administrative review of the countervailing duty order on live swine from Canada. We have now completed that review and determine the net subsidy during the period April 1, 1988 through March 31, 1989 to be Can$0.0449/lb. for live swine (other than sows and boars) and Can $0.0047/lb. for sows and boars.

EFFECTIVE DATE: June 21, 1991.

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

SUPPLEMENTARY INFORMATION:

Background

On February 12, 1991, the Department of Commerce (the Department) published in the Federal Register (56 FR 5676) the preliminary results of its administrative review of the countervailing duty order on live swine from Canada (50 FR 32880; August 15, 1985). The Department has now completed that administrative review in accordance with section 751 of the Tariff Act of 1930, as amended (the Tariff Act).

Scope of Review

Imports covered by this review are shipments of live swine from Canada. Through 1988, 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 review covers the period April 1, 1988 through March 31, 1989 and 41 programs: (1) Agricultural Stabilization Act; (2) Feed Freight Assistance Program; (3) National Tripartite Stabilization Scheme for Hogs; (4) Canada/British Columbia Agri-Food Regional Development Subsidiary Agreement (ARDSA); (5) Canada/Quebec Subsidiary Agreement on Agri-Food Development; (6) Saskatchewan Hog Assured Returns Program (SHARP); (7) British Columbia Farm Income Insurance Plan (FIP); (8) Quebec Farm Income Stabilization Insurance Programs (FISI); (9) Alberta Crow Benefit Offset Program; (10) Ontario Farm Tax Rebate Program; (11) Ontario (Northern) Livestock Improvement and Transportation Assistance Programs; (12) Ontario Pork Industry Improvement Plan (OPIIP); (13) Quebec Productivity Improvement and Consolidation of Livestock Production Program; (14) Quebec Regional Development Assistance Program; (15) Saskatchewan Livestock Investment Tax Credit; (16) Saskatchewan Livestock Facilities Tax Credit Program; (17) British Columbia (B.C.) Feed Grain Market Development Program; (18) British Columbia Special Hog Payment Program; (19) Manitoba Hog Income Stabilization Plan; (20) Alberta Red Meat Interim Insurance Program; (21) British Columbia Swine Herd Improvement Program; (22) New Brunswick Hog Price Stabilization Program; (23) New Brunswick Livestock Incentives Program; (24) New Brunswick Agricultural Development Act-Swine Assistance Program; (25) New Brunswick Hog Marketing Program; (26) New Brunswick Swine Industry Financial Restructuring Program; (27) New Brunswick Swine Assistance Policy on Boars; (28) Newfoundland Weanling Bonus Incentive Policy; (29) Newfoundland Hog Stabilization Program; (30) Nova Scotia Natural Products Act-Pork Price Stabilization Program; (31) Nova Scotia Swine Herd Health Policy; (32) Nova Scotia Transportation Assistance Program; (33) Nova Scotia Improved Sire Policy; (34) Prince Edward Island Hog Price Stabilization Program; (35) Prince Edward Island Transportation Grants; *28532 (36) Prince Edward Island Swine Development Program; (37) Prince Edward Island Interest Payments on Assembly Yard Loan; (38) Ontario Hog Price Stabilization Program; (39) Ontario Weaner Pig Stabilization Plan; (40) Newfoundland Farm Products Corporation-Hog Price Support Program; and (41) Newfoundland Weanling Bonus Incentive Policy.

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 four parties to the proceeding, the Canadian Pork Council (CPC), the Government of Quebec (GOQ), P. Quintaine & Son Ltd., of Brandon, Manitoba (Quintaine), and Pryme Pork Ltd., of St. Malo, Manitoba (Pryme). Rebuttal briefs were submitted by the NPPC, CPC, and the GOQ. At the request of the NPPC, the GOQ, and Pryme, we held a public hearing on April 8, 1991.

