DEPARTMENT OF COMMERCE
Internal Trade Administration
[C-122-404]
Live Swine From Canada; Final Results of Countervailing Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Final Results of Countervailing Duty Administrative
Review.
SUMMARY: On October 7, 1996, the Department of Commerce (the Department
) published in the Federal Register its preliminary results of
administrative review of the countervailing duty order on live swine
from Canada for the period April 1, 1994 through March 31, 1995 (61
FR52426). The Department has now completed this administrative review
in accordance with section 751(a) of the Tariff Act of 1930, as
amended. For information on the net subsidy, see the Final Results of
Review section of this notice. We will instruct the U.S. Customs
Service to assess countervailing duties as detailed in the Final
Results of Review section of this notice.
EFFECTIVE DATE: April 14, 1997.
FOR FURTHER INFORMATION CONTACT:
Stephanie Moore or Cameron Cardozo, Office of CVD/AD Enforcement VI,
Import Administration International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION
Background
Pursuant to 19 C.F.R. section 355.22(a), reviews should cover only
those producers or exporters of the subject merchandise for which a
review was specifically requested. However, as explained in the
preliminary results, the Department has determined that it is not
practicable to conduct a company-specific review of this order because
a large number of producers and exporters requested the review.
Therefore, pursuant to section 777(e)(2)(B) of the Tariff Act of 1930,
as amended, we are conducting a review of all producers and exporters
of subject merchandise covered by this order on the basis of aggregate
data. This review also covers the period April 1, 1994 through March
31, 1995, and 33 programs. On May 1, 1996, we extended the deadline for
the final results of this review to no later than 180 days from the
date of publication of the preliminary results. See Live Swine from
Canada; Extension of Time Limit for Countervailing Duty Administrative
Review (61 FR 19261).
Since the publication of the preliminary results on October 7, 1996
(61 FR 52426) the following events have occurred. We invited interested
parties to comment on the preliminary results. On November 6, 1996,
case briefs were submitted by the Government of Canada (GOC), the
Government of Quebec (GOQ), and the Canadian Pork Council (CPC),
(respondents), and the National Port Producers' Council (petitioners).
On November 13, 1996, rebuttal briefs were submitted by the petitioners
and the respondents. At the request of the GOQ and the CPC, the
Department held a public hearing on December 11, 1996.
Applicable Statute
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act (URAA) effective January 1, 1995 (the
Act). The Department is conducting this administrative review in
accordance with section 751(a) of the Act.
Scope of the Review
On August 29, 1996, the Final Results of Changed Circumstances
Countervailing Duty Administrative Review, and Partial Revocation were
published (61 FR 45402), in which we revoked the order, in part,
effective April 1, 1991, with respect to slaughter sows and boars and
weanlings from Canada, because this portion of the order was no longer
of interest to domestic interested parties. As a result the merchandise
now covered by the order and by this administrative review is live
swine except U.S. Department of Agriculture certified purebred breeding
swine, slaughter sows and boars and weanlings (weanlings are swine
weighing up to 27 kilograms or 59.5 pounds). The merchandise subject to
the
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order is classifiable under the Harmonized Tariff Schedule (HTS) item
numbers 0103.91.00 and 0103.92.00. The HTS item numbers are provided
for convenience and Customs purposes. The written description remains
dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
submitted in the questionnaire responses. We followed standard
verification procedures, including meeting with government and company
officials, and examination of relevant accounting and original source
documents. Our verification results are outlined in the public version
of the verification report (Verification Report), which is on file in
the Central Records Unit (Room B-009 of the Main Commerce Building).
Allocation Methodology
In the past, the Department has relied upon information from the
U.S. Internal Revenue Service (IRS) on the industry-specific average
useful life (AUL) of assets in determining the allocation period for
non-recurring grant benefits. See General Issues Appendix appended to
Final Countervailing Duty Determination; Certain Steel Products from
Austria, 58 FR 37063, 37226 (July 9, 1993). However, in British Steel
plc. v. United States, 879 F. Supp. 1254 (CIT 1995) (British Steel),
the U.S. Court of International Trade (the Court) ruled against this
allocation methodology. In accordance with the Court's remand order,
the Department calculated a company-specific allocation period for non-
recurring subsidies based on the AUL of non-renewable physical assets.
This remand determination was affirmed by the Court on June 4, 1996,
British Steel, 929 F. Supp. 426, 439 (CIT 1996).
The Department has decided to acquiesce to the Court's decision
and, as such, we intend to determine the allocation for non-recurring
subsidies using company-specific AUL data where reasonable and
practicable. In this proceeding, the Department preliminarily
determined that it is not reasonable and practicable to allocate
nonrecurring grants using company-specific AUL data because it is not
possible to apply a company-specific AUL in an aggregate case (such as
the case at hand). We invited the parties to comment on the selection
of this methodology and provide any other reasonable and practicable
approaches for complying with the Court's ruling. The GOQ submitted
comments on this issue. The GOQ agreed with the Department that it is
not feasible to allocate nonrecurring grants using company-specific
data in aggregate cases and that the U.S. Internal Revenue Service tax
tables are appropriate for allocating nonrecurring grants in this
review. However, the GOQ also stated that, in future proceedings
conducted on an aggregate basis, the Department should seek suggestions
from the parties as to more appropriate methodologies for calculating
the allocation period. Accordingly, in this review, the Department is
using the allocation period assigned to each grant in prior reviews of
this order.
Calculation Methodology for Assessment and Cash Deposit Purposes
For the review period, we calculated the net subsidy on a country-
wide basis by first calculating the subsidy rate for each program
subject to the administrative review. We calculate the rate on a
province by province basis. We then weight-averaged the rate received
by each province using as the weight the province's share of total
Canadian exports to the United States of market hogs. We then summed
the individuals provinces' weighted-average rates to determine the
subsidy rate from each program. To obtain the country-wide rate, we
then summed the subsidy rates from all programs.
Analysis of Programs
Based upon the responses to our questionnaires, the results of
verification, and written comments from the interested parties, we
determine the following:
I. Programs Conferring Subsidies
A. Programs Previously Determined to Confer Subsidies
1. Feed Freight Assistance Program: In the preliminary results, we
found that this program conferred countervailable subsidies on the
subject merchandise. Our review of the record and our analysis of the
comments submitted by the interested parties, summarized below, has led
us to modify our findings from the preliminary results for this
program. We have determined that the proper calculation methodology
with respect to FFA benefits is the one that the Department has used to
determine the benefit for the only other ``federal'' program, NTSP, in
this review. Therefore, we are first calculating a benefit per kilogram
of live swine within each province eligible for FFA assistance using
each province's total production. Next, we are adjusting each
province's rate per kilogram based on each province's share of exports
to the United States of the subject merchandise. Finally, these
individual provincial rates are summed to obtain a total national rate
for the FFA program. Accordingly, the net subsidy for this program has
changed from Can$0.0006 per kilogram to less than Can$0.0001 per
kilogram.
2. National Tripartite Stabilization Scheme for Hogs (NTSP): In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. Our review of the
record and our analysis of the comments submitted by the interested
parties, summarized below, has led us to modify our findings from the
preliminary results for this program. In our calculation of NTSP
benefits to hog producers, we have excluded payments related to other
NTSP commodity plans which, in our preliminary results, were
inadvertently cumulated with those for hogs. We have recalculated the
NTSP benefit applicable only to hog producers during the POR using the
same methodology described in the Preliminary Results (61 FR at 52428).
Accordingly, the net subsidy for the residual NTSP payments and the
retroactive NTSP surplus has changed from Can$0.0172 to Can$0.0004 per
kilogram. Also, the cash deposit for this program has been adjusted to
zero to reflect that this program has been terminated and there are no
residual benefits. See Final Affirmative Countervailing Duty
Determination: Certain Pasta from Turkey, 61 FR 30366, 30370 (June 14,
1996) (Pasta from Turkey).
3. British Columbia Farm Income Insurance Program (FIIP): In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of less
than Can$0.0001 per kilogram remains unchanged from the preliminary
results.
4. Saskatchewan Hog Assured Returns Program (SHARP): In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. Our review of the
record and our analysis of the comments submitted by the interested
parties, summarized below, has led us to modify our findings from the
preliminary results for this program with regard to the cash deposit.
The net subsidy for this program of Can$0.0028 per kilogram remains
unchanged from the preliminary results. However, the cash deposit for
this program has been adjusted to zero to reflect that this
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program has been terminated and there are no residual benefits. See
Pasta from Turkey.
5 Saskatchewan Livestock Investment Tax Credit: In the preliminary
results, we found that this program conferred countervailable subsidies
on the subject merchandise. We did not receive any comments on this
program from the interested parties, and our review of the record has
not led us to change any findings or calculations. Accordingly, the net
subsidy for this program of Can$0.0001 per kilogram remains unchanged
from the preliminary results.
6 Saskatchewan Livestock Facilities Tax Credit: In the preliminary
results, we found that this program conferred countervailable subsidies
on the subject merchandise. We did not receive any comments on this
program from the interested parties, and our review of the record has
not led us to change any findings or calculations. Accordingly, the net
subsidy for this program of Can$0.0001 per kilogram remains unchanged
from the preliminary results.
7 Saskatchewan Interim Red Meat Production Equalization Program: In
the preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of
Can$0.0011 per kilogram remains unchanged from the preliminary results.
8. Alberta Crow Benefit Offset Program (ACBOP): In the preliminary
results, we found that this program conferred countervailable subsidies
on the subject merchandise. We did not receive any comments on this
program from the interested parties, and our review of the record has
not led us to change any findings or calculations. Accordingly, the net
subsidy for this program of Can$0.0010 per kilogram remains unchanged
from the preliminary results.
9. Ontario Livestock and Poultry and Honeybee Compensation Program:
In the preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of less
than Can$0.0001 per kilogram remains unchanged from the preliminary
results.
10. Ontario Export Sales Aid Program: In the preliminary results,
we found that this program conferred countervailable subsidies on the
subject merchandise. We did not receive any comments on this program
from the interested parties, and our review of the record has not led
us to change any findings or calculations. Accordingly, the net subsidy
for this program of Can$0.0001 per kilogram remains unchanged from the
preliminary results.
11. Ontario Bear Damage to Livestock Compensation Program: In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of less
than Can$0.0001 per kilogram remains unchanged from the preliminary
results.
12. New Brunswick Livestock Incentives Program: In the preliminary
results, we found that this program conferred countervailable subsidies
on the subject merchandise. We did not receive any comments on this
program from the interested parties, and our review of the record has
not led us to change any findings or calculations. Accordingly, the net
subsidy for this program of less than Can$0.0001 per kilogram remains
unchanged from the preliminary results.
13. New Brunswick Swine Industry Financial Restructuring and
Agricultural Development Act--Swine Assistance Program: In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of less
than Can$0.0001 per kilogram remains unchanged from the preliminary
results.
14. New Brunswick Swine Assistance Policy on Boars: In the
preliminary results, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change any findings or
calculations. Accordingly, the net subsidy for this program of less
than Can$0.0001 per kilogram remains unchanged from the preliminary
results.
B. New Programs Determined to Confer Subsidies
1. National Transition Scheme for Hogs: In the preliminary results,
we found that this program conferred countervailable subsidies on the
subject merchandise. Our review of the record and our analysis of the
comments submitted by interested parties, summarized below, has led us
to modify part of our preliminary determination on this program. The
change concerns the cash deposit. The net subsidy for this program of
Can$0.0042 per kilogram remains unchanged from the preliminary results.
However, the cash deposit for this program has been adjusted to zero to
reflect that this program has been terminated and there are no residual
benefits. See Pasta from Turkey.
2. Technology Innovation Program Under the Canada/Quebec Subsidiary
Agreement on Agri-Food Development: In the preliminary results, we
found that this program conferred countervailable subsidies on the
subject merchandise. Our analysis of the comments submitted by the
interested parties, summarized below, has not led us to change our
findings from the preliminary results. Accordingly, the net subsidy for
this program of less than Can$0.0001 per kilogram remains unchanged
from the preliminary results.
II. Programs Found Not to Confer Subsidies
Research Program under the Canada/Quebec Subsidiary Agreement on
Agri-Food Development: In the preliminary results, we found that this
program did not confer subsidies during the POR. Our analysis of the
comments submitted by the interested parties, summarized below, has not
led us to change our findings from the preliminary results.
III. Programs Found To Be Not Used
In the preliminary results, we found that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following programs:
A. Quebec Farm Income Stabilization Insurance Program (FISI);
B. Support for Strategic Alliances Program under the Canada/Quebec
Subsidiary Agreement on Agri-Food Development;
C. Agricultural Products Board Program;
D. Federal Atlantic Livestock Feed Initiative;
E. Western Diversification Program;
F. Newfoundland Hog Price Support Program;
G. Newfoundland Hog Price Stabilization Program;
H. Newfoundland Weanling Bonus Incentive Policy;
I. Nova Scotia Improved Sire Policy;
J. Nova Scotia Swine Herd Health Policy;
K. Ontario Swine Sales Assistance Policy; and
L. Ontario Rabies Indemnification Program.
Our analysis of any comments submitted by the interested parties,
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summarized below, has not led us to change our findings from the
preliminary results.
IV. Programs Found To Be Terminated
In the preliminary results, we found the following programs to be
terminated and that no residual benefits were provided:
A. Alberta Livestock and Beeyard Compensation Program;
B. British Columbia Special Hog Payment Program; and
C. British Columbia Swine Herd Improvement Program.
We received no comments on our preliminary results and our findings
remain unchanged in these final results.
Analysis of Comments
Comment 1: The GOC and the CPC argue that the Department
erroneously concluded that NTSP payments were made to hog producers
during the period of review (POR). They argue that in calculating a
benefit for this program, the Department mistakenly used the payout
figure for all NTSP plans, which included miscellaneous post-
termination adjustments under the NTSP for the Hogs' plan, adjustments
under the other terminated NTSP plans, payouts under the active NTSP
plans, and all surplus distributions to producers under all the various
terminated plans categorized as ``tripartite payments'' in the Farm
Cash Receipts (FCRs) data. They also argue that the adjustments to the
NTSP for hogs resulted in the GOC collecting a net of Can$41,000 from
hog producers during the POR. Therefore, they argue that the Department
should find that there were no benefits to hog producers under the NTSP
for hogs during the POR.
The petitioners contend that the GOC's supplemental questionnaire
response dated June 3, 1996 at page 3 indicates that tripartite
payments that had been held over from earlier fiscal years had been
paid to live swine producers during the POR, and were accounted for in
the FCRs. The petitioners also contend that the Department's September
23, 1996 Verification Report at page 4 states that representatives of
Agriculture Canada explained not only that NTSP payouts had been made,
but also that some NTSP payments remained outstanding. Thus, the
petitioners contend that the Department verified that hog producers
received NTSP payouts during the POR based on program activities that
occurred throughout the life of the program. Therefore, the petitioners
contend that the record established that hog producers received NTSP
payouts during the POR and, further, that these payouts were
substantial. Furthermore, the petitioners contend that because the GOC
has failed to submit the NTSP Annual Report for the review period,
which represents the official document that presumably would outline
the nature and extent of the hog account closeout adjustments and their
effect on NTSP payouts, the GOC's argument is deficient.
Department's Position: We agree, in part, with the GOC and the CPC,
and, in part, with the petitioners. At verification, we reviewed the
``Tripartite Payments'' line item in the FCRs, which showed an
aggregate figure for payments received by producers under all NTSP
plans in each province. There was no breakdown by commodity. Therefore,
we examined a GOC internal document entitled ``Tripartite Payments,''
which shows the payments to producers of all commodities covered by an
NTSP plan in each province (Exhibit GOC-5 to the Verification Report).
We also reviewed an internal document entitled ``Surplus Distribution--
Producer,'' which shows the NTSP surplus distribution for all
commodities in each province (Exhibit GOC-6 to the Verification
Report). We selected provinces from Exhibit GOC-5 and GOC-6 to trace to
the FCRs, because the totals from both of these documents were recorded
in the FCRs ``Tripartite Payments'' line item. However, when
calculating the NTSP benefit for the subject merchandise for the
preliminary results, we inadvertently used the total tripartite
payments listed in the FCRs. Therefore, in these final results, we have
recalculated the NTSP benefit applicable only to hog producers during
the POR using the same methodology described in the Preliminary Results
(61 FR at 52428). To obtain the payouts made to hog producers during
the POR, we summed the payments listed for hog producers in each
province in Exhibit GOC-5 to the Verification Report.