Comment 1: NP argues that the Tripartite Scheme for hogs is de jure limited to a specific industry, since the most appropriate level of analysis for determining specificity is the Tripartite Scheme for hogs itself. NPPC further argues that Bill C-25 was only an enabling statute which allowed the federal government to create a number of distinct programs targeted toward specific commodities, with each distinct program de jure limited to a specific industry because each: (1) Is separately administered; (2) is separately negotiated at different times for different purposes; (3) covers different geographical areas; (4) uses individual plan-specific formulae which have no necessary relationship to differences in the types of commodities or markets; and (5) is separately funded. NPPC also states that the Tripartite Scheme for hogs is not "integrally linked" to other Tripartite stabilization schemes. NPPC submits that for the forgoing reasons, the Department should perform its specificity analysis at the level of the individual stabilization agreement as in IPSCO, Inc. v. United States, 687 F. Supp. 614, (U.S. Court of International Trade (CIT), 1988), hereinafter IPSCO, and Comeau Seafoods v. United States, 724 F. Supp. 1407 (CIT 1989), hereinafter Comeau Seafoods. By its very terms, the Tripartite Scheme for hogs provides benefits only to hog producers. Accordingly, its benefits are de jure limited to a specific industry and are thus countervailable. NPPC further argues that if the Department should decide to evaluate specificity at the level of Tripartite schemes collectively, Tripartite benefits viewed collectively remain de jure limited to a specific group of industries. In evaluating de jure specificity, NPPC argues, the Department must examine not only the relevant statute, but also any implementing regulations. In the case of Tripartite schemes, the implementing regulations are contained within the particular commodity-specific agreements. Considered collectively, these agreements explicitly limit benefits, de jure, to producers of nine commodities. Since the number of industries covered by Tripartite agreements constitute only a small portion of the vast agricultural sector, benefits under the collective Tripartite schemes are de jure limited to a specific group of industries and are thus countervailable. CPC argues that Tripartite agreements are de jure generally available to any agricultural commodity in Canada. CPC states that the language of the Agricultural Stabilization Act (ASA) makes Tripartite agreements generally available to producers of "any natural or processed product of agriculture." The Tripartite Program does not act in law to limit the number of commodities that may be covered under agreements. The Department correctly conducted its specificity analysis at the level of the Tripartite enabling legislation, rather than at the level of the individual Tripartite Scheme for hogs. In response to NPPC's argument that each individual Tripartite scheme has independent administrative control, CPC points out that Bill C-25 provides a framework for the implementation of each Scheme as part of the Tripartite Program, including basic principles for every agreement and arrangements for the scheme's administration and funding. CPC notes that to allege that there are no common requirements for the implementation of individual Tripartite scheme is to ignore the language of the statute, which contains a long list of requirements which must be specified in the agreement establishing each scheme. However, if Bill C-25 had required all of the scheme to be completely uniform, there would be a loss of comparable benefits among the various commodities, as each commodity is different and thus requires a scheme to be shaped to best fit that commodity producers' needs. CPC argues that IPSCO and Comeau Seafoods provide no support for NPPC's view, and Comeau Seafoods specifically endorses the Department's level of analysis in this review. In these cases, the Department conducted its specificity analysis at the level of the individual subsidiary agreements negotiated pursuant to federal-provincial agreements. However, these federal-provincial agreements are not comparable to a statutory scheme such as Bill C-25 or the ASA. Therefore, argues CPC, there is no analogy between the federal-provincial agreements found in IPSCO and Comeau Seafoods and the statutory scheme of ASA/Tripartite, and therefore no basis to argue that the Department's level of analysis should be the individual Tripartite Scheme for hogs. Moreover, in Comeau Seafoods, the Court ruled that when the specificity test was applied properly, loans from the Fisheries Loans Boards were de facto nonspecific, because they were made as "part of an overall lending development policy administered through the Rural Development Loan Program"--in the same way that the Tripartite Scheme for hogs was negotiated as part of an overall Tripartite policy.

Department's Position: The Department determines that each product-specific scheme is structured pursuant to the enabling legislation and basic principles provided in Bill C-25, and, therefore, the implementing legislation and product-specific schemes are integral parts of the Tripartite Program. Although many aspects are specific to the individual schemes, the Department finds that these product-specific schemes exist, and operate, under the framework of the ASA and Bill C-25. The language of Bill C-25 does not limit the availability of these Tripartite programs to certain agricultural commodities or products. We therefore stand by our determination that the Tripartite program is not de jure specific. We have determined instead that the Tripartite program is de facto specific for the reasons enumerated in Comment 3.