However, consistent with the Department's practice, we did not
offset the NTSP benefit to the hog producers by the premiums the hog
producers paid during the POR, as argued by the respondents. In prior
administrative reviews of Live Swine, we only countervailed two-thirds
of the payments made to swine producers because the federal government
and the provincial government contributed two-thirds of the premiums
from which payments were made to the hog producers. We did not
countervail the remaining one-third because it represented the
producers premiums. Because we only countervail two-thirds of the
payments, there is no reason to make any further adjustments to the
payments to hog producers. See, Live Swine from Canada; Notice of
Preliminary Results of Countervailing Duty Administrative Reviews;
Initiation and Preliminary Results of Changed Circumstances Review and
Intent to Revoke Order in Part, 61 FR 26879, 26883 (May 29, 1996) and
Live Swine from Canada; Final Results of Countervailing Duty
Administrative Reviews, 61 FR 52408 (October 7, 1996).
We agree with the petitioners that payments for closing entries of
the NTSP hog plan were made during the POR, and we have calculated the
benefit from these payments. However, we disagree with the petitioners
that the GOC official's comment, Verification Report at 4, that some
NTSP payments remained outstanding necessarily means payments to hog
producers. There are NTSP plans for other commodities, which were still
in effect, and for which there could be payments due in the future.
However, we verified that the plan for hogs was no longer in effect and
that there will be no payments made in the future under that plan.
Comment 2: The CPC contends that the Department stated in the
preliminary results that it intended to calculate a benefit from the
Feed Freight Assistance Program (FFA) using the same methodology
applied in the sixth review (See Live Swine from Canada; Final Results
of Countervailing Duty Administrative Review: 59 FR 12243 (March 16,
1994), (Swine Sixth Review Results)). However, the CPC claims that the
methodology used in the instant review is inconsistent with that used
in Swine Sixth Review Results, and constitutes a ministerial error. In
Swine Sixth Review Results, the Department calculated ``production in
kilos'' based on the total production of live swine in provinces
eligible for FFA. In the preliminary results of this review, however,
the Department calculated ``production in kilos'' for three provinces
using only the live swine produced in the FFA eligible areas of the
three provinces: British Columbia, Quebec, and Ontario. The CPC also
states that the same ministerial error was made in Swine Seventh,
Eighth and Ninth Review Results, which the Department corrected in an
amended final notice (Live Swine from Canada; Amended Final Results of
Countervailing Duty Administrative Reviews, 61 FR 58383; (November 14,
1996) (Amended Swine Seventh, Eighth, and Ninth Review Results)). As a
result, the CPC contends that the Department should also correct this
alleged error in the preliminary results of the current review.
---- page 18091 ----
The petitioners argue that the Department should affirm the
calculation methodology that it used in the preliminary results because
it correctly ``ties'' FFA receipts to the merchandise actually
benefiting from the subsidy. In Ontario, Quebec, and British Columbia,
only certain counties, and, therefore, only a percentage of swine
production, are eligible to receive FFA assistance. Therefore, the
petitioners argue that the Department should divide the amount of FFA
assistance by the total weight of live swine produced in FFA-eligible
areas rather than by total production in each province. According to
the petitioners, tying FFA benefits that can only be received by a
subset of producers in certain provinces to all production in those
provinces would yield the same absurd result as tying provincial
benefits to national production.
In rebuttal, the CPC argues that should the Department decide to
revise its methodology, any revision must be consistent with the
Department's calculation of the benefit from other ``national''
programs providing varying benefits to individual provinces, correctly
tie the benefits to eligible production and exports. According to the
CPC, the revised methodology, applied by the Department to all other
programs available in more than one province, should calculate a
benefit per kilo per province, and then calculate a weighted average
rate per kilo based on each province's share to total exports. These
individual provincial rates should then be added up to obtain a total
national rate. The CPC submits that any revision to the FAA benefit
calculation should conform to this standard methodology.
Department's Position: In consideration of the comments received on
this issue, we have reexamined our FFA calculation methodology. We have
determined that the proper calculation methodology to follow with
respect to FFA benefits is the one that the Department has used in this
review to determine the benefit for the only other ``national''
program, NTSP. Therefore, we first calculated a benefit per kilogram
for each province eligible for FFA assistance using the provinces'
total production of live swine. Next, we weighted each province's
benefit by each province's share of total exports of the subject
merchandise to the United States. Finally, these weighted provincial
rates are summed to obtain the benefit for the FFA program on live
swine.
We disagree with the petitioners regarding the use of an adjusted
production figure in the denominator for Ontario, Quebec, and British
Columbia. This review is conducted on an aggregate basis. In this case
we have treated the provinces as we treat companies in a typical case.
To calculate a country-wide rate, we weight-average each province's
rate by its share of exports to the United States. To calculate the
province's rate for the FFA program, we obtain the same result using
two different methods: (1) We can calculate a rate for the counties
receiving FAA benefits and a rate for the counties that received no FAA
benefits, and then derive the weighted-average rate for the province,
or (2) simply calculate a rate for the province by using the amount of
FAA assistance in the numerator and total swine production in the
denominator. We have adopted the latter method to calculate the FFA
rate for each province.
Also, we addressed this same comment in Swine Sixth Review Results
where we stated that ``[a]lthough we recognize that FAA availability is
limited to certain areas within the participating provinces, we
determine it is not appropriate to adjust provincial production
downward. * * * We determine that adjusting the denominator as we did
in the past results is overstating the FAA benefit.'' Id. at 12261.
Therefore, for these final results, we have calculated FAA benefits as
described above.
Comment 3: The GOQ argues that the Department's preliminary
determination to countervail a portion of the Canada/Quebec Subsidiary
Agreement on Agri-Food Development (Agri-Food Agreement) is contrary to
the Department's administrative practice. The GOQ claims that in the
last five administrative reviews of this order, the Department has
found the Agri-Food Agreement, in its entirety, not countervailable
because it is a research program in which the results are made publicly
available. The only possible change with respect to the Agri-Food
Agreement is the expiration of the original Agri-Food Agreement in 1991
and its replacement in 1993 with the current Agri-Food Agreement.
According to the GOQ, this change cannot justify the Department's
reconsideration of the Agri-Food Agreement in this review because the
current Agri-Food Agreement was already in place during the ninth
administrative review when the Department found the Agri-Food Agreement
non-countervailable. The GOQ asserts that the Department's long-
standing policy has been not to re-examine programs previously found
not countervailable absent new information or evidence of changed
circumstances. Because the Department found the Agri-food Agreement
non-countervailable in the ninth review and no party submitted new
information in this proceeding, the GOQ contends that the Department
should have continued to find it not countervailable.
The GOQ claims that, although the Department erred in investigating
the Agri-Food Agreement after finding it non-countervailable in all
prior administrative reviews, the record evidence once again
demonstrates that the Agri-Food agreement is not countervailable.
Section 355.44(1) of the 1989 Proposed Regulations reflects the
Department's long-term practice that research and development programs,
such as the Agri-Food Agreement and its components, are not
countervailable if the research results are made publicly available.
According to the GOQ, the Agri-Food Agreement is a single program and
each of its components individually meet the requirements of section
355.44(1). Thus, the GOQ argues that, in the final results of this
review, the Department should not find the Agri-Food Agreement or any
of its components countervailable.
The CPC argues that the Department preliminarily determined that
the Technology Innovation component of the Agri-Food Agreement is
countervailable without first examining whether the results of the
research generated by the funded projects are generally available, and
that this analysis is not in accordance with either U.S. law or the
Department's practice. The CPC claims that funding for this Agri-Food
Agreement is shared 50/50 by the federal government and the province,
and argues that in prior reviews the Department's analysis of similar
jointly funded agreements have begun with a determination as to whether
the research results were made publicly available. Only if research
results were not made available has the Department then gone on to
examine the source of funding. The CPC contends that this analysis is
as long-standing as the Department's 1989 Proposed Regulations, and as
recent as the preliminary and final results of the seventh, eighth and
ninth administrative reviews of this order. As a result, the CPC
concludes that the Department should analyze the Agri-Food Agreement in
accordance with U.S. law and its past practice, and should find that
none of the components of Agri-Food are countervailable.
The petitioners contend that in an effort to avoid the question of
the countervailability of the Technology Innovation component of the
Agri-Food
---- page 18092 ----
Agreement, the GOQ and CPC attempt to argue that the Department's past
treatment of the Agri-Food Agreement, as a whole, prevents the agency
from revisiting one particular component of the program in the present
review. The petitioners state that the Department's past findings of
countervailability are limited to instances where it has examined the
Agri-Food Agreement on an aggregate basis. However, the Department has
never found the Technology Innovation component of the Agri-Food
Agreement, by itself, to be not countervailable, and the Department's
finding in the present case does not conflict with its past treatment
of this subsidy. Also, the Department's prior finding of
noncountervailability was limited to the previous Agri-Food Agreement.