Comment 2: NPPC argues that benefits under Quebec's Piglet and Feeder Hog Schemes are de jure limited to a specific industry. The Act Respecting Farm Income Stabilization Insurance (FISI Act) does not establish particular programs, nor does it prescribe a particular method for the stabilization of income with respect to covered commodities, but instead is a broad and vague authorization for the creation of various commodity-specific schemes, each with its own particular terms. NPPC states that the FISI Act: (1) Did not create a FISI Scheme and (2) did not provide for the administration and funding of a FISI Scheme; and that FISI Schemes (3) are separately created at *28533 different times for different purposes; (4) provide different levels of support for reasons unrelated to differences in the types of commodities or markets; (5) are separately funded; and that the Feeder Hog Scheme and Piglet Scheme are not "integrally linked" to other FISI Schemes. Therefore, it is appropriate for the Department to perform its specificity analysis of FISI at the level of the particular scheme, and benefits under each scheme are de jure limited to a specific industry and are thus countervailable. Furthermore, NPPC argues that FISI benefits remain de jure specific when analyzed at the collective level. In evaluating de jure specificity, the Department must examine not only the relevant statute but also any implementing regulations. Stabilization pursuant to the FISI Act is implemented through regulations, which establish each particular scheme. Each scheme specifies, by regulation, the manner in which benefits are calculated and paid and the class of eligible producers. These implementing regulations explicitly limit benefits, de jure, to producers of hogs, lambs, beef (slaughter cattle, feeder cattle, feeder calves (cow-calf)), apples, sugar beets, white pea beans and other dry edible beans (kidney, cranberry, and other colored beans). Accordingly, FISI benefits are de jure limited to those commodities for which a particular scheme has been established by regulation, and are thus de jure limited to a specific group of industries and countervailable. The GOQ argues that NPPC arguments on FISI's de jure specificity contradict Department determinations, a CIT decision, as well as two decisions of a binational panel constituted under the Free Trade Agreement. (Final Affirmative Countervailing Duty Determination; Live Swine and Fresh, Chilled and Frozen Pork Products from Canada (50 FR 25104; June 17, 1985), hereinafter Pork; Alberta Pork Producers' Marketing Board v. United States, 669 F. Supp. 455, 452 (CIT 1987); Memorandum Opinion and Order, In the Matter of Fresh, Chilled, and Frozen Pork, United States-Canada Binational Panel Reviews, USA-89-1904-06 at 79-80, September 28, 1990 and USA-89-1904-06 at 19-20, March 8, 1991). Furthermore, the GOQ states that to argue that FISI is de jure limited is to ignore the distinction set out by the CIT between de jure and de facto tests for specificity. In fact, argues the GOQ, the de jure test involves only an examination of statutes and regulations. Furthermore, the cases on which the NPPC relies to allege de jure specificity have nothing to do with the de jure test. Lastly, the GOQ argues that FISI regulations must conform with the statute, authority for specific regulations must be specifically delegated to the administrative agency, and the regulations must have the full force of law, but always subject to the precise terms of the statute. Hence, the statute and its regulations must be taken together: the regulations have no force without the guiding statute, and the statute cannot be implemented without the regulations. Therefore, the GOQ submits that FISI is generally available according to the statute and regulations and confers equal benefits upon all users, and is thus de jure not specific.

Department's Position: The Department has consistently determined that FISI is not de jure limited to a specific enterprise or industry or group of enterprises or industries. The Department finds that the language of the FISI Act does not limit the availability of these programs to certain agricultural commodities or products. Although many aspects of FISI's implementation and administration are left to the specific schemes, the program exists and operates under the framework of the FISI Act, which is not limited statutorily to specific enterprises or industries.

Comment 3: CPC disagrees with the Department's finding that Tripartite is de facto specific, arguing that the Department has failed to consider all of the information provided by the Government of Canada, particularly the information provided during verification, and that, when all the facts are considered fairly, the Tripartite Scheme does not meet the "specificity test" set forth in s 355.43(b)(2) of the Department's proposed regulations, and is thus not countervailable. CPC argues that the Department failed to properly apply the specificity test in this case by: (1) Focusing too narrowly on the number of commodities for which there already are finalized Tripartite agreements, rather than recognizing Tripartite as a relatively new program with an expanding number of plans (and thus penalizing hog producers for having been among the first commodities to complete a Tripartite agreement); (2) relying too heavily on the fact that 52 percent of the Tripartite payments made to participating producers went to hog producers, rather than examining payouts in the overall context of the program; (3) looking at Tripartite in a "snap-shot" fashion, focusing only on one year, when in fact payments to producers of one commodity will exceed payments to others in any given year; and (4) examining hog producers in a vacuum, making no attempt to define the universe in which dominant users (or disproportionate benefits) are to be measured. NPPC states that CPC's arguments in this case are the same arguments that were rejected by the Department in Pork; the Department's determination with respect to the de facto specificity of the Tripartite program has been upheld by the U.S. - Canada binational panel in the Pork case which reviewed that determination (Memorandum Opinion and Order Regarding Commerce's Determination on Remand, Case No. USA-89-1904-06, March 8, 1991). NPPC further argues that claims made by CPC that variations in the support formulae for different commodities are "solely due to the economic circumstances of each commodity" run counter to the evidence, and that these variations show that different Tripartite plans adopt fundamentally different approaches and provide benefits which differ in kind from benefits under other plans, including plans for similar commodities. NPPC further argues that the Department's findings of de facto specificity of the Tripartite programs would not change if the Department examined a period longer than one year, since it has been established that over 96 percent of all Tripartite payments arose during calendar year 1988. In response to CPC's argument that although hog producers may have received 52 percent of all Tripartite payouts in the review period, these producers also made almost 50 percent of all producer contributions to Tripartite during the period, NPPC argues that the proportion of producer premiums paid into the fund is irrelevant to an analysis of disproportionality because the Department's concern is with the government monies paid to producers, not with the producers' own contributions. If the analysis of disproportionality requires any examination of contributions to the fund, the proper subject of analysis would be the contributions of governments, not the producers, and hog producers also benefitted disproportionately by this measure. NPPC rejects CPC's assertion that Tripartite Schemes might be created in the future for other commodities as irrelevant to the Department's specificity analysis. Indeed, the pace at which new commodities are added is slowing, not accelerating. Also, the rejection of Tripartite Agreements for asparagus, sour cherries, and corn (See *28534 Pork) remains relevant to the Department's specificity analysis.