The petitioners allege that this review presents the first time that
the Department has examined the current Agri-Food Agreement at
verification. Thus, the petitioners claim the record in this review
provides the Department with ample basis to ``reinvestigate'' the
countervailability of the new Agri-Food Agreement.
The petitioners continue that the respondents are incorrect to
argue that the Technology Innovation program should be considered non-
countervailable because it constitutes a research program under which
research results are made publicly available. According to the
petitioners, U.S. law and past Department practice support the
Department's decision to treat the Technology Innovation component of
the Agri-Food Agreement as a regionally specific technical assistance
program provided by the Canadian federal government to the designated
geographic region of Quebec. In Final Affirmative Countervailing Duty
Determination; Fresh, Chilled, and Frozen Pork from Canada, 54 FR 30774
(July 24, 1989) (Pork Investigation), the Department examined the
separate components of the precursor Agri-Food program and determined
that the federal government's contributions to the Technology component
were countervailable because the program did not involve research and
was limited to the region of Quebec. Consistent application of agency
practice requires the Department to treat Technology Innovation as a
technical assistance subsidy for production aid. According to the
petitioner, the Technology Innovation program is designed principally
to provide production support. Given that the Technology Innovation
program does not constitute a research subsidy, the petitioners argue
that the Department has correctly not examined the public availability
of this program. Only when referring to the Agri-Food program in it
entirety can the program be characterized generally as a ``research''
program. However, the petitioners conclude that the Department
correctly rejected this approach and based its countervailability
finding on the theory that the program is regionally specific.
Department's Position: We disagree with the GOQ and CPC. The
Department's preliminary finding with respect to the countervailability
of the Technology Innovation program in not inconsistent with prior
Department practice. In fact, the Department examined the
countervailability of the predecessor Agri-Food Agreement in the Pork
Investigation. In that case, the Department also examined the separate
components of that agreement (Research and Development, Technological
Innovations and New Initiatives, Soil Conservation and Improvement) as
three separate programs and determined that the Technological
Innovations program was countervailable because the program did not
involve research, and the funding, provided by the federal government,
was limited to the region of Quebec. See Pork Investigation at 30779.
In Live Swine from Canada; Preliminary Results of Countervailing Duty
Administrative Review 55 FR 20812, 20814 (May 21, 1990) (Swine Second
and Third Review Results), we stated again that the Agri-Food Agreement
contained three programs: Research and Development, Technological
Innovations, and Soil Conservation, and that the federal government's
contributions were limited to Quebec, and therefore countervailable. We
examined the Agri-Food Agreement again in the fourth and seventh,
eighth, and ninth reviews (the program was not used in the fifth and
sixth review). Although we consistently described the Agri-Food
Agreement in terms of three programs under the same agreement, we
examined individual projects as if they all were financed under the
Research program rather than under the other two programs. See, e.g.
Swine Seventh, Eighth and Ninth Review Results at 26887. Our
understanding was inaccurate and does not reflect a determination that
the Agri-Food Agreement is one program totally related to research, as
the GOQ and the CPC suggest. Furthermore, the GOQ submitted no
information on the record of the ninth review showing that a new Agri-
Food Agreement was in effect. It was only during the instant review
that the Department learned that a new Agri-Food Agreement was in
force. The fact that a new Agri-Food Agreement is in force is
sufficient evidence of changed circumstances in warrant a reexamination
of our prior determinations. Because we determined that it was
appropriate to reexamine the Agri-Food Agreement in this review, we are
not constrained by our previous examinations in earlier reviews.
Moreover, the Department has discretion in determining whether to
re-investigate a program previously found to be non-countervailable.
The court of International Trade in affirming this discretion, stated
that the Department is ``entitled to draw upon its own knowledge and
expertise and facts capable of judicial notice.'' PPG Indus., Inc. v.
United States, 746 F. Supp. 119, 135 (CIT 1990). As a result, we
determined that it was appropriate to examine the countervailability of
the 1993 Agri-Food Agreement. In line with this decision, the GOQ was
offered an opportunity to claim green light or green box status under
section 771(5B) of the Act. (See Department's Questionnaire, September
25, 1995, Section III.4 at III.4-2).
We disagree with the respondents' claim that the Agri-Food
Agreement is nothing more than a research program. The language of the
Agreement conveys much broader goals than simply the research and
development of new products or processes. While research and
development constitute a portion of the activities under this
Agreement, the Agreement itself clearly denotes broader economic
development objectives. In fact, the Agreement focuses on the agri-food
industry, because ``agri-food development in Quebec continues to be a
priority in the economic and regional development strategies of both
governments.'' (See Canada-Quebec Subsidiary Agreement on Agri-Food
Development, attached as Exhibit J to the GOQ Questionnaire Response,
dated December 4, 1996, at 6.) According to the Agreement, the
objectives of the two governments are as follows: ``(A) to intensify
the economic and regional development of Quebec and to create an
environment in which Quebec and its regions can achieve their economic
potential..; (B) to consolidate and improve opportunities for
employment and income..; (C) to facilitate consultation and
coordination of the economic and regional development policies,
programs, and activities of both governments..''. (Id at 5-6). The
purpose of the Agreement is ``to promote cooperation and coordination
of the efforts of the governments of Canada and Quebec with a view to
strengthening the development,
---- page 18093 ----
competitiveness, and profitability of the agri-food industry.'' (Id. at
9).
As we stated in Memorandum on Canada/Quebec Subsidiary Agreement on
Agri-Food Development, to the Acting Assistant Secretary from CVD/AD
Team dated September 25, 1996, which is on file in CRU (Agri-Food
Memorandum), we recognize that the Research program is a research and
development program, and, therefore, we applied the public availability
criterion to our analysis. However, when we analyzed the Technology
Innovation program, we found that its application review process,
eligibility requirements, purposes, and types of projects funded were
more typical of a technological assistance program than of a research
and development program.
Under the Technology Innovation program, the applications are
reviewed by the Quebec Ministry of Agriculture (Ministere de
l'Agriculture, des Pecheries et de l'Alimentation du Quebec (MAPAQ)),
to see whether they meet the eligibility criteria and the objectives of
the program. (See Verification Report at 29.) Any organization,
agricultural operation, or individual associated with agricultural
production is eligible under Testing and Experimentation, except for
consulting firms, specialized educational institutions or research
establishments; only groups of farms are eligible under Testing
Networks. The type of project that can be funded deals ``with the
introduction, final adjustment, or full-scale field testing of tools,
specialized equipment, new techniques and practices, or agricultural
management tools based on proven technical expertise'' for the Testing
and Experimentation component; there is no specific requirement for the
Testing Networks component. When we then look at the project assessment
criteria, we find that ``Scientific and technical validity'' is only
one of nine criteria used, with no particular weight given to any one
of them. (See, Canada-Quebec Subsidiary Agreement on Agri-Food
Development--Technology Innovation Program, attached as Exhibit L to
the GOQ Questionnaire Response, dated December 4, 1996, at 14-15).
Furthermore, it appears unusual that research institutions would be
specifically excluded from applying for funds under this program, if it
is as claimed, a research and development program. More importantly, it
is not clear in this case whether the ``new technologies'' are newly
developed technologies or technologies that are new to Quebec but may
be widely used in other areas.
The GOQ contends that ``[t]he Technology Innovation component of
Agri-Food provides grants for applied research projects in which
concepts developed in laboratories are tested under actual farming
conditions.'' There is no evidence in the record indicating the
projects must be tied to ``concepts developed in laboratories'' or that
the tested product, technology or process be in the experimental stage.
Instead, the eligibility requirements seem to accommodate products
already existing in the market and being tested for use in Quebec. The
types of projects financed under this program seem to support this
interpretation: ``Rotational grazing versus cow-calf production,''
``Strip grazing versus dairy farming,'' ``Enhancing the competitiveness
of the goat milk industry'' or ``Ventilation of pig barn using air
diffuser and low-level exhaust.''
Our reasoning becomes even more clear when we compare the
Technology Innovation program with the Research program. Under the
Research program, the Conseil des Recherches en Peche et en Agro-
Alimentaire du Quebec (CORPAQ) reviews the applications and administers
the projects. This committee, which includes three university
professors and a company researcher, is the same committee that
evaluates all scientific research funded by the government in Quebec.
CORPAQ screens a proposal for a project based on scientific merit; for
the projects that are deemed eligible, a more detailed description of
the project is requested which is evaluated by a second committee made
up of experts specifically ``in the fields or research disciplines
concerned.'' The scientific validity of the project appears to be the
only criterion for the selection of the projects receiving the funding.
Eligible applicants are universities under all three components of the
Research program; under the Support for Partnership Research also
private enterprises or associations may apply.
Testing obviously represents a stage in the research and
development process. Any new product or process developed in a
laboratory has to undergo testing to see whether or not the goals of
the research have been achieved. However, when testing is isolated from
the research process and conducted for other purposes, such as to adapt
existing technologies to specific weather conditions, it is still
testing, but it is no longer part of the research and development
process. The fact that the Technology Innovation program does not
emphasize the scientific value of the projects but seems to stress
technical expertise, further buttresses our determination that this is
a program providing technological assistance to farmers in order to
speed up the adoption of cutting-edge technologies in Quebec.
Moreover, we verified that during the POR, this program was funded
exclusively by the GOC. See Verification Report at page 29. Schedule C
of the Agri-Food Agreement shows how funds were allocated to the three
programs and clearly shows that, since its inception, the Technological
Innovation program has been funded solely by the federal government. As
a result, because assistance under the program is provided by the
federal government to industries located within a designated
geographical region of Canada (i.e., Quebec), we determined that the
federal contributions were countervailable. See section 771(5a)(D)(iv)
of the Act and Statement of Administrative Action accompanying the
URAA, reprinted in H.R. Doc. No. 316, 103d Cong., 2d Sess. 932 (1994)
at 262.
With respect to the Research program, we did examine the public
availability of the results of research projects for purposes of making
a finding that the program is not countervailable. (See Department's
Position on Comment 4). However, because we have determined that the
Technological Innovation program is not a ``research'' program, our
``public availability'' test is inapplicable. Therefore, we continue to
find that the Technological Innovation program of the Agri-Food
Agreement provided a countervailable subsidy to live swine during the
POR.
Comment 4: The petitioners allege that the Department erroneously
declined to countervail benefits received under the Research component
of the Agri-Food Agreement. The petitioners argue that the GOQ has
failed to provide sufficient evidence to establish that the results of
research projects will be published as required by the 1989 Proposed
Regulations. The petitioners also state that the respondents have not
shown that the results of the research projects must be made public in
all instances because the program allows recipients to obtain patent
protection for the results of their research. Citing to Final
Affirmative Countervailing Duty Determination: Fresh and Chilled
Atlantic Salmon from Norway, 56 FR 7678, 7682 (February 25, 1991)
(Norwegian Salmon), the petitioners assert that in instances where
research projects are ongoing, the Department has required that the
results are scheduled to be publicized. Petitioners argue that no such
evidence exists on the record for this review. The petitioners also
argue that the
---- page 18094 ----
Department's failure to countervail research grants under these
circumstances would be inconsistent with Department practice and would
create loopholes potentially allowing subsidizing governments to avoid
countervailability by delaying decisions to publish the results of
subsidized research until after the three-year allocation period has
expired.
The GOC and CPC counter that the petitioners' argument
inappropriately assumes that the GOC would fail to discharge its
domestic and its international obligations fully and in good faith. The
GOC cannot avoid or delay publication of Agri-Food Agreement research
results without violating the terms of the Agri-Food Agreement itself.
The GOC states that in the preliminary results, the Department found
that the research results are published ``upon completion.'' In prior
administrative reviews, the Department similarly has found that without
exception the swine-related research results under the Agri-Food
Agreement or its predecessor have also been made publicly available
upon completion. Also, the CPC argues that the Department has verified
that no researcher has ever exercised the option to patent research
results, and in so doing to limit the extent of their publication.
According to the CPC, the mere possibility of a future patent for one
research project is insufficient proof that no results of research
under this program will ever be made publicly available, citing Final
Affirmative Countervailing Duty Determinations: Certain Steel Products
from Germany, 58 FR 37315, 37321-22 (July 9, 1993) (German Steel).
Therefore, the GOC and CPC request that the Department affirm its
determination that the Research component of the Agri-Food Agreement is
not countervailable.
The GOQ argues that the Department's practice is not to countervail
an uncompleted research project unless it is known at the time of the
determination that the project results will not be disseminated
publicly. The GOQ continues that the petitioners' position is based
upon pure speculation about what might happen in the future. In any
case, leaving aside the Department's determination that the Research
component is a noncountervailable research program, the GOQ argues that
the Research component is neither regional, nor de jure or de facto
specific. As a result, the GOQ urges the Department to reject the
petitioners' argument and confirm that the Research component is not
countervailable.
Department's Position: We disagree with the petitioners. Although
there is no schedule for publication as in Norwegian Salmon, we
explained and documented in our Verification Report and Agri-Food
Memorandum that the results of research projects funded under the Basic
Research program are required by the terms of the Agri-Food Agreement
to be published in an annual report upon completion. The Agri-Food
Agreement states that ``the Government of Canada and the Government of
Quebec agree to announce jointly all authorized projects, as well as
project and program reports and results.'' However, no swine-related
research projects were completed during the POR. We find it
inappropriate to countervail these projects during the instant review
because there are no results to determine whether they were made
publicly available. The mere possibility of a future patent for the
results of a research project is not sufficient evidence to justify a
finding of countervailability of an entire research program, where
there is a general requirement that research results be made publicly
available. See, e.g., German Steel at 37321-22. Therefore, we reaffirm
our preliminary determination that the Research program did not confer
countervailable benefits on live swine during the POR. The
determination that benefits under this program are countervailable
could only be made if the swine-related projects were complete. It is
only upon completion that we can know whether the results of research
have been made publicly available. See, e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Sweden
58 FR 37385 (July 9, 1993).
Comment 5: The GOP argues that the Department preliminarily
determined to examine the Agri-Food Agreement as three separate
programs because it incorrectly assumed that there are distinct
differences in the purposes, funding, eligibility requirements, and
application and approval processes across the three components of the
Agri-Food Agreement. The GOQ states that the Agri-Food Agreement is a
single program with a single common purpose of ``strengthening the
development, competitiveness and profitability of the agri-food
industry.'' According to the GOQ, the agreement provides that funds may
be transferred among the various components of the agreement.
Therefore, the GOQ claims that since funds are fungible among the
various components of the agreement, those components in practice have
the same funding.
The GOQ further argues that the Agri-Food Agreement has a single
administration. According to the GOQ, the budget for administration of
the agreement is provided as a single component; there is no separate
administrative budget for each operative component. Further, the GOQ
claims that there are common eligibility requirements applicable to all
three components that are set forth in the main text of the Agri-Food
Agreement. The main text of the agreement establishes a single
management committee with ultimate authority over project and contract
approval for all three components.
Finally, the GOQ notes that in Swine Seventh, Eighth and Ninth
Review Results, the Department cited to the Final Affirmative
Countervailing Duty Determination on Certain Fresh Atlantic Groundfish
from Canada 51 FR 10041, 10061 (March 24, 1986) (Groundfish) to
distinguish between ``umbrella legislation'' and ``subsidiary
agreement'' in its single program analysis of Canada's Farm Income
Protection Act. The GOQ claims that, in Groundfish, the Department
examined each subsidiary agreement under Canada's Economic and Regional
Development Agreements (ERDA) as a single separate program. The GOQ
states that the Agri-Food Agreement is a ``subsidiary agreement'' under
the umbrella of ERDA. Therefore, the GOQ argues that pursuant to the
rationale established in Groundfish and ratified in Swine Seventh,
Eighth and Ninth Review Results, the Department should examine the
Agri-Food Agreement as a single program.
The petitioners contend that the GOQ ignores that the shared
purpose of the programs is too broad to meet the Department's legal
standard. According to the petitioners, the Department has expressly
rejected this type of broad purpose as the basis for treating
independent subsidy programs as a single program, instead requiring
commonality at the program-specific level. Finally, the Department has
regularly examined component parts of subsidy programs similar to the
umbrella program found in the Agri-Food program on an independent
basis. See, e.g., Final Affirmative Countervailing Duty Determination
on Pure Magnesium and Alloy Magnesium from Canada 57 FR 30946 (1992);
Final Affirmative Countervailing Duty Determination on Small Diameter
Circular Seamless Carbon and Alloy Steel Standard Line and Pressure
Pipe from Italy 60 FR 31922 (1995).