Department's Position: In analyzing de facto specificity, the Department looks at the actual number of commodities covered during the particular period under review. There is general agreement that there are at least 100 commodities produced in Canada. However, despite Tripartite's nominal general availability to all commodities, the Annual Report of the Agricultural Stabilization Board for the fiscal year ending March 31, 1989, shows that there were only six Tripartite agreements in place, covering just nine commodities. Furthermore, hog producers received 52 percent of the total payouts made under the six Tripartite Schemes in the review period. Since Tripartite's inception, 51 percent of all Tripartite payments made to all schemes have gone to hog producers. Although CPC argues that there are other Tripartite Schemes under negotiation (and honey and onion negotiations have been completed after the review period) we have no authority to take into account predictions about the future growth of the Tripartite Stabilization Plan. During the review period the program was limited, de facto, to a specific group of enterprises or industries, and is therefore countervailable.

Comment 4: CPC, Quintaine, and Pryme argue, in separate briefs, that the Alberta Crow Benefit Offset Program (ACBOP) is not a countervailable subsidy because benefits that compensate partially for disadvantages caused by a related government program are not countervailable. Furthermore, because the average Crow Benefit payment is twice the amount of an ACBOP payment, Alberta's program only partially offsets the artificially high price paid for grain. CPC adds that if the Department does countervail ACBOP benefits, it must correct an error in its calculation methodology. Pryme and CPC argue that the Department has found no countervailable subsidy exists when the benefits of one governmental program merely counteract the disadvantages of a related program, thus resulting in no overall "economic benefit" (Certain Steel Products from the Federal Republic of Germany, 47 FR 39345; September 7, 1982, hereinafter German Steel). A parallel situation exists in this review: ACBOP is "inseparably linked" with the Crow Benefit payments made under the Western Grains Transportation Act (WGTA). Because ACBOP does not completely correct the price distortion, grain purchasers in Alberta remain at a disadvantage. In the 1986/88 administrative reviews of Live Swine, the Department assumed that it would be possible for Alberta livestock producers to purchase less expensive feed grains from outside Alberta. In fact, WGTA and its grain price enhancement effect applies to the entire western Canada grain-producing region, putting grain purchasers in Alberta at a competitive disadvantage. ACBOP removes part, but not all, of that disadvantage, and there is therefore no subsidy for the Department to countervail. Pryme argues that if any benefit does flow to hog producers, that benefit goes to an input, and the Department must conduct an upstream subsidy investigation. And only after an affirmative "threshold determination" may Commerce proceed with an upstream subsidy investigation. Unless and until an upstream subsidy investigation is carried out, the benefit, if any, to hog producers from the ACBOP cannot be measured. CPC argues that the methodology used by the Department to calculate the amount of benefit contains a significant error. CPC argues that the Department should have considered industry standards that 3.5 pounds of livestock feed will be necessary to produce 1 pound of weight gain, and that 15-l8 percent of this livestock feed is made up of protein supplement, not feed grain. By asserting that 3.5 pounds of grain, not feed, is required to produce 1 pound of weight gain, the Department has significantly overstated the amount of grain consumed by hogs in Alberta. Also, the Economic Indicators of the Farm Sector publication used by the Department is not a valid document for the purpose for which it has been used by the Department. It provides cost of production information for American Farmers, not Canadian farmers, and higher U.S. hog weights increase the feed-grain to weight-increase ratio. Therefore, the Department should revise its calculations, using a document provided at verification containing Canadian industry standards. NPPC argues that the Department has previously rejected the same arguments on the countervailability of ACBOP in Pork and that the 0.2. - Canada binational panel also rejected CPC's and other Canadian parties' claims that the ACBOP was not countervailable, thus rejecting the German Steel argument as it applies to this case. NPPC adds that neither CPC nor Pryme have attempted to show that the Department's decision was erroneous or that the Panel's determination is not intrinsically persuasive.