---- page 18095 ----
Department's Position: We disagree with the GOQ. First, the
Department has examined the components of the predecessor Agri-Food
Agreement as separate programs in prior determinations. (See
Department's Position on Comment 3 above). Second, the instant review
represents the first opportunity for the Department to examine the new
Agri-Food Agreement. As extensively explained in the Agri-Food
Memorandum, in this review, we examined the components of the Agri-Food
Agreement as three separate programs because there are distinct
differences in the purposes, funding, eligibility requirements, and
application and approval procedures across the three components. The
fact that the three components stem from the same agreement between
federal and provincial government does not detract from this finding.
The GOQ claims that the Agri-Food Agreement has a single purpose of
``strengthening the development, competitiveness and profitability of
the agri-food industry.'' This is correct; however, when we examine the
program areas, we find that the purpose of each component is much more
specific, as we outlined in the Agri-Food Memorandum: the purpose of
the Research component is to create major leverage effects on research;
the purpose of the Technological Innovation component is to speed up
the rate of adoption and dissemination of technologies and production
systems; and the purpose of the Strategic Alliance Support component is
to stimulate cooperation and strageic alliances in the agri-food
industry (see Appendices K, L, and M of the GOQ's December 4, 1995
questionnaire response).
With respect to funding, we agree that at the agreement level, the
funding is contributed 50/50 by the two governments. However, at the
program level, Schedule C of the Agreement shows that the funding for
the Research program was provided by both the GOQ and the GOC, and the
funding for the Technological Innovation and Strategic Alliance Support
components was provided solely by the GOC.
With respect to the administration of these programs, while it is
correct that the Agreement is administered by the management committee,
individual ``management subcommittees'' were also established ``for the
purpose of managing and administering each program under this Agreement
. . .'' (Section 4.5(b) of the Agreement). With respect to the
application process, each program has distinct application forms,
application processes, and evaluation systems. As we have already
indicated, applications under the Research program are processed by
CORPAQ, applications under the Technological Innovation program are
processed by MAPAQ, and application for the Strategic Alliance Support
program are processed by Agriculture Canada. As outlined in the Agri-
Food Memorandum, each program has different eligibility requirements.
Each application is then reviewed by the management subcommittee for
the corresponding program for final approval.
We also disagree with the GOQ's argument that, pursuant to the
rationale established in Groundfish and ratified in Swine Seventh,
Eighth, and Ninth Review Results, the Department should examine the
Agri-Food Agreement as a single program. In Groundfish (at 10049), the
Department stated that: ``ERDA subsidiary agreements establish
programs, delineate administrative procedures and set up relative
funding committees of the federal and provincial governments.'' Under
both the Prince Edward Island subsidiary agreement and the New
Brunswick subsidiary agreement, we found multiple programs. As a
result, Groundfish does not support the GOQ's argument for treating
subsidiary agreements as single programs.
The countervailing duty law does not mandate a specific standard
for determining whether government actions under review should be
treated as a single program or several programs. Under these
circumstances, the Department has discretion and must base its
determination on a reasonable interpretation of the facts on the
record. The record shows that we extensively analyzed the information
submitted by the GOQ's, as well as our determinations in prior cases,
in reaching our determination that we should examine the components of
the Agri-Food Agreement as separate programs. Consequently, we reject
the GOQ's argument and reaffirm our position in the preliminary results
of the instant review.
Comment 6: The GOQ states that the Department concluded that the
Technology Innovation component of the Agri-Food Agreement is
countervailable because it is a federal program that is limited to a
single province and, thus, is regionally specific. The GOQ claims,
however, that the statutory provision provides that the determination
of whether a subsidy is regionally specific must be made in relation to
``the jurisdiction of the authority responsible for the subsidy * * *
'' 19 U.S.C. Sec. 1677(5A)(D)(iv). According to the GOQ, Quebec is the
authority responsible for the Basic Research and Technology Innovation
components. Both components are administered on a day-to-day basis
exclusively by Quebec even though the GOC also provides funding for the
program. Quebec is responsible for record keeping, application for
grants, and decisions regarding which projects receive funding.
Consequently, the GOQ states that Quebec, rather than Canada, should be
viewed as the authority responsible for the Basic Research and
Technology Innovation components of Agri-Food. Therefore, the GOQ
argues that neither of the program components are regionally specific
because they are available everywhere in Quebec.
The GOQ claims that because the Technology Innovation component is
not regionally specific, in order to determine specificity the
Department would have to determine whether the component is de jure or
de facto specific. The GOQ argues that the Agri-Food Agreement is not
de jure specific because the agreement provides that its benefits are
available to all sectors of Quebec's agricultural economy, including
food production, processing, storage and marketing. Also, the GOQ
argues that an analysis of the four factors as set forth in section
355.43(b)(2) of the 1989 Proposed Regulations show that the Technology
Innovation component of the Agri-Food Agreement is neither de jure nor
de facto specific. According to the GOQ, actual recipients are not
limited in number, live swine are not a dominant or disproportionate
user of the program, and there is no evidence that the authorities
exercised discretion so as to favor the live swine industry.
The petitioners state that U.S. law and past Department practice
support the decision to treat the Technology Innovation component of
the Agri-Food Agreement as a regionally specific technical assistance
program provided by the Canadian federal government to the designated
geographic region of Quebec. The petitioners contend the Department
examined the separate components of the precursor Agri-Food Agreement
and determined that the federal government's contributions to the
Technology Innovation component were countervailable because it did not
involve research and was limited to the region of Quebec. See Pork
Investigation at 30774, 30779. Thus, the petitioners contend that
because the instant case examines the same program, consistent
application of agency practice requires the Department to treat the
Technology Innovation component of the Agri-Food
---- page 18096 ----
program as a technical assistance subsidy for production aid. Also, the
GOQ is not ultimately responsible for administering the program.
According to the petitioners, the Department verified that while the
GOQ is responsible for administration, the critical issue of funding
lies exclusively within the jurisdiction of the federal government.
Therefore, it is irrelevant whether assistance is available everywhere
in Quebec. The petitioners state that the Department's regional
specificity inquiry in this case has focused correctly on the
availability of Agri-Food assistance vis-a-vis all of Canada, not
within particular provinces. The petitioners also contend that because
the Department has based its countervailability finding on the theory
that the Agri-Food Agreement is regionally specific, a de facto
specificity analysis is irrelevant.
Department's Position: We disagree with the GOQ that the Technology
Innovation program is not specific under section 771(5A)(D)(iv). The
SAA makes clear that this provision codifies the Department's regional
specificity test. It states that `` * * * subsidies provided by a
central government to particular regions (including a province or a
state) are specific regardless of the degree of availability or use
within the region.'' SAA, at 932. Although the Agri-Food Agreement
states that the GOC and the GOQ will each contribute 50 percent of the
total cost of the agreement, Schedule C of the agreement shows the
allocation of those funds to the three programs and clearly shows that
since its inception, the Technology Innovation program has been funded
solely by the federal government. Because the Department found that the
assistance under this program is being provided by the federal
government to industries located within a designated geographical
region of Canada (i.e., Quebec), we determine that the federal
contributions are specific under section 771(5A)(D)(iv), and therefore,
countervailable.
Contrary to the remainder of the GOQ's claim, section
771(5A)(D)(iv) does not require the Department to analyze the
specificity of a subsidy in relation to the authority responsible for
managing the subsidy program. The statutory language explicitly refers
to ``the jurisdiction of the authority providing the subsidy.'' As
discussed above, the record evidence demonstrates that the GOC not the
GOQ provided all funding for the Technology Innovation program during
the POR. Therefore, consistent with the statutory language, we have
examined the specificity language, we have examined the specificity of
the program from the perspective of the GOC as the source of funding.
Because we determine the program to be specific under section
771(5A)(D)(iv), there is no need to conduct a de jure or de facto
specificity analysis.
Comment 7: The GOQ argues that the Department should find that the
Support for Strategic Alliances component of the Agri-Food Agreement is
not countervailable because it funds studies with a view to developing
markets and improving competitiveness, or developing knowledge and
know-how, which is research. The GOQ claims that the research results
under this component are specifically conditioned upon the applicant
making available and disseminating the results of the projects.
Therefore, the results are publicly available. According to the GOQ,
the Department should make a noncountervailable determination in the
instant review so as to avoid wasting resources reinvestigating this
component in future reviews.
Department's Position: We disagree with the GOQ. We reviewed the
Support for Strategic Alliance projects that were outstanding during
the POR, and verified that none were related to live swine. Because the
program was not used during the POR, we did not determine the
countervailability of the program. If we find in a future review that
projects related to live swine have been approved, we will examine the
countervailability of this program.
Comment 8: The GOQ agrees with the Department's preliminary
determination that the Basic Research components of the Agri-Food
Agreement did not confer countervailable benefits on live swine during
the POR. However, the GOQ argues that, because the Department
preliminarily determined that the Basic Research component does not
provide countervailable benefits to live swine, the Department should
not continue to investigate this component in future reviews. Because
the Department found that the Basic Research component was used during
the POR, the Department's determination not to countervail that
component is equivalent to a decision that the Basic Research component
is not countervailable. According to the GOQ, it is well-established
policy that the Department will not reinvestigate programs in future
reviews that did not confer countervailable benefits in prior reviews
absent new evidence or changed circumstances. The GOQ argues that the
Department has abandoned this well established policy in its
preliminary results of this review by announcing in advance that it
will continue to reinvestigate the Basic Research component of the
Agri-Food Agreement.
The GOQ states that the reason the Department gave for potentially
reinvestigating the program was that in the future there might be a
research project the results of which may not be published. However,
the GOQ argues that the Department has verified at least twice that the
results of Agri-Food projects are always published. Should a future
research project not be published, it would constitute a change in the
program and, according to the GOQ, it would be petitioner's burden to
allege a change in the program. The GOQ contends that the Department
cannot keep a noncountervaliable program open to investigation on the
possibility that the program might change. Therefore, the Department
should announce that it will not reinvestigate the program again absent
substantial allegations of a change in the program or evidence that the
results of a completed research program benefitting live swine were not
published.
The petitioners contend that the GOQ is wrong in suggesting that a
decision not to countervail a subsidy program in a particular review
constitutes a de facto finding of noncountervailability. This argument
ignores the fact-based nature of the Department's countervailing duty
inquiry and also entirely overlooks the fact that the Department
frquently delays making a countervailability finding when subsidy
programs are not used. The petitioners assert that the Department
should reject the GOQ's attempts to preclude the Department from
considering the countervailability of the Basic Research component.
Department's Position: We disagree with the GOQ. It is the
Department's practice to continue to review those research and
development programs where there is an indication that all results may
not be made publicly avaiable. See e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Sweden,
58 FR 37385 (July 9, 1993). In the case of the predecessor Agri-Food
Agreement, we verified in the fourth and seventh administrative reviews
that research results were made publicly available. The instant review
provided the Department with its first opportunity to verify whether
research results are made publicly available under the new Agri-Food
Agreement. However, during the POR, none of the swine related projects
were completed; therefore, it will not be known whether the results of
the research are publicly available until completion of the project.
Also, in the instant case, we verified that under Section 8 of the
Research program
---- page 18097 ----
guidelines participants have the right to patent protection for the
results of the research, if divulging the information will reduce the
commercial value of those results. As a result, we will continue to
examine the countervailability of these research grants in future
reviews and upon completion will determine whether they are
countervailable.
Comment 9: The GOQ argues that the Department should find that the
Agri-Food Agreement was not used during the POR. The GOQ claims that
the Agri-Food Agreement only benefits swine produced in Quebec, and
there is no verified record evidence indicating that swine produced in
Quebec, that are subject to the order, were exported to the United
States during the POR. All market hogs must be sold through the Quebec
Federation of Pork Producers. According to the GOQ, the record shows,
and the Department verified, that no swine sold through the Federation
were exported to the United States during the POR. U.S. import
statistics that show imports from Quebec of 1,795 hogs include
nonsubject merchandise, such as weanlings, sows and boars. Therefore,
the GOQ argues that the Department should determine in its final
results of this review that the Agri-Food Agreement was not used during
the POR.
Department's Position: We disagree with the GOQ. The Department did
not state that there were no exports of subject merchandise from Quebec
to the United States during the POR. Official import statistics,
provided by the GOC, show that Quebec exported 1,795 animals to the
United States during the POR under the HTS numbers that cover live
swine. We were unable to verify that these imports did not include
imports of subject merchandise. Therefore, we have included exports
from Quebec in all appropriate program benefits calculations, except
FISI (see Department's Position on Comment 12 below). As a result, the
Department appropriately examined the Agri-Food Agreement during the
POR.
Comment 10: The CPC argues that the Department should adjust the
cash deposit rate to take into account the program terminations of the
NTSP, the National Transition Scheme for Hogs (Transition Scheme), and
the Saskatchewan Hog Assured Returns Program (SHARP). In the case of
SHARP, the CPC states that the last date producers received benefits
under SHARP was March 31, 1996, and the only other possible benefit
continuing beyond that date is a minor potential liability of $3,124 in
uncashed checks. Thus, they argue that this is a program-wide change
and there is no possibility that measurable benefits of any
significance will continue, therefore, the cash deposit rate should be
adjusted. Second, the CPC claims that the NTSP for Hogs was terminated
as of July 2, 1994, the entire NTSP surplus was distributed in two
fiscal years, 1994/95 and 1995/96, and that no residual benefits may
continue to be bestowed under this terminated program. They also claim
that all payments were made either in fiscal year 1994/95 or in 1995/96
under the Transition Scheme, which was a temporary support program.
Likewise, the CPC argues that these two programs meet the Department's
criteria for a program-wide change qualifying for an adjustment in the
cash deposit rate.
The petitioners state that according to section 355.50(d) of the
Department's 1989 Proposed Regulations, the cash deposit rate should be
adjusted if: (1) the termination of a program constitutes a program-
wide change and (2) no residual benefits can be bestowed under the
terminated program. The petitioners contend that while the three
programs have been terminated, record evidence clearly establishes that
residual benefits may be provided under these programs; therefore, they
do not meet the second condition that is required for a cash deposit
rate adjustment.
With respect to SHARP, the petitioners point out that the final
year in the SHARP three-year allocation period extends beyond the
current review period, meaning that residual benefits will continue to
be distributed to hog producers. In addition, even though there is a
current agreement to use a three-year allocation period for SHARP
benefits, there is no guarantee that this period will not be altered in
the future, thereby allowing residual benefits to continue beyond the
next review period. With respect to NTSP and the Transition Scheme, the
petitioners assert that the record also establishes that residual
benefits will continue past the current review period. Since the CPC
acknowledged that NTSP and Transition Scheme payments will be made in
the next review period, the petitioners state that it would be
premature to modify the cash deposit rate for these two programs.
Also, the petitioners argue that the CPC incorrectly implies that
since benefits under each of the three programs can be accounted for
during either the POR or the subsequent period (1995-1996), the
Department should find that no residual benefits exist. The petitioners
state that there is nothing in section 355.50 to suggest that the
Department should define residual benefits as anything other than
benefits that will be received after an instant proceeding. Also,
according to the petitioners, section 355.50(d) places a much more
stringent burden of proof on respondents, requiring respondents to
prove, with a degree of certainty, that residual benefits will not
continue to be bestowed under a particular program, rather than to
confirm all currently-planned future outlays.
Department's Position: We agree with the CPC. When a program that
provides countervailable benefits has been terminated and all benefits
have ceased to be bestowed prior to the preliminary results of review,
the Department's practice is to adjust the cash deposit rate, unless a
substitute program has been introduced. See e.g., Pasta from Turkey at
30370. The verified record evidence demonstrates that SHARP, NTSP, and
the Transition Scheme were all terminated prior to the preliminary
results of this review. See Preliminary Results at 52428-52429.
With respect to NTSP and the Transition Scheme, the information on
the record for this review demonstrates that all benefits were paid out
from these terminated programs during the 1994/95 and 1995/96 fiscal
years. The last day of the 1995/96 fiscal year is March 31, 1996. We
verified that the NTSP and the Transition Scheme programs paid out all
residual benefits prior to the publication of our October 7, 1996
Preliminary Results. Furthermore, there is no evidence on the record
that any substitute programs have been introduced for the NTSP and the
Transition Scheme. Accordingly, consistent with our practice, we are
adjusting the cash deposit rates for these programs.
With regard to SHARP, the last year of our three-year allocation of
the SHARP deficit corresponds with the 1995/96 fiscal year. We verified
that the only potential residual benefit are a contingent liability for
uncashed checks of $3,124. (Verification Report at page 38). As a
result, we determine that the residual benefit can be added to the
allocated SHARP deficit for the instant review, thus leaving no
residual benefits accruing after October 7, 1996, the date of the
publication of the preliminary results of the instant review.