Department's Position: We agree with the NPPC. 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. The fact that a program is designed to offset the economic effect of another government program or policy does not exempt it from investigation under the countervailing duty law. We reject respondents' claim that this program is analogous to German 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 German 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 review, the benefit is paid directly to grain users and not to grain producers. Thus, there is no need to conduct an upstream subsidy analysis. Payments under the ACBOP are not part of a comprehensive program relating to the input product, but rather are received directly by the hog producers. Therefore, Commerce is not required to conduct an upstream analysis, and we reasonably determined that compensation under the ACBOP confers a countervailable benefit on Alberta hog producers. Concerning CPC's argument that the Department should change its methodology when calculating the amount of benefit hog producers receive from the ACBOP, we determine that the source used by the Department, Economic Indicators of the Farm Sector, a U.S. Department of Agriculture (USDA) document, provides similar information to verbal information provided during verification. We used the information found in the USDA document as the best information available because the information on the record was inadequate. Upon our return from verification, CPC provided a document titled Nutrient Requirements of Swine, also a U.S. publication, from the National Research Council. The document provided an inadequate basis for calculating the amount of benefit for the following reasons: (1) The document does not provide usable information on the amount of protein supplement added to the cereal grain feed since it provides a chart showing the required percentage of dietary protein without specifying *28535 whether that percentage is in addition to or inclusive of the percentage of protein naturally contained in the cereal feed; and (2) the listed grain consumption to weight grain-ratios are calculated in hog weight steps of 10-20 kilos, 20-50 kilos, and 50-110 kilos, with no indication of the time periods hogs remain in each weight stage, so no weighting of stages is possible. By contrast, the document used by the Department provides one grain to weight-gain ratio (348.3 lbs. of grain to 100 lbs. of weight gain), and lists separately protein supplements as well (81.2 lbs. of supplements for each 100 lbs. of weight gain). For these reasons, we continue to base our final calculations on the USDA document, although we have made an adjustment in our ratio, from 3.5 pounds of grain for each 1 pound of weight gain to 3.483 pounds of grain for each 1 pound of weight gain to more accurately reflect the information as presented in Economic Indicators of the Farm Sector. This change in our methodology does not change the calculated benefit of Can$0.0042/lb. for all live swine.

Comment 5: CPC argues that the Feed Freight Assistance Program (FFA) is not a countervailable subsidy, because any benefit that accrues to livestock producers from this program is incidental, and that before the Department can impose a countervailing duty it must determine that a government "is providing a subsidy with respect to the manufacture, production or exportation of a class or kind of merchandise imported into the United States." (See 19 U.S.C. 1671(a)). FFA benefits are provided with regard to the manufacture of feed from grain, with no evidence that the grain is imported into the United States. CPC further argues that to countervail benefits paid to producers of feed grain for livestock, the Department would have to conduct a separate investigation. NPPC argues that the same arguments with respect to FFA were considered and rejected by both the Department and the FTA Panel in Pork.

Department's Position: In the preliminary results, we 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 771(A) (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). This rationale has been consistently applied in previous reviews of this order. In this review, CPC submitted no new information. Therefore, the Department's determination remains unchanged.

Comment 6: CPC argues that the Department has erroneously calculated the countervailing benefit to swine resulting from the Ontario Farm Tax Rebate Program, using total rebates paid to swine producers in all of Ontario, rather than viewing the program as a regional subsidy within the Province. CPC believes the Department should have countervailed only the benefit to farmers in eastern and northern Ontario whose annual output is at least Can$5,000 but less than Can$8,000, as the Department has done in the past. NPPC argues that because the program is limited to specific, scheduled commodities, the program is de jure limited to a specific group of industries and provides countervailable benefits to all recipients, not just those in the favored region.

Department's Position: We agree with CPC that this program provides a regional subsidy and that only the benefit to farmers in eastern and northern Ontario whose annual output is at least Can$5,000 but less than Can$8,000 is countervailable. We have adjusted our calculations accordingly. As a result of this change, the benefits from this program during the review period are significantly less than Can$0.0001/lb., which is effectively zero, for both sows and boars and other live swine.