The Department is satisfied that the verified information described
in the Verification Report and contained in the verification exhibits
demonstrates that there are no residual benefits under these programs.
All cash payments under NTSP and the Transition Scheme were made in
1994/95 and 1995/96. SHARP has a potential liability which
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we have accounted for as discussed above. We disagree with the
petitioners' claim that the Department should define residual benefits
as any benefits received in the subsequent review. Because cash deposit
rates apply to future entries, we adjust the cash deposit rate to zero
only when we are satisfied that no residual benefits from a terminated
program will be paid out subsequent to the issuance of the notice which
establishes the new cash deposit rates. In this case, these conditions
have been met since the three programs were terminated and cannot pay
out residual benefits after the issuance of the Preliminary Results of
this administrative review. Therefore, we are adjusting the cash
deposit rate accordingly.
Comment 11: With respect to FISI, the GOQ argues that the
Department has the discretion to determine that a program it has
investigated is not countervailable, even when the Department concludes
that the program was not used during the POR. The GOQ claims that the
Department has used that discretion in past cases where it has
determined that an investigated program was both unused and
noncountervailable. See e.g., Certain Refrigerator Compressors from the
Republic of Singapore: Final Results of Countervailing Duty
Administrative Review, 61 FR 10315 (March 13, 1996) (Singapore
Compressors). The GOQ argues that the Department should have concluded
that FISI is not used and is not countervailable because the Department
has a complete record, including a verification, showing that FISI is
not countervailable.
The GOQ argues that the Department may not rely upon its decision
in Swine Sixth Review Results in order to find FISI countervailable in
this review or continue to investigate FISI in future reviews. The GOQ
states that three binational panels found FISI to be non-
countervailable. According to the GOQ, a binational panel decision is
the equivalent of a valid and final judgment of a court of competent
jurisdiction for the purpose of applying the doctrine of collateral
estoppel. Since the Department lost the issue of FISI's
countervailability before a binational panel, it is estopped from
claiming that FISI is countervailable in the current review. In any
case, the GOQ argues that the facts on the record in the instant review
demonstrate that FISI is not countervailable based on the number of
users, no dominant/disproportionate use, no GOQ discretion in
conferring benefits, and integral linkage with Crop Insurance.
The petitioners contend that the GOQ's arguments do not rest on new
factual information or evidence of changed circumstances that would
warrant the Department's reexamination of the countervailability of
FISI. Furthermore, the Department rejected the same collateral estoppel
argument made by the GOQ concerning FISI in Swine Seventh, Eighth, and
Ninth Review Results. The petitioners also contend that the GOQ has not
offered any arguments that are responsive to the Department's earlier
finding that FISI was not linked to crop insurance in Swine Seventh,
Eighth and Ninth Review Results.
Department's Position: We disagree with the GOQ. The record
evidence establishes that FISI was not used during the POR for exports
of the subject merchandise to the United States. Therefore, we follow
the Department's practice, which is not to examine the
countervailability of programs that are not used during the POR. See,
e.g., Live Swine from Canada; Final Results of Countervailing Duty
Administrative Reviews (56 FR 10410, 10411; March 12, 1991). For this
reason, all arguments advanced by the GOQ on the non-countervailability
of FISI, including collateral estoppel, are moot.
We disagree with the GOQ's contention that the Department has
exercised its discretion to determine that an investigated program was
both unused and noncountervailable in Singapore Compressors. In
Singapore Compressors, the program referred to by the GOQ did not
provide benefits to the subject merchandise, and we specifically stated
that ``the Department's regulations were not intended to require the
Department to discuss programs which do not apply to subject
merchandise.''
Comment 12: The GOQ states that the Verification Report does not
accurately reflect the effort made by GOQ officials at verification to
demonstrate that FISI and Crop Insurance are integrally linked. The GOQ
contends that its officials proved that Crop Insurance, working
together with FISI, is in fact an income insurance program. The two
insurance systems, FISI and Crop Insurance, are integrally linked to
work together to meet a common objective of providing income insurance.
However, much of this information was not reported in the Verification
Report. The GOQ requests that the Department amend its verification
report to reflect accurately and completely what occurred at
verification in this administrative review.
Department's Position: We disagree with the GOQ. The purpose of
verification is to confirm the accuracy of the information already
submitted on the record. This practice is clearly stated in the
verification outline that the Department provides to the interested
parties before conducting any verifications. During verification, the
GOQ deemed it appropriate to elaborate in great detail on generic
statements made in the response with respect to linkage. If this
information had been provided in the GOQ's questionnaire responses, the
Department might have issued a supplemental questionnaire and would
have checked at verification on the accuracy of this previously
submitted material. In this instance, however, the argumentation and
documentation presented at verification clearly went beyond what had
been stated and documented in the response. Verification is not
intended to be an opportunity for respondents to argue their position,
nor is it intended to be an opportunity for submission of new factual
information, as stated in our verification outline.
Furthermore, in this case, the record evidence establishes, and the
Verification Report documents, that the FISI program was not used
during the POR for exports of the subject merchandise to the United
States. Therefore, consistent with the Department's practice, we do not
examine the countervailability, and therefore integral linkage, of
programs that are not used in the POR by producers of the subject
merchandise (See Department's Position on Comment 11). As a result, the
issue of amending the Verification Report is moot as FISI was not used
during the POR.
Comment 13: The petitioners contend that the Department partially
relied on a finding that Quebec did not export live swine during the
POR as a basis for concluding that the FISI program was not used during
the POR. However, the petitioners state that review of the record
evidence shows that the two Canadian Government agencies responsible
for reporting Quebec export data have provided contradictory responses.
The GOQ identified Quebec as a province that exported 1,795 hogs to the
United States during the POR. Quebec, however, provided data suggesting
that no live swine were exported to the United States during the POR.
Since the Department has been unable to solve this discrepancy,
according to the petitioners, the record does not support the
conclusion that Quebec did not export live swine. Where a respondent
has submitted data that is contradictory, the Department routinely
makes assumptions about these data that are unfavorable to
---- page 18099 ----
respondents. The petitioners conclude that, under these circumstances,
the Department should assume that Quebec exported live swine to the
United States during the POR for purposes of analyzing the FISI
program.
The GOQ and the CPC argue that, contrary to the petitioners'
assertion, the Department's determination was not based upon a finding
that there were no exports of live swine from Quebec during the POR;
the determination was based on finding that FISI could not have
benefited any live swine that might have been exported to the United
States during the POR. The GOQ and the CPC state that the Department
verified that all market hogs that could have benefited from FISI
payments were sold to abattoirs in Canada. Therefore, the Department
correctly found the FISHI could not have benefited any subject
merchandise that might have been exported to the United States during
the POR.
Department's Position: We disagree with the petitioners. The
Department verified that all hogs receiving FISI payments during the
POR were slaughtered in Canada. See Verification Report at page 32. As
such, no live swine exported from Quebec received FISI payments.
Accordingly, we determined that this program was not used. However, we
also verified that there were exports of live swine from Quebec. As
such, for those programs where assistance was provided during the POR
to all live swine in Quebec, we properly calculated a subsidy rate for
the POR. (See Memorandum to the File from Team A regarding the Farm
Income Stabilization Program dated September 25, 1996, which is on file
in the CRU.)
Final Results of Review
For the period April 1, 1994 through March 31, 1995, we determine
the total net subsidy on live swine from Canada to be Can$0.0098 per
kilogram.
The Department will instruct the U.S. Customs Service to assess
countervailing duties of Can$0.0098 per kilogram on shipments of live
swine from Canada exported on or after April 1, 1994 and on or before
March 31, 1995.
The cash deposit is Can$0.0013 per kilogram, which is de minimis.
Accordingly, the Department will also instruct the U.S. Customs Service
to waive cash deposits on shipments of all live swine from Canada
entered, or withdrawn from warehouse, for consumption on or after the
date of publication of this notice. The cash deposit rate is different
than the assessment rate because, as explained above, we have taken
into account program-wide changes in calculating the cash deposit rate
(see Pasta from Turkey).
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return/destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: April 7, 1997.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 97-9551 Filed 4-11-97; 8:45 am]
BILLING CODE 3510-DS-M
The Contents entry for this article reads as follows:
International Trade Administration
NOTICES
Countervailing duties:
Live swine from--
Canada, 18087