Comment 7: CPC argues that the British Columbia Farm Income Insurance Program (FIIP) is generally available to producers of any viable commodity with an interest in, and a demonstrated need for, such a program, with no evidence of selective treatment in the establishment of schemes, and is therefore not a countervailable program as it pertains to benefits to hog producers. CPC argues that although only 36 percent of farm cash receipts in B.C. are covered by FIIP (for potatoes, vegetables, apples, other tree fruits, strawberries, other berries and grapes, cattle, calves, hogs, sheep and lambs), almost another 40 percent are covered by federal supply management programs (dairy, poultry and eggs), another 3 percent are covered by crop insurance or the Western Grains Stabilization Act (grains and oilseeds), and almost another 4 percent (honey and grapes) are covered by crop insurance. Therefore, argues CPC, approximately 82-83 percent of the farm cash receipts for the province are provided by commodities participating in one of these various programs, with the remainder being too profitable for their producers to be interested. CPC argues that finding FIIP countervailable because it is only available to farmers producing commodities specified in the Schedule B guidelines (to the Farm Income Insurance Act of 1973), as the Department did in its Preliminary Results, is incorrect. CPC states that this is not evidence of selective treatment because commodities have been added to, and removed from, Schedule B since the statute authorizing FIIP was promulgated in 1973. Therefore, there is no evidence to support the Department's assertion that benefits provided under the FIIP are not generally available. NPPC argues that the countervailability of FIIP was affirmed by the CIT in Alberta Pork, and that CPC's arguments are without merit.

Department's Position: We disagree with CPC's first argument because it is our view that crop insurance and supply management are sufficiently different so as to make the linkage with FIIP inappropriate. Crop insurance protects against climatic disasters, while FIIP is an income stabilization program. As noted by the March 8, 1991 U.S.--Canada binational panel decision in Pork, supply management type programs tend to restrict production, while income stabilization programs tend to encourage production. Therefore, it is inappropriate to link FIIP to crop insurance or to supply management programs. Even though raspberries were removed from participation in FIIP in 1985 and potatoes were added in 1983, the Department finds these changes in Schedule B insufficient to counter evidence of selective treatment. By CPC's own admission, only 36 percent of British Columbia's farm cash receipts are covered by FIIP. The program is only available to farmers producing commodities specified in the Schedule B guidelines to the Farm Income Insurance Act of 1973 (with a limited number of agricultural products listed), and is therefore limited to a specific group of enterprises or industries, and therefore countervailable.

Comment 8: CPC argues that the British Columbia Feed Grain Market Development Program is not countervailable because it attempts to counteract the disadvantage caused by the Western Grains Transportation Act. As in the German Steel case, this program was designed solely to *28536 counteract the competitive disadvantage caused by a related governmental program. The B.C. Feed Grain Market Development Program was an attempt to encourage grain producers in B.C. to sell their grain in the province, rather than exporting it, and to accomplish this it was necessary to offset the competitive advantage provided by the federal Crow Benefit payments. The Department has previously determined that no countervailable subsidy exists when the benefits of one governmental program merely counteract the disadvantages of a related program, and should thus make the same determination of no countervailable benefit as regards the B. C. Feed Grain Market Development Program. NPPC argues that CPC's argument, identical to that used concerning the Alberta Crow Benefit Offset program, is no more persuasive in the context of the British Columbia Feed Grain Market Development program.

Department's Position: We disagree with CPC. The facts in this case differ from German Steel in that payments under the British Columbia Feed Grain Market Development program do not benefit the producers of the input product, but are received directly by the hog producers, therefore reducing their cost of production. We continue to find this program limited to grain producers and grain users in B. C., and thus limited to a specific group of enterprises or industries and therefore countervailable.

Comment 9: Pryme argues that weanling pigs (weanlings) are a separate class or kind of merchandise, outside the scope of the present case, or, in the alternative, should at least be accorded a separate countervailing duty rate based on their minimal direct contact with the farm economy before being sold abroad to feeders. Pryme points out that the International Trade Commission's (ITC) definition of "live swine" was based on animals destined for immediate slaughter, and that a review of the ITC record shows that the inclusion of weanlings in the scope of this case cannot be justified. Furthermore, Pryme argues, with the adoption of the Harmonized System, weanlings are now classified separately from all other live swine for duty purposes, as "live swine, other, weighing less than 50 kg each." Accordingly, with the new tariff classification, weanlings can be easily segregated by weight. Pryme notes that in Certain Steel Products from the United Kingdom (47 FR 35668; August 12, 1982), hereinafter Steel Products, the Department found that certain merchandise was held to be of the same class or kind as the goods which were originally investigated, but sufficiently different in its characteristics to merit a separate margin. Pryme argues that if the Department follows the same reasoning applied in that case, weanlings would be excluded from the scope of the order on live swine because weanlings have: (1) A different tariff classification; (2) dissimilar physical characteristics; (3) separate pricing mechanisms from that of live swine; (4) different buyer expectations; (5) distinguishable channels of trade; (6) different uses; (7) extensive processing after sale; and (8) are customarily categorized differently from live swine. Pryme argues that if weanlings are not removed from the scope of this case, as the Steel Products case would imply, there can be no justification for applying alleged bounties or grants awarded to indexed slaughter hogs in calculating benefits received by weanlings. Furthermore, the Department did arrive at a separate rate for sows and boars in this case; the facts of the weanlings' situation should garner, at least, a similar finding leading to a separate countervailing duty rate based on the principles the Department applied to sows and boars in this proceeding.

Department's Position: We stand by 'the determination reached in our preliminary results that weanlings are within the scope of this order. Pryme did not request a separate rate for weanlings until its submission of a case brief. At that time, the Department deemed it inappropriate to delay the processing of the review to solicit the necessary information in order to determine whether it is appropriate or possible to calculate a separate rate for weanlings in these final results. Based on the record, we have no way of determining how many weanlings were raised by, and exported from, each province, nor do we have complete knowledge of weanling producers' participation in the various programs. The information presented in this review does not allow the Department to disaggregate the data between weanlings and other live swine. Weanlings are young hogs; in some cases, such as Ontario's implementation of the Tripartite Scheme for hogs, they are even specifically assigned a percentage of the program's overall benefits. We disagree with Pryme that in the Harmonized Tariff Schedule weanlings are classified separately from all other live swine for duty purposes. While weanlings certainly fall within HTS item number 0103.92.00, other live swine are also included under this subheading, since it encompasses "live swine, other, weighing 50 kg. or less each." Pryme's own definition of weanlings is the following: "(weanlings) are swine at the age when they are taken from their mothers and placed on diets of solid food to prepare them for market. They typically weigh 35 to 40 pounds (15.5 to 17.8 kg.) at the time of sale." The HTS subheading thus encompasses swine other than weanlings, because weanlings weigh no more than 17.8 kg., while the subheading covers swine weighing up to 50 kg. Therefore, the swine entering the United States under HTS 0103.92.00 may eat a solid diet of feed grains, and may receive benefits under many of the grain-related and other programs the Department has found countervailable. Therefore, we will continue to allocate countervailable benefits over total live swine, including weanlings.

Comment 10: The GOQ argues that Quebec's Regional Development Assistance (RDA) program is not countervailable because all of the hogs benefitting from this program were slaughtered in Quebec, as verified and as dictated in Quebec's law. The transportation support under this subprogram is provided, by law, exclusively to move swine to Quebec slaughterhouses. In the Final Affirmative Countervailing Duty Determination; Porcelain-on-Steel Cooking Ware from Mexico, 51 FR 36447, 36449 (1986), and the Final Results of Countervailing Duty Administrative Review; Industrial Nitrocellulose from France, 52 FR 833, 836 (1987), the Department clearly held that support for products or merchandise that are not exported cannot be countervailed. Hence, Quebec's RDA program, and more particularly the Livestock Transportation subprogram, by law cannot be countervailed because it does not benefit the "manufacture, production, or exportation" of the merchandise that is under review. 19 U.S.C. 1671(a)(1)(B).

Department's Position: We agree with the GOQ that the Livestock Transportation subprogram of Quebec's RDA program is not countervailable, because it does not benefit merchandise that is exported, and have revised our calculations accordingly.

Comment 11: The GOQ argues that the Farm Building Improvements subprogram of Quebec's Productivity Improvement and Consolidation of Livestock Production Program is not countervailable: (1) Because the product benefitted is pork, not swine, as the swine are slaughtered by the farmers receiving the assistance; and (2) because it is not specific to an enterprise, industry, or group thereof. Furthermore, there is no evidence of targeting. *28537 Therefore, the program satisfies both de jure and de facto tests.

Department's Position: The record does not support the GOQ's contention that all swine producers benefitting from the Farm Building Improvements subprogram of Quebec's Productivity Improvement and Consolidation of Livestock Production Program slaughter their swine on their premises, as opposed to selling the swine to slaughterhouses or exporters. We also disagree with the GOQ's second argument that the subprogram is not specific to an enterprise, industry, or group thereof. This program is not available to all agricultural commodities. Rather, the program is limited to farm buildings housing livestock, and covers cow-calves, veal calves, cattle, sheep, hogs, pigs, livestock for dairy production, horses, rabbits, goats, and bees. Therefore, we continue to find the Farm Building Improvements subprogram of Quebec's Productivity Improvement and Consolidation of Livestock Production Program limited to a specific group of enterprises or industries, and therefore countervailable.

Comment 12: The GOQ argues that Quebec's Farm Income Stabilization Insurance (FISI) is not countervailable because it is neither de jure nor de facto specific to enterprises or industries. There is no allegation that Quebec's statutes or regulations limit access to FISI's benefits, or target beneficiaries. Therefore, there is no allegation of de jure specificity. The issue is whether the Department's evidence that the program covers fourteen producer groups, and that several major agricultural commodities are not covered under this program, warrants the conclusion that FISI is de facto specific. The GOQ continues, arguing that the record contains ample evidence that FISI is not countervailable. For the review period, 74.4 percent of the total insured value of commercial farm production in Quebec was covered by FISI, with the verification report noting that 84.8 percent of the total value of agricultural production in Quebec is covered for risks related to price fluctuation (by FISI and supply management) or climatic disaster (by crop insurance). The record plainly shows that Quebec's insurance programs are comprehensive, generally available, and almost universally used. The Department's argument that one reason for finding FISI countervailable is that eggs, dairy products, and poultry are not enrolled does not make note of the fact that producers of these products are governed by federally established marketing boards that limit market risk by managing supply. For this reason, these producers are not subject to price fluctuations, and have no need to pay for related insurance. They are, however, eligible to enroll in FISI, although they simply choose not to enroll. The Department's argument that the program is countervailable because it provides benefits to only fourteen commodities does not take into account the fact that fourteen is a large number of commodities in Quebec, where climate and soil conditions limit agricultural diversity to approximately forty-five distinct products in the insurable agricultural sector. Fourteen very different commodities, ranging from piglets to barley, can hardly be classified as a specific group of enterprises or industries, especially when reviewing other Department decisions. The GOQ concludes by arguing that the Department should follow the decision of the U.S.-Canada Binational Panel in Pork, which, in two separate opinions, held that FISI is not de facto specific. NPPC comments that the Panel's decision with respect to FISI appears to be based upon perceived deficiencies in the record and dissatisfaction with the Department's explanation of its findings. NPPC argues that the GOQ's statement that "for the review period, 74.4 percent of the total insured value of commercial farm production in Quebec was covered by FISI" is misleading. According to the Department's verification report, the fourteen commodities covered by FISI account for 30.9 percent (by value) of Quebec's total agricultural production, as reported by Quebec officials. Furthermore, NPPC argues that it is the number, not the relative value of each industry's annual production, that is relevant to the specificity analysis, and therefore the relative size of the industry is not an important criteria for analysis, as the GOQ suggests.

Department's Position: While we agree with the GOQ's statement that FISI benefits are not de jure specific (see Comment 2), we disagree with their argument that FISI benefits are not de facto provided to specific enterprises or industries. In a province producing at least 45 commodities, FISI benefits are provided through 10 schemes covering only 14 commodities, and have been provided to the same 14 commodities since 1981, with no change in the commodities covered. Furthermore, according to information provided by the GOQ in its supplemental questionnaire response, and sourced from Quebec's Regie des Assurances Agricole's, these 14 commodities represent only 27 percent of the total value of agricultural production in Quebec. The GOQ has relied on insured value figures when stating that 74.4 percent of the total insured value of commercial farm production in Quebec was covered by FISI. However, reliance on insured value figures understates the value of agricultural production in Quebec because not all products are insured. When the GOQ states that 84.8 percent of the total value of agricultural production in Quebec is covered by a combination of FISI, supply management, and crop insurance, the GOQ links three separate commodity programs which are fundamentally different from one another in their operation and purpose. In fact, while crop insurance protects against climatic disasters, FISI is an income stabilization program; while supply management programs tend to restrict production, income stabilization programs tend to encourage production. For these reasons, we find it inappropriate to incorporate this linkage into our analysis, and we continue to consider FISI independently of the other insurance programs. There have been prior inconsistent judicial decisions regarding the FISI program. The CIT affirmed the Department's finding of de facto specificity in a challenge to the investigation of Live Swine and Fresh, Chilled and Frozen Pork from Canada. See, Alberta Pork Producers' Marketing Board v. United States, 669 F. Supp. 445 (CIT 1987). On the other hand, the binational panel's decision regarding FISI in the Pork case was based on the Department's failure, for that period of investigation, to provide sufficient evidence to support a specificity finding. These two decisions were based on different administrative records and, in the case of Pork, a separate administrative case. These decisions are not controlling where the record of this fourth administrative review supports a finding of de facto specificity. Based on the evidence on the record, we find FISI de facto specific to a group of enterprises or industries, and therefore countervailable. Final Results of Review: After reviewing the comments received, we determine the net subsidy for the period April 1, 1988 through March 31, 1989 to be Can $0.0047/lb. for sows and boars and Can$0.0449/lb. for all other live swine. Therefore, the Department will instruct the Customs Service to assess countervailing duties of Can$0.0047/lb. on all shipments of sows and boars, and Can$0.0449/lb. on all shipments of all *28538 other live swine, exported on or after April 1, 1988, 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$0.0047/lb. on all shipments of sows and boars, and Can$0.0449/lb. on all shipments of all other live swine, entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice. This deposit 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: June 12, 1991.

Eric I. Garfinkel,

Assistant Secretary for Import Administration.

[FR Doc. 91-14854 Filed 6-20-91; 8:45 am]

BILLING CODE 3510-DS-